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The macro economy and gender: the IMF goes some way but not quite far enough

The International Monetary Fund (IMF) Staff Discussion Note Women, Work, and the Economy: Macroeconomic Gains from Gender Equity, September, 2013 (Fund Note), covers no new territory. Nor does it really connect with what the IMF does through its IMF-supported programs with developing countries. For the most part, it presents data and analysis of the World Bank’s World Development Report 2012: Gender Equality and Development, supplemented with Organization for Economic Cooperation and Development (OECD) analysis as well as insights and findings from an earlier IMF Working paper, Gender and Its Relevance to Macroeconomic Policy: A Survey.

Yet the IMF’ Staff Discussion Note, while not remarkable, is very important for one simple reason:  it is published by the IMF, and, the IMF has credibility and influence with finance ministers and central bankers like no other institution. So if the IMF says that gender matters, then, it does. And that is precisely what the Note says, quite explicitly. The report of 17 pages plus 8 pages of boxes, appendices, figures, tables and references written by eight authors makes the following salient points:

  • Women’s contribution to  measured economy activity, growth and well-being is far below its potential;
  • Progress on gender equality has stalled; and
  • Gender inequality has serious macroeconomic consequences.

While the Fund’ Discussion Note does not explicitly depart from the IMF’s traditional pre-occupation with the trade-off between growth and equity, it does say, if understatedly, that ‘the challenge of growth, job creation and inclusion are closely intertwined.’

The Fund Note does a credible job of reporting on the state of existing research on gender and labor markets, highlighting the inter-linkage to macroeconomics gain and losses to the economy arising from persistent gender inequality. It also includes a short set of recommendations for fiscal policy to help improve gender equality.  Over all, the Note sends positive messages about the importance of gender equality to economic performance. It also voices concerns about the seeming slow-down of progress in gender equality. This should raise concerns in developing countries as well as help to strengthen the impetus towards continuing progress on gender equality and women’s economic and social empowerment in place such as the Caribbean, where there is a perception that gender equality has been achieved and women’s progress is assured upwardly. Hence in these countries there is a backlash on gender equality often accompanied by a strong call for addressing what is now being termed as male marginalization.

Lastly, and quite significantly, the Fund’s Note flags unpaid work. It argues that women in most economies spend considerable more time than men on unpaid work (child-rearing and household tasks) which is not accounted for in GDP. But the Discussion Note does not explore this issue beyond that.

The IMF Staff Discussion Note, however, is disappointing on two levels: first, it tends to instrumentalize gender equality and, second, while it emphasizes how gender equality can impact macro policy there is no discussion about the adverse impacts of macro policy on gender equality and women’s empowerment.

The heavy emphasis on the contribution of gender equality to macroeconomic performance, while important, does seem to reinforce a trend in international organizations of treating gender inequalities and biases and discrimination against women primarily in terms of their impact on women’s contribution to measured economic activity and the enhancement of macroeconomic performance. Does this mean that if women had little or no impact on measured economic activity there would be no need for an IMF institutional view on the matter? There is a need to emphasize that gender equality is good and desirable intrinsically; its basis is the human rights obligations of IMF member countries. Women must have equal access to tangible and intangible resources the same as men so that they can maximize their choices and options in society and realize their full potentials.

Because the Note sets aside the rights-rooted approach to gender equality, it is not surprising that it does not discuss or address the contribution and potential consequences of the Fund’s approach to macroeconomic policies on gender equality and women’s economic empowerment. The consequence is that the inter-linkages between gender inequality and the Fund’s business model and its core functions—lending, economic and financial surveillance and policy advice– are not examined. This is surprising given the vast literature, most recently arising from the 2008-2009 global financial crisis, as well as, from analyses of the Asian Financial Crises of the 1990s and the 1980s critique of structural adjustment policies, that argued that the Fund’s approach to exchange rate management and fiscal and monetary policies have serious adverse impacts on women, poverty, work and the economy. While there a few lines about poverty in the Note, there is no attempt to explore poverty dynamics underlying the issue of women and work and how fiscal and monetary policy impacts on these dynamics.

