Shinzo Abe, Japan’s prime minister, has gained international recognition for his aggressive new approach to Japan’s decades of deflation. “Abenomics,” his prescription for boosting the economy and fighting off another recession, falling wages, and a high debt-to-GDP ratio, includes monetary and fiscal policy such as stimulus spending on infrastructure and renewable energy, quantitative easing, and structural reforms.
But there’s a new pillar of Abenomics: putting more women in executive roles by asking businesses to set a target of at least one female executive per company. “Women are Japan’s most underused resource,” he said upon unveiling his plans. And the numbers back him up, as women hold just 1.6 percent of executive roles at Japanese public companies. Only 15 percent of Japan’s companies have any female executives at all.
It may take more than just a focus on the executive suite, however. Only about a third of Japanese mothers are in the labor force. If women’s rate of employment, currently about 60 percent, were raised to the same level of men’s, which is 20 points higher, Japan could grow its GDP by as much as 15 percent. To that end Abe has also promised to create 250,000 day care openings over the next few years to boost women’s employment.
While the U.S. has a higher rate of women in the work force and a larger percentage of female executives, it still has room to grow in both. It now ranks at number 17 out of 22 developed countries for women’s rate of participation in the labor force, with just about three-quarters of women in the workforce, compared to nearly 80 percent for the other countries on average. Just over 14 percent of executive roles in U.S. Fortune 500 companies are filled by women.
The idea that increasing women’s overall participation in the workforce and their representation in the C-suite is good economics is backed up by research. As much as 20 percent of U.S. growth in productivity over the past 50 years can be attributed to fallen barriers to employment for women and other groups who had previously been excluded. The economy would in fact be about a quarter smaller if women hadn’t entered the workforce in such strong numbers since the 1950s.
At the top of the economic ladder, one study found that companies in the MSCI AC World index that had a gender diverse board outperformed male-only ones by 26 percent over six years. Another study of Israeli companies found that those with boards that had at least three directors of both genders attending meetings had a significantly larger return on equity and net profit margin. Research makes the case that more diversity in company leadership often leads to better results.
The U.S. hasn’t taken the aggressive action that Shinzo Abe is proposing to address its disparities, however. The most aggressive action on women’s representation in executive roles has been in Norway, which has a requirement that 40 percent of board members be women, and the European Union is looking at a similar measure. Meanwhile, the U.S.’s lack of spending on child care is part of why it has fallen behind developed peers in women’s labor force participation, along with poor parental leave policies and no protections for those who seek part-time work. If the U.S. enacted better policies on all three fronts, women’s labor force participation rate would jump 6.8 percentage points. That could have a huge effect on an economy that’s still struggling to recovery from the recession.