Gender Gaps and Growth: The Economic Impact of Reducing Workplace Inequality

The study examines how declining gender barriers in employment and wages have driven economic growth, increased female labor force participation, and expanded the service sector across 91 countries over five decades. It finds that reducing gender norms had a greater impact on economic development than wage discrimination, highlighting the need for policy interventions to promote gender equality in the labor market.

For more than 50 years the role of women in the global workforce has changed significantly. A study by the World Bank and the University of Virginia explores how reducing gender-related job restrictions has influenced employment patterns and economic growth. Using data from 91 countries, the research focuses on six major economies—India, Indonesia, Brazil, Mexico, Canada, and the United States—to show how gender equality in the workplace has shaped economic progress. The study finds that as gender barriers decrease, more women enter the workforce, especially in service-based industries, leading to significant economic benefits.

How Jobs Have Changed for Men and Women

As countries develop, men and women move through the workforce differently. Traditionally, men have shifted from agriculture to manufacturing and later to service-sector jobs. Women, however, have followed a different path. In poorer countries, when agricultural jobs decline, many women leave the labor force rather than transition to new sectors. In wealthier countries, they return to work, but mostly in the service sector rather than manufacturing. This pattern shows that women face additional obstacles when trying to enter certain industries, such as factory work, which continues to be male-dominated worldwide.

The study also finds that middle-income countries tend to have the highest levels of job segregation between men and women. In these nations, economies are changing quickly, but policies supporting gender equality in the workforce often lag behind. As a result, women remain underrepresented in many high-paying fields, even as economies grow.

The Impact of Gender Barriers

The research identifies two main obstacles that limit women’s participation in the workforce: gender norms and wage discrimination. Gender norms include societal expectations and cultural beliefs that discourage women from working in certain jobs. These may include pressure to focus on family responsibilities or a lack of support systems like childcare and parental leave. Wage discrimination, on the other hand, occurs when women are paid less than men for doing the same work.

Both of these barriers create inefficiencies in the labor market. When women are prevented from working in jobs where they can excel, economies miss out on valuable skills and talent. This affects productivity and slows overall economic growth. The study finds that while wage discrimination has declined in many countries, it still remains a major issue. Even in the 2010s, women were earning only 70 cents for every dollar earned by men, compared to 50–56 cents in the 1970s. Unlike job participation rates, which tend to improve as economies develop, wage gaps remain widespread regardless of a country's level of development.

Why the Service Sector is Growing

One of the most noticeable effects of declining gender barriers is the rise of the service sector as a leading employer of women. If gender restrictions had not changed since the 1970s, far fewer women would be working today, and economic growth would have been much slower. The study finds that reducing gender barriers has contributed to 40–45% of employment growth in services and 20–35% of output growth in manufacturing and services.

Middle-income countries such as Brazil and Mexico have seen the biggest impact, with gender equality contributing to more than 50% of their GDP per capita growth. In contrast, countries like India, where gender norms remain restrictive, have experienced slower progress. The study also highlights how increasing female employment raises household incomes, leading to higher consumer spending and greater demand for services. This, in turn, reinforces the shift toward service-based economies.

How Talent is Wasted Without Gender Equality

The study explores how gender barriers prevent women from fully using their skills. When societies restrict women’s job opportunities, many talented workers are left out of the economy. The research finds that declining gender norms have had a greater impact on economic growth than reducing wage discrimination. This is because fewer restrictions allow more women to enter high-paying jobs such as professional and managerial roles.

The study also compares two ways of thinking about job choices:

1. Preference-based choice, where people take jobs based on personal interests.
2. Talent-based sorting, where workers enter jobs that match their skills and abilities.

The results suggest that economies grow faster when workers are allowed to follow their talents rather than being forced into roles based on gender norms. This highlights the need for policies that ensure fair job access for all, regardless of gender.

What Can Be Done to Improve Gender Equality?

The study suggests that improving gender equality requires more than just equal pay laws. The biggest changes come from policies that address cultural norms and workplace restrictions. Key recommendations include:

• Improving education access for women to increase job opportunities.
• Providing affordable childcare to support working mothers.
• Enforcing strong anti-discrimination laws to ensure fair hiring and promotions.
• Encouraging companies to create inclusive workplaces that allow both men and women to thrive.

By implementing these policies, governments and businesses can help close gender gaps in employment and wages. The research shows that when gender barriers are removed, economies benefit from increased workforce participation, higher productivity, and stronger economic growth.

The Road Ahead

While progress has been made, gender inequality in wages and job opportunities still exists in many parts of the world. The study underscores the importance of continued efforts to reduce gender-based labor market barriers. Removing these restrictions will allow economies to grow faster and create more job opportunities for everyone. Future research should focus on understanding why gender norms change at different rates in different countries and identifying the best policies to promote equality.

By ensuring that women have the same opportunities as men in the labor market, countries can unlock greater economic potential and improve overall prosperity. Gender equality is not just a social issue it is a key driver of economic success.