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Growth and Children: Corporate Responsibility, Not Individual Choice

Analysts have done many projections about the impressive economic growth that could be achieved by various nations if they close their gender gap in employment. Importantly, we are now seeing that treating women better in the workplace will also likely have the surprising effect of raising fertility rates—a looming concern in the developed world.  Yet when commentary turns to fertility, the responsibility often shifts to individual parents. I am arguing here that the social and economic constraints on young couples are systemic. The main fault–and the responsibility for change–lies at the feet of the private sector.

I am going to focus in this blog on eastern European countries because they present the starkest illustration of how the failure to accommodate women in the economy negatively affects fertility rates. (Americans: don’t stop reading just because this is not about you–it is relevant to your situation.)

All the countries in the list below have fertility rates below 1.7; indeed, nearly all of them are below 1.5.  As you can see, they also have female labor force participation that is quite low (the US, Canada, and the UK are about 67-70%, the Scandinavian countries higher).

In the next two columns are two estimates of the gender ratio in salary. The first is an estimate from the World Economic Forum of the relationship between what women are paid and what men are paid for similar or equal work.  Globally, this gap averages about 67–that is, women make, on average, 67% of what men make for the same job.  Here, you have a range from 48 in the Czech Republic (this would be a low figure anywhere in the world) to 79 in Macedonia (a very good figure, relatively speaking).  But the average is about 63.  Similarly, the estimated earned income—a figure based on actual earnings, but unadjusted for pay differences by industry and the prevalence of part-time work—is not too far below the global average.  But look then at tertiary education, where the women are vastly overrepresented.  And then see how they dominate the most highly-skilled jobs.  Yet, as in the rest of the world, they are not being paid as much and they are not getting to the higher level posts.

A closer look at the composition of pay inequality may be helpful here.  Below is the OECD attempt to explain the gender gap in pay across a list of countries.  Please notice that all of these countries have a gap.  You can see that OECD has broken out job characteristics, hours worked, and other “explanations” for the difference.  Yet, in each case, there remains an unexplained gap, represented by the red bar in this picture. That red bar, the guy at OECD tells me, is the sex discrimination.  Notice that the eastern European countries have the biggest unexplained gaps (but even the Scandinavian countries show evidence of pure prejudice).

So, eastern Europe presents a picture where countries are educating their women and putting them in technical professions, but then they are treated unequally in the workplace.  Perhaps it is not surprising, then, that they are not in the labor force in big numbers—but it means these countries have a massive waste in human capital and educational investment.  Now let’s look at what it is doing to their national productivity.

I am going to focus first on Poland, Hungary, Russia, and the Czech Republic.  Then I will zero in on the Czech Republic as an illustration. I have chosen these countries because there is a greater level of detail available for them. First, let’s note their fertility trend:  births have been plummeting for twenty years.  Remember that replacement rate is about 2.0—once you are down where Hungary is, at 1.2—you’re in trouble for a lot of reasons.  Note also that there is a smaller cohort already working through the system in these countries and it is too late to change that.  Fertility increases can only be achieved going forward.

Next:  the OECD labor projections for now until 2030.  At the right, you can see that Poland, if it effects no change in the gender mix of its labor force, will have a dramatic decline in the total population of workers in the next twenty years, as  represented by the black line dropping across the bottom of the graph.  Scary, no?  This decline is caused by (1) the delayed impact of declining fertility over the past twenty years, (2) a lot of outward migration, and (3) poor integration of females into the labor force.  It is already too late to change the fertility decline moving through the system.  And reversing outward migration could also be difficult, but should be considered.  The third, and perhaps most feasible rapid-impact option, is to try and (1) retain more women in the workplace and (2) make it possible for them to work as much as men.  The red line is what can be achieved if the numbers of women working converge toward men and the grey line is what can be achieved if women begin working more hours (that is, full time).

You can see the same phenomenon in the Czech Republic, Russia, and Hungary.

If high fertility rates were a matter of keeping women at home, we would expect these four countries to have lots of babies and lots of workers–because they do not support women in the workplace.

So, I think we can conclude there is no indicated gain to be had from refusing to accommodate women at work—indeed, given the better record of the Scandinavian countries (high labor participation, small pay gaps, replacement fertility rates), it would seem that the opposite conclusion is to be drawn.

If we look more closely at the family/work policies of one of these nations, the Czech Republic, we can see that the companies there claim they have parental leave, re-entry programs, and work-life balance policies (whatever that is) roughly on par with the global average.  But they are lower than an already-too-low global average on subsidizing child care.  And, most telling of all, look at what the penalty is for women re-entering the labor force after having children.

Not surprisingly, then, women fall out of the pool of candidates as careers progress toward top slots.  They are taken in as employees at roughly the same percentage as the global average, but are hired much less often into entry-level management.  At the senior level, there is a further drop, even relative to the global average.  Again this happens at the board level.  Then they totally disappear at the CEO slot.

This is a systemic problem:  the Czechs are not advancing their women, despite the investment in their education.  But let me assure you that this pattern, though worse in eastern Europe, is similar all over the world, as you can infer from the global average.

The emergent “big picture” is one where women—a well-qualified, but stressed-out, under-paid, and career-blocked subsegment of the labor force—are being held back, largely because of their employers’ failure to address family needs.  Couples are choosing to deal with the problem by having fewer kids.  Why is that a surprise?

My opinion is that the responsibility for this issue lies with employers–with the private sector as a whole–not with individual families.  Fertility rates will not improve until companies start treating mothers better. Those companies with a multinational footprint should be in the lead.


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