Gender equality and the economic potential of women
Due to large gender inequalities, the economic potential of qualified women is not optimally used. Women and men are legally equal, but clearly, they are not economically equal. Equality between women and men is one of the every country’s main objectives and tasks. However, only one in three managers is a woman, and women work predominantly in sectors or occupations where wages are the lowest. The average pay differential for men and women in full-time jobs in OECD countries is more than 18 percent. In Japan and Korea, women earn at least one-third less than men. In Germany, Switzerland, Canada, and the United States, women earn over 20 percent less than men (OECD 2008), meanwhile in Indonesia women earn only less than 6 percent than men.
In 2011 the unweighted mean for the pay gap was 23 percent in Indonesia. According to the ILO (2012) the gender inequality results in lost resources which are bad for economic growth. Or, as OECD (2008) states it, the economic potential of qualified women is not optimally used. Despite making up nearly half of the workforce and accounting for 22% respectively 24% in 2008, the Indonesian shares of female legislators, senior officials and managers among employees respectively the labour force at large were rather low, women continue to be under-represented in economic decision-making positions. Women’s untapped talent which could benefit businesses and society as a whole, represents a wasted investment in human capital (MDGs report 2011).
There are gender inequalities in labour participation, work duration, education, and wages. Moreover, there is strong sectoral gender segregation, there are few women in management functions, and few women in political functions.
Hochberg and Schmid (2005), estimate the effect of the increasing participation rate on GDP growth to be an average of 0.4 percent per annum. The effect is greater in countries experiencing strong growth, and is more limited in countries experiencing weaker growth. Löfström (2009) interprets gender labour market equality as women and men working to the same extent in paid jobs, having an equal share of part-time work and self-employment. Calculations of these gains shows that there is a potential for increased GDP of between 15 and 45 percent in Indonesia. This suggests that there are major benefits to be gained from enhancing gender equality.
With respect to women in management functions, Valerio (2009) states that women leaders are good for business. As United States businesses expand into new markets, cultures, and workforces across the United States and around the world, the companies that integrate gender diversity into their business strategy prove to be more successful. Catalyst (2004) has shown that the Fortune 500 companies with the highest percentages of women corporate officers, experiences, on average, a 35.1 percent higher return on equity and 34 percent higher total return to shareholders than did those with the lowest percentage of women corporate officers. Indonesian government should add to this that gender diversity brings a number of vital benefits to boardrooms, such as higher returns, better overall performance, better risk management and greater employment of female talents. Multiple studies show that when women are well-represented in decision-making bodies, the overall quality of governance rises and levels of corruption decrease (OECD 2008).
Gender inequality in education and a gender pay gap hamper economic growth. Remarkably, sectoral gender segregation promotes economic growth. So it is suggested that gender specialization goes along with a productivity gain. Moreover, the number of female legislators hampers economic growth and, on the other hand, the percentage of women in parliament is positively related to economic growth.