Strong link between gender pay gap and overall inequality, IMF report finds

23 Oct 15

The International Monetary Fund has found a strong link between the levels of the gender pay gap in a country and overall income inequality.

The fund’s Catalyst for Change: Empowering Women and Tackling Income Equality report used the UN’s multi-dimensional Gender Inequality Index to study the relationship between the two phenomena in almost 140 countries over two decades.

Even when controlling for the standard factors of income inequality, the report found a strong relationship between gender pay gaps and inequality across all income groups.

Launching the report at an event hosted by Oxfam America yesterday, IMF managing director Christine Lagarde said that eliminating employment gender gaps could boost gross domestic product by 5% in the US, 9% in Japan, and 27% in India.

“Tackling gender inequality can reduce income inequality significantly. And, as we know, reducing excessive inequality is conducive to more sustainable growth,” she stated.

The report concluded that gender income equality would reduce overall income inequality by 10 Gini coefficient points – the measure of inequality in countries.

This is a “big deal”, said Lagarde, as 10 Gini points marks the approximate difference between Europe’s least inclusive and most inclusive country.

However, the report highlighted that the underlying factors for gender-based income inequality across different economies varied.

In advanced economies ‒ where women have greater opportunities ‒ pay gaps arose mainly from different levels of economic participation. In emerging markets and low-income countries this was mainly due to inequality of opportunity, in particular gender gaps in education and health.

There was therefore a need for different policy approaches, the fund concluded. In advanced economies, recommendations included introducing paid parental leave for both genders, the provision of high-quality, affordable childcare and action to raise female pay rates to equal males.

For emerging market and low income countries the report recommended investments in health and education for women, improved access for women to finance and the removal of existing legal barriers to equity.

“By creating opportunities for women and by increasing their economic participation, policymakers can tackle income inequality,” Lagarde concluded.

“Today there is a need for sustained growth and stability. To achieve this we must go on by strengthening inclusion ‒ including by empowering women.”

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