Managing Partner, McKinsey & Company, Inc.
Professor of Public Policy and Economics, Frank Batten School of Leadership and Public Policy, University of Virginia
Senior Fellow and Director of the Women and Foreign Policy Program, Council on Foreign Relations
According to a new McKinsey Global Institute (MGI) report, advancing women’s equality could add $12 trillion to GDP by 2025. This seminal report, entitled “The Power of Parity,” is the product of research from ninety-five countries on the relationship between gender parity and economic growth. Kweilin Ellingrud, a lead researcher on the report, and Christopher Ruhm, whose research examines the economic effects of work/family policies, joined the Women and Foreign Policy program for a discussion about the economic imperative of promoting gender equality. This roundtable was generously sponsored by the William and Flora Hewlett Foundation.
VOGELSTEIN: OK, good morning. Welcome to the Council on Foreign Relations. My name is Rachel Vogelstein. I’m the director of the Women and Foreign Policy Program here at CFR, which has worked with leading scholars for more than a decade to analyze how advancing the status of women advances U.S. foreign policy objectives.
I want to begin by expressing my gratitude to Ruth Levine and Alfonsina Peñaloza of the William and Flora Hewlett Foundation for their support for the Council’s work, including our meeting this morning.
I also want to recognize the leaders of CFR’s Women and Foreign Policy Advisory Council who are joining our discussion this morning.
This is the first meeting of the Council’s Hewlett Foundation Roundtable Series on Revitalizing Economic Growth in the 21st Century, and it comes at an auspicious moment in the global economy. Over the past decade, we have witnessed an economic slowdown that has roiled markets from Asia to Europe. We have seen countries struggle to stabilize market turmoil and promote growth. And we have seen world leaders, policymakers, and multilateral economic institutions grapple with policy questions about how to reverse this economic tide.
Today’s discussion also occurs at a time when the evidence of the relationship between women’s advancement and economic growth has never been clearer. Over the past two decades, analyses from the International Monetary Fund, the Organization for Economic Co-operation and Development, and the World Bank, among others, have demonstrated the growth potential of increasing women’s labor force participation and economic opportunity. Today we will hear new evidence on the importance of women’s economic participation from a recent report of the McKinsey Global Institute, which concludes that closing the global gender gap could drive between 12 (trillion dollars) and $28 trillion in GDP growth by 2025.
Yet, despite the evidence of the importance of women’s economic participation to growth and the critical need to pursue strategies to jumpstart the global economy, the data show that barriers to women’s participation in the marketplace persist. How can we address the legal, policy, and cultural barriers to women’s economic participation around the world? And what will be required to finally unleash the full economic potential of 50 percent of the world’s population?
Well, today we are fortunate to host two experts who are leading the charge in helping to answer these questions. First, we are delighted to be joined by Kweilin Ellingrud, a partner at McKinsey & Company and the lead author of the aforementioned McKinsey Global Institute report entitled “The Power of Parity.” At McKinsey, Ms. Ellingrud designs and implements global performance transformations and co-leads McKinsey’s Power of Parity work around the world. Welcome.
We are also privileged to be joined by Dr. Christopher Ruhm, a distinguished professor of public policy and economics at the University of Virginia. From 1996 to 1997, he served as senior economist on the White House Council of Economic Advisors, providing advice on health policy, aging, and labor market issues. He is the co-author of “Time Out With Baby: The Case for Paid Parental Leave,” and he has published more than 80 pieces in economics, public policy, and health journals. Welcome to you.
Please join me in welcoming our speakers. (Applause.)
So we will begin with a few opening remarks from each of our speakers and then commence with our discussion. And, Kweilin, I’d like to turn to you first to share some insight from the report that you wrote on women’s contributions to economic growth. So the floor is yours.
ELLINGRUD: Wonderful. Great. Good morning, and thank you for joining this morning. I’m going to give you a quick tour of the global work that we did, as well as just a brief sampling of the U.S. work and the U.S. insights.
