Getting More Women Into Japan’s Workforce Could Grow Its Economy By 13 Percent

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If as many Japanese women were employed as men, its economy could grow by as much as 13 percent, according to a Goldman Sachs report.

Women in Japan have a labor force participation rate of 62.5 percent, a record, but it’s still far behind men’s 80.6 percent rate. If theirs were raised to men’s, the country’s workforce would grow by more than 7 million people, boosting output. “Japan can no longer afford not to leverage half its population,” Goldman Sachs Chief Japan Strategist Kathy Matsui wrote in the report.

While the 13 percent boost is slightly lower than the 15 percent expected in 2010, it would still have a huge impact. “The potential GDP boost has become slightly smaller, but nevertheless remains significant and one of the highest in the developed world,” Matsui wrote.

Prime Minister Shinzo Abe has focused on this problem, calling women “Japan’s most underused resource” and promising tax incentives for companies to hire women as well as the creation of 250,000 day care openings over the next few years and an extension of family leave. As it stands, only about a third of the country’s mothers are in the workforce and about 70 percent of women quit after they have their first child. He has also set a goal of company boards being at least 30 percent female by 2020 and for companies to have at least one female executive, even though just 15 percent of its companies currently meet that requirement.

Japanese women’s low labor force participation rate may be a particularly egregious case among developed countries, but the United States isn’t free of similar problems. American women nearly doubled the hours worked each year between 1979 and 2007, and that increase grew the economy by 11 percent. But women still lag behind men in labor force participation — in 2012, women’s rate was more than 12 percentage points behind men’s — and their dramatic gains in the 1970s, 80s, and 90s have plateaued. While 21 other developed countries have decreased the gap between men and women from 30 points to 13 since 1990, the U.S. has only closed the gap by a few points.

Child care is certainly a big piece of the puzzle for Japan and the U.S. alike. Economists found that part of the reason American women have slowed down compared to other countries is the lack of spending on child care programs — help for parents who can’t afford care recently hit a decade low, even as the cost of care continues to rise. Paid family leave is also part of why the U.S. is getting left behind — it is one of three countries out of 178 across the globe that doesn’t guarantee paid maternity leave. If the U.S. did better on those two fronts and also made it easier for parents to have flexible schedules, women’s participation rate would be 82 percent.