Gender Equality and Growth in Brazil

Brazil’s starring role among the booming quartet of emerging markets known as the BRICs is well documented: in a decade the number of people in relative poverty has fallen by half and the percentage of those living on $1.25 a day fell from 9.8 percent to 6.1 percent. Low inflation, strong reserves management practices, and robust economic growth have enabled this economic surge.

Yet the less glittery side of the Brazilian story remains: the country came in at a disappointing 130 out of 185 in the 2013 World Bank Doing Business rankings, behind Indonesia and Ethiopia and two spots lower than the previous year. Questions about the quality of secondary education and the adequacy of the country’s infrastructure continue.

Recently the country has hit what the Fitch ratings agency calls a “stumbling block.” The heady economic tailwinds of the past decade have given way to slowing growth as commodity prices decline and exports fall.

One answer in addressing the challenge of long-term growth in Brazil is the promotion of gender equality, according to a newly published World Bank paper. As the IMF recently noted in another paper,

jobs and increased labor force participation, including among women, are important to foster inclusive growth and reduce poverty and income inequality; and social cohesion and job creation can lead to more sustained growth… at the heart of this nexus lies productivity growth—those economies with the highest growth in per capita incomes are also those that have experienced the highest growth in labor productivity by investing in physical and human capital and embracing technological change.

Brazil has made enormous strides in addressing gender disparities. Literacy rates have soared and women now outnumber men in tertiary education. As the World Bank notes, women in the work force now count 8.8 years of schooling, while men have an average of 7.7 years. And the “female to male labor force participation rate increased from 52.2 in 1990 to… 73.3 in 2010.”

Still, however, challenges remain and they hamper economic progress. Brazilian women earn 58 percent of what their male colleagues earn while devoting over 15 hours more each week to housework than men. “Discriminatory practices and social norms” seem to account for the earnings gulf.

World Bank research points to two strategies that could help to address this inequality and to spur economic growth.

1. Help women make the most of their time—and their talent. As the World Bank puts it, promote “access to infrastructure by investing in rural roads, power grids, and others: the direct effect of this policy is of course an increase in the public-private capital ratio, which therefore promotes growth directly. In addition, this increase reduces mothers’ time allocated to home production and raises time allocated to market work, human capital accumulation, and child rearing.” This additional time to devote to their own “human capital accumulation raises women’s bargaining power, which translates into a higher family preference for girls’ education and children’s health, an increase in the average share of family income spent on children, and a lower preference for current consumption.”
2. Address the inefficiency of unequal pay and pass antidiscrimation laws to address gender bias in the workplace. “Women’s ‘take-home’ pay therefore increases, all else being equal,” the World Bank report says. “The direct effect of this policy (at the initial level of wages) is to raise family income. In turn, higher income leads to a higher level of private savings and higher private capital stock, which have a direct positive effect on growth and bring higher tax revenues.”

The result of these increases is that “fostering gender equality, which may depend significantly on the externalities that infrastructure creates in terms of women’s time allocation and bargaining power, can have a substantial impact on long-run growth in Brazil."

Few expect that either of these changes will happen in an instant and perhaps even over the longer term. But the benefits to economic growth—and the IMF’s goal of “inclusive growth”—of enhancing women’s ability to participate in their economy and to get paid for doing so show up in the numbers.