So McKinsey over the last 10 years has invested pretty heavily in the space of women in the workplace. And about a year ago, we released a report called “The Power of Parity” across 95 different countries, over 95 percent of the world’s women, 95 percent of global GDP. And I’m going to share with you the insights from that work.
So if you could flip to the next page.
You know, as we mentioned, you know, women are 50 percent of the women’s—population, but far from equal. So we took a look at over 100 different indicators around the world, boiled that down to 15 that we thought most clearly captured where women were and where the biggest gaps were.
On the top left, you see some of the gaps in terms of women in the workplace. So about 36 percent of global GDP from women. About 655 million fewer women than men in the labor force.
On the top right, you see some of the gaps in terms of essential services. So the two interesting ones we thought were 195 million fewer women than men are literate; and 190 million fewer women than men have access to a formal financial bank account, and that is either through a banking or financial institution, or in some cases in some parts of the world through their mobile phones. And that’s not a coincidence that those two numbers are so similar, the 195 (million) and the 190 million.
On the bottom left, we see sort of legal protection and autonomy. One in three women around the world have experienced violence from an intimate partner. That was a shocking statistic that we looked around the world. And embarrassingly, here in the U.S., we’re at the global average. And one in a million—1 ½ million girls missing around the world from sex-selective abortions every single year.
On the bottom right, you see some of the political representations piece. So men holding five times the number of parliamentary seats around the world as women.
If you flip to the next page, this was really the broader insight. As you look around—actually, if you—you can flip all the way through. As you look around the world—keep going; sorry, thanks—there were three things that we looked at in terms of the gender gap. There was, first of all, are women participating equal to men? And that, you know, all of the models that look at parity account for workforce participation, but there were two other elements that we incorporated. And that’s the part-time/full-time mix; so men tend to have the majority of full-time roles and women the majority of part-time roles. And then sector mix; women tend to be more concentrated in services sectors or lower-average productivity sectors.
And all three of those components were very important across the globe. In fact, when you look at it and you close the full gap, that opportunity is about $28 trillion around the world. That’s the equivalent of the economy of the U.S. and China put together, which is just staggering.
But we didn’t think that was realistic. We didn’t think that was achievable in the next 10 years. You can’t close the full gap. And we set about figuring out what is realistic—what could we achieve in the next 10 years, given the rate of improvement that we’ve seen over the last 10 years? And across those three factors—workforce participation, part-time mix, and sector mix—we said let’s look at the best rate of improvement within a region over the last 10 years. So, in Europe, that means improving at the rate of Spain. In South America, that means improving at the rate of Chile. And when you do that—match what within that region has empirically been achieved over the last 10 years—that’s what gets you to $12 trillion. That’s what we call our best-in-region scenario. We know that’s aspirational, but we know that’s also achievable if there’s some concerted effort put into that.
That $12 trillion, just to put it in perspective, is the size of the economy of the U.K., Germany, and Japan put together. So incredible global growth at stake if we can get this right.
If you flip to the next page. Yeah.
So, across the board, we wanted to simplify this. We created a simple number between zero and one, and we took this down to the country level across those 95 countries, and here you see the regional results. And we called it a Gender Parity Score. One means perfect equality across both genders; zero means perfect inequality. And you see here, at the highest level, North America at a 74, Western Europe at a 71. You’ve got South Asia at a 44, India at a 48. You see some of the disparity. And I think the key insight here was, when you boil it all down to a simple number, every single region in the world has quite a bit of work to do, including North America.
One of my favorite insights from the work was that you cannot capture your share of the $12 trillion unless you tackle the societal barriers that are holding women back from participating in the workforce. So what you see here is a scatterplot of all 95 countries. Every single dot or symbol is a different country. On the Y axis, you see equality in work; and on the X axis, you see equality in society. And what you see here is a significant relationship where no country can really capture their share of the 12 trillion (dollars)—which is on the Y axis—unless they’re tackling those societal barriers there on the X axis, right? There are some issues, if you will, that you grow your way out of as GDP improves and you move sort of to the top right, but there’s a number of sort of cultural and other barriers that you can’t grow your way out of that really need to be tackled.