While it is undeniable that Poverty Reduction and Growth Facility (PRGF)-supported programs in developing countries have provided support for social issues, it is also the case that macroeconomic adjustment in IMF-supported programs have continued in their traditional business-as-usual pathways of enforcing fiscal consolidation and conditionalities that have adverse consequences for both employment and the social sector. For example, one of the key recommendations of Fund’s policy advice to developing country’s economic decision-makers is centered on the reduction of government services and public sector employment—a key area where women have made the most consistent and sustainable advance, both in terms of the quantity and quality of employment: in some countries many women are in senior management positions in the public sector more so than they are in the private sector. Yet, invariably Fund policy advice to troubled economies centers on reduction of public sector employment and facilitates the privatization of public sector enterprises. Likewise, exchange rate advice usually does not take account of the most often adverse impacts on prices and employment in the domestic economy, such as the inflationary impacts of devaluation.

The first section of the Note, ‘Macroeconomic implications of the labor market divide: does gender matter?,’ makes arguments that are useful to gender advocates supporting better integration of gendered and social content to labor and employment policies as well as the macroeconomic framework that girds these policies, including that:

  • When women are able to develop their full labor market potential, there can be significant macroeconomic gain.
  • Better opportunities for women to earn and control income could contribute to broader economic development in developing economies.
  • Equal access to inputs would raise the productivity of female-owned companies.

The second section of the report, ‘Female labour force participation: Stylized facts,’ essentially reproduces findings from the OECD and the World Bank on women’s labor market participation. These include that:

  • Average Female labor force participation is low at around 50% (low or 21% in Middle East and North Africa to a high of 63% in East Asia & the Pacific and Sub-Saharan Africa.
  • Women are still over-represented in sectors characterized by low status and pay.
  • Gender gaps in education have been declining but literacy rates for women continue to lag those of men.

The third section on ‘gender-specific labor market characteristics’, is short and to the point. It highlights that women contribute significantly to economic welfare through unpaid work, which also constrains their availability for paid work. In a subsequent section, it argues that better access to comprehensive, affordable and high quality child care could free up women’s time for formal employment. The Note also highlights the continuation of perverse gender gaps that negatively impact economic performance. Those identified are a significant gender wage gap (16 per cent in the OECD, relatively high in emerging economies—China, Indonesia and South Africa; narrower in Middle East and North Africa), high gender gaps in self-employment (higher than in wage employment) and low female representation in senior positions in entrepreneurship.

The fourth section of the Note, entitled, ‘Policies in support of higher female labor force participation’ is based on the premise that ‘well designed, comprehensive policies can be effective in boosting women’s economic opportunities and their actual economic participation.’ It correctly argues that fiscal policies have significant scope for increasing female labour force participation. But the argument that social welfare benefits and pensions weaken the link between labor supply and income treads on dangerous ground as it may bolster conservative argument that social welfare is a disincentive to work and hence a justification for the current austerity approach that cuts governments’ social program. In many societies women actually can benefit from greater expenditures on social welfare that help to increase their availability for productive work, increase the profitability of their enterprises as well as increase leisure time.

Many of the fiscal policy measures that the Discussion Note proposes, while they may be appropriate for OECD countries such as the US (i.e., reduction of secondary earner tax wedge) may have limited appeal in developing countries. Other proposals such as tax benefits for low-wage earners can be useful where implementable, especially in emerging economies. But for many low-income developing countries the leverage they need to stimulate labor participation, including women’s participation and employment creation, is not so much on the tax side but on the expenditure side. These countries need to undertake expenditures on primary, tertiary education and technical training as well as promote the  provisioning of  early childhood education and day care programs, improve feeder roads for women farmers, increase government support for storage and distribution facilities and gender sensitize extension services and marketing information to access international markets. So a fiscal boost is what is needed. In such cases, the IMF could consider, in partnership with the World Bank, a grant-based funding facility to enable many poor developing countries to undertake such measures.

