The Impact of Women in the Economy and Markets
When you invest, you are buying a day you don’t have to work.
— Aya Laraya
Having just commemorated International Women’s Day on 8 March, we felt that it would be good time to highlight the important role women play in many aspects of the global economy. Apart from economic growth, the impact of women can influence productivity and stock market performance as well.
Labour supply is closely related to long-term potential GDP growth in a country’s economy and the overall decline in the labour supply due to ageing populations helps to explain the slow decline in growth in many of the world’s developed economies shown in the chart below.
Increasing productivity growth can help to alleviate the decline in labour participation. It is no wonder that our Singapore government is obsessed with increasing the productivity of the working population.
With women forming half of the global population, women’s participation in the labour force can influence economic expansions. Demographic and productivity trends are closely linked over the long-term and women play an out-sized role in the productivity story as they are more likely to invest in their children and can contribute to more diverse work teams.
Research shows that individuals with higher education are more likely to be employed productively. And in an encouraging increase, education rates among women have increased over time and are higher than men in most developed countries. As such, women play a very important role in the economic productivity story.
Growth in labor markets is also important for equity market performance in the long-run. A popular way of analyzing the impact of demographics on equity markets is through the Mature-to-Young, or MY ratio, originally developed by economists Geanakoplos, Magill, and Quinzii.
To summarise a long story, maturing workers are good news for equity markets as they are more productive, make more money, and generally save for retirement or other factors by putting their savings back into the equity markets. Due to sustained strong growth in maturing-age populations in the emerging and frontier world, and even parts of the developed world, like the U.S., the global MY ratio is set to rise beyond 2030 as projected in the chart below.
Unfortunately, in spite of the importance of women, there is still a gender pay gap that exists between them and men in the workforce, albeit narrowing over the years. The latest study by MOM based on 2018 figures showed that women on average earn approximately 6% less than men.
Conversely, research shows that women manage their finances better than men. A study by investing giant Fidelity in 2017 showed that women not only saved more than their counterparts, they were also more willing to participate in retirement plans. Depending on the prior research done, women in general tended to hold slightly more risk averse portfolios but outperformed men. Medical science suggests that the poor performance of men could be explained by hormones.
The outperformance of women in investing and their willingness to save is good news. After all, since women are more likely to live longer than men, the need for adequate retirement is even greater. Females outlive males in every major economy, spanning from three years more in India, to over ten years longer in Russia.
We acknowledge the accomplishments and the importance of women in global economic progress and we hope that over time, inequality will cease to exist. At the same time, we encourage all women out there to also take charge of their finances and to invest in their future. If you need a second opinion on your money matters or would like to just have a quick check-up, feel free to contact your advisor or through our corporate contact page.