And the last piece on the global side, before we shift to just two minutes on the U.S. insights. We boiled this down to 10 impact zones. So the big opportunity of the $12 trillion is exciting. What are the societal gaps that are holding different countries back from capturing that $12 trillion? We boiled that down to 10 impact zones. Five of them are global, meaning there’s no real country in the world that’s doing a great job on these, and five of them are more regional.
So the five global ones across the top: Economic potential, right? Not participating fully in the workplace. Unpaid care work. Women do three times as much unpaid care work around the world as men do. Fewer legal rights. Political representation. Violence against women.
And then more targeted regional focus areas around education, girl child vulnerability, et cetera.
So those were the global insights, and I’ll just spend two minutes on the U.S. insights before we move over to Dr. Ruhm. The next page—next couple of pages, actually.
So the $12 trillion, if you take a look at that on the U.S. level, the U.S. share of that is $2 trillion. That equates to—it’s just shy of the size of the economy of California, which is the biggest state economy. It’s actually bigger than the second-biggest state economy, which is Texas. And if you break that down, we looked at earlier, right, it was 60/20/20 in terms of the three components of workforce participation, part-time mix, and sector mix. On a U.S. level it’s 40/30/30, so similar but slightly different mix here in terms of less from workforce participation.
And if you flip to the next page, interestingly, as you break that down by state, every single state in the United States could increase their GDP by at least 5 percent, and half of the states could increase their GDP by 10 percent or more.
And then, what are the societal gaps, then, in the U.S. that are holding us back from capturing our share of that 2 trillion (dollars) within the United States? There were six impact zones. Many of them were global, right, so consistent with the global impact zones that we just saw. And then a couple of them were U.S.-specific. So I’ll just share the two U.S.-specific ones.
Single mothers and teenage pregnancy were very specific to the U.S. Single mothers—in this day and age, right, there’s a lot of single mothers by choice. Wonderful. That’s not what we’re talking about here. What we’re talking about here is the link between single mothers and intergenerational poverty. So 60 percent of families in poverty in the U.S. are led by a single mother. That’s what we’re talking about in breaking the cycle here. The other piece, teenage pregnancy, 600,000 girls between 15 and 19 every year become pregnant. That actually has improved quite a bit over the last few years and last decade, but still quite a bit of work to do there. So those are the societal barriers in the U.S. holding us back from capturing the 2 trillion (dollars).
And the last piece, as we connect to Dr. Ruhm’s area of focus, is within the workplace—so this is U.S.-specific research in partnership with Lean In. We did a survey across 118 different companies and said, what are the barriers within the workplace, as you think about the typical large company, that are holding women back in that environment? And what you see is that the front end of the funnel starts at about 45 percent women, which is interesting because the majority of valedictorians and higher GPAs in this country are actually from women. So already at that first inflection point we’ve got a bit of a skew. That 45 percent women going all the way down to 17 percent women in that C-suite.
And we see a couple of big trends here. One is we see a lot of women leaving the workplace around maternity leave, as Dr. Ruhm will share with us. But we also see women taking more staff roles versus line roles—so head of HR, head of finance versus P&L owners, where the CEO role is typically pulled from. We also see women with more narrow and more junior sponsorship networks, and that over time is hurting them as they advance to different levels.
We had a hypothesis. And many people said, oh, it’s just that women are leaving; they’re voting with their feet, they don’t want to stay. That is categorically not true in the data that we saw. In fact, women stay at the same rates as men. And in fact, in the C-suite, they stay at double the rate as men. So if you get women, senior women to the C-suite, they’re actually more loyal and stay quite a bit higher. So, as we think about that and connecting to some—what are the levers within corporate America that we can pull so that we keep more women in the workplace and help them advance, hopefully that will connect to some of Dr. Ruhm’s focus.
VOGELSTEIN: Thank you for that global picture of the economic potential that we are leaving on the table, and also for relating it back to the situation here in this country to give us an insight into many of the factors that go into that.
Chris, I want to turn to you. You’ve researched the economic effects of policies to promote women’s economic participation, particularly paid family leave. Can you tell us what your research has uncovered about the economic effect of paid family leave in countries around the world?