But the main unconditional fiscal measures to help support female labor force participation rate in the discussed Note is the design of family benefits in the form of parental leave schemes. The other fiscal expenditure measures discussed in the report, such as reform of child support and other social benefits are only given qualified support. Reform of child support it is argued can be a disincentive to work. Further, the Note also argues for linking such benefits to labor force participation (or ‘in-work benefits’).  Hence, there is overemphasis on formal labor market, whereas many women in developing countries tend to be located  in the informal and subsistence economies.

With unconditional support only proffered for expenditures that improve or enable women’s access to labor market — child care, reforms of pensions, expenditures on education of women and improvements in rural infrastructure, there is less attention paid to women as farmers and own-account producers. In general the set of policies discussed to increase the demand for female labour is consistent with findings in the literature and good practices for emerging and developed economies. But without some adjustments in macroeconomic policy frameworks, the measures discussed are likely to remain aspirational for poor developing countries to beginning to think through in their national development strategies.

In the concluding section of the paper, ‘Further IMF Work to strengthen the role of Women in the Economy’, the paper says that the IMF will continue to contribute to enhancing the analysis of the macroeconomic effects of gender inequality and inclusion, including its surveillance work.  But there is no commitment to examine how macroeconomic policy affects gender inequality and inclusion. Given that the main competence of the IMF is in this area and that the most powerful interventions by the institutionare with regard to standby programs and external payments crises, it is not good enough for the IMF to rely on the World Bank and the OECD.  Does the IMF intend to incorporate gender issues in designing these programs? In the case of surveillance, does the IMF intend to point out the harmful spillovers from developed country policies on gender equality both in general and, more specifically, in developing countries?Thus, while enhancing gender disaggregated data and measurements can help in the work to enhance economic opportunities for women, it is not enough.  Getting the collection and analysis of gender disaggregated data right is an important and extremely desirable area. It is an area of work that will undoubtedly benefit from IMF expertise and well-resourced information and data analysis apparatuses. But it is also important to signal what are the key parameters to measure, monitor and track. Such measurement parameters and frameworks should also relate to the design and implementation of IMF-supported programs and their effects on gender and the economy and work.

A second important area flagged for further work by the Discussion Note is the IMF analysis with regard to fiscal policies. Here the specific policy response is focused tax codes— to identify and remove provisions that discriminate against women. But there are also broader and deeper fiscal policy mechanisms on which the Fund should focus. For example, fiscal measures to ensure gender equality oriented expenditure as well as non-gender equality interventions that will benefit communities and women.

Additionally, gender budget analysis could be incorporated in IMF and World Bank  public  financial management and the financial and technical support that they are designed to promote, the process of reforming developing countries’ performance budgeting, tax reform, budget classification and accounting methods. Clearly medium-term fiscal and expenditure frameworks and integrated financial management information systems could be adjusted (as a part of reflecting and strengthening the link to ensure public priorities) and reflect the new understandings about gender equality and macroeconomic performance and the general social accountability framework. The proposed IMF Revised Fiscal Transparency Code includes the provision of detailed information on the financial impact of major policies on different demographic groups, including income-specific, gender specific issues. Yet, there was no systematic attempt to look at how the Fund itself does macro-policy in terms of its fiscal and other recommendations to governments, especially to debt-constrained economies.

The IMF needs to also spell out more thoroughly its approach to social policy and employment-generation schemes. In the report, it flags those of Brazil. But Brazil, as well as India, is not involved in IMF lending programs with conditionalities. Will future IMF programs make space for governments to undertake such programs?

All in all, kudos to the International Monetary Fund Managing Director, Ms. Christine Lagarde, for speaking in multiple fora about the report and therefore highlighting the issues well beyond what a discussion note might otherwise entail.

Mariama Williams is Senior Programme Officer with the South Centre, a member of  Caribbean DAWN, a Director of the Institute of Law & Economics (Jamaica), and a Trustee of the Dag Hammarskjöld Foundation.


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