RUHM: Yeah, sure. I’m happy to. And it’ s wonderful to be here, and thank you all for coming.
So what—I’m going to actually be very quick here so we can get to the questions, and I just want to give you a little bit of a framework.
So I’ve been working on these issues for over a decade, probably 15 years. And one of the things that’s remarkable is how much interest there is right now, and I think you’re all aware of that. I think in the U.S., at least, we are seeing I think the opportunity for the kind of change that we have not seen in, well, probably ever, really.
And so, to give you a little background, when I got into this, I didn’t—I was not an advocate for leave policies. I wasn’t an opponent either. I was just looking at research. And my research has convinced me that these policies, if they’re well-structured, can really be quite beneficial and quite helpful.
I should say I don’t view parental leave policies as a women’s issue. I view it as a—maybe somewhat a family values issue, as a kind of society we are.
I think the bulk of the evidence is that there are net benefits. And in fact, there’s very little evidence of significant costs for well-designed policies.
With that said, I think we need to be careful how we structure these policies. And although we’re talking about economic benefits here, I think the benefits extend well beyond that.
So just to give you a little background, if you go to the next slide, I’m going to just show you a couple. I only have two slides, and they’re not going to be pretty like the ones you just saw. (Laughter.) This is the—academics, you know, we don’t—we don’t do pretty stuff. (Laughter.)
But this is showing you—these data are a few years old, but these are to give you just a sense of what we see in other industrialized countries around parental leave. So these numbers are in months, not weeks. These are months of leave. And you notice the first—the first column is showing you total leave, so those are ranging—the low is Switzerland here, three-and-a-half months. That’s not so much. But you see a lot of these countries are a year or more of paid leave, in some cases—sorry, of total leave—in some cases up to three years of leave. Now, there may be some concerns we might have when you get to those durations of leave, but I just want to point out the very long leaves—leave entitlements here.
If you look—the next column is showing you leave that’s exclusively available to fathers. And that’s, you know, a much smaller number, obviously, but still in many of these countries it’s considerable. Now, often that leave is unpaid. And one thing we know is fathers rarely take leave that’s unpaid, or they don’t take it for very long.
The third column is showing you paid leave, and so—and here, again, remember these are in months. Part of the point here is we’re talking about much longer durations of leave than many of us would ever consider in a country like the U.S.
The last one is paid at more than two-thirds of earnings. And you see even there some of these countries are, you know, on the order of nine months of a year. If you’re look at, for example, a Canada, you’ll notice they’re at zero. The reason they’re at zero is they pay 55 percent of your salary; they don’t pay two-thirds. But they’re paying 55 percent for a year.
So this is just to give you a little sense. If you look around the world, or at least the industrialized world, anything that we’re talking about in the U.S. is extremely modest in comparison. I mean, even policies that would be viewed as radical in the U.S. are quite modest compared to other countries. And maybe in Q&A I can talk a little bit about structure of these policies, if we want.
If you go to the next slide, I just want to move now to the U.S. and show you what we have here. Now, as you probably know, the Family and Medical Leave Act gives you 12 weeks of unpaid leave if you qualify for it, and there is eligibility criteria. There are four states now that have paid leave programs either in place or about to go into place. So the first one was California, and we’re talking about six weeks of paid leave at 55 percent of your wage rate. That’s actually a little bit more complicated, and again, in Q&A we can get into that. But New Jersey’s also six weeks. Rhode Island is four weeks. And then, as you probably know, New York has just put a policy in place that’ll start in 2018, and that’s going to be initially eight weeks and going up to 12 weeks. So that will be the longest paid leave in the U.S. that we have so far.
So just to say kind of the bottom line what I see on these policies, leave policies that aren’t too long or too generous, there’s pretty clear evidence to me of net benefits. So net benefits in terms of things like women’s labor force participation and career advancement, also some evidence of benefits in terms of child health. So, for example, in some of the work I did on European countries, we see declines in infant mortality, particularly in the post-neonatal period—that’s after the first month, and that’s where time with the baby is likely to make a difference.
I think what I’ll do is stop there and we can go to more general Q&A.
VOGELSTEIN: Thank you for that overview of the economic effect of paid leave policies around the world.
Kweilin, I want to follow up on one of the points you mentioned about the economic opportunity that’s presented by the empowerment of women, as well as some of the persistent barriers you highlighted that continue to inhibit women’s economic participation. Based on your research, what would you say are the most effective solutions that you’ve seen globally to address some of the barriers that still remain?
ELLINGRUD: So some of the barriers we’ve seen—we mentioned Spain was one of the fastest-improving countries in Western Europe, and Chile in South America. It’s not actually a single sort of silver-bullet solution.
What we see is actually the government working in concert with the private sector is what typically works, and in some cases even with the nonprofit sector. So either dual-sector or tri-sector collaboration has worked quite effectively in many of these markets. That’s on the sort of economic participation side.
On the societal side, you see the same thing—sort of two or three different types of actors acting together and pulling a couple of different levers. So not just financial incentives or support or attitudinal change, but a number of different things together.
VOGELSTEIN: You mentioned Spain and the progress that we’ve seen there. You’ve surveyed countries all over the world, 95 countries for this report. Can you give us a sense, based on your review of the data, which countries have made the most progress over, let’s say, the last 10 years? And what can we learn from those examples?
ELLINGRUD: Yeah. I think some of the exciting examples, both on the workplace—but actually I find some of the societal gaps and some of the societal progress even more exciting.
So, for instance, in South Korea, they have really turned around what was a huge issue in sex-selective abortions. So you see the vast majority of sex-selective abortions today in India and China, China and India. But you see South Korea, that had an issue, really have turned that around, both through government regulation, and through nonprofit and sort of doctor collaboration. So they’ve made it illegal to share the sex of the baby before birth, and they’ve collaborated with doctors, as well as a real PR campaign through soap operas and other things elevating the status of women in society. So while what intuitively would have been maybe just a government regulation piece or just collaborating with doctors has really been a cultural attitudinal change campaign to turn around how women are really valued in society.
And so those are some of the most exciting examples I see of real progress. And as you have then more women in the country and you’re really highlighting their role in society and in jobs more, that really advances and propels the country forward. As opposed to Japan, where, right, you don’t see the same progress, and you see really on an economic basis them trying to fight with one hand tied behind their back.
VOGELSTEIN: Chris, I want to turn to you to ask in more depth about paid leave policies. You mentioned that you don’t see parental leave as a women’s issue, and I actually want to ask you about men. Can you talk about what you’ve learned from your research about how uptake of parental leave policies by men relates to women’s labor force participation and compensation, if we think about trying to capture some of the gains that Kweilin has articulated?
RUHM: Yeah, that’s actually a really good question, and one on which we have I think pretty limited information. So we do know a fair bit about whether men take leave, and the answer is—at least some of the answer is a little bit discouraging. If you look in Europe, traditionally almost all the leave was taken by women. And so one of the things that European countries—some European countries have done are put in explicit portions of the leave that are allocated only to the men.
In the U.S., we’ve—(audio break)—policy in the sense it’s an individual leave, right? And the leaves do increase male leave-taking from—it’s actually quite a lot in percentage terms, it’s just from pretty low levels. So I’m not convinced—at least, say, in the U.S.—that we’re going to see big enough effects to affect women’s labor market outcomes.
There is some interesting recent evidence from Canada and Quebec, which has put in kind of a special piece of the leave to the men, that that does seem to have had an impact on time use, and including increased involvement in the labor market by women. So I do think we may be seeing effects longer run. But the research right now is somewhat limited on that question.
ELLINGRUD: If I could add, maybe. Dr. Ruhm, you concentrate on sort of state- and city-level leaves. And I think, as we take that into the corporate setting, what we’ve seen—I think Google doubled their maternity leave and saw the percentage of women that were leaving Google drop by half, which was significant. And if you take that down to the company level, you know, the data differs company by company, but what many companies have seen is around 40 percent or so of women leaving either six months before or six months after a maternity leave. So the policies that you’re talking about are critical to keeping women in the workplace, and many find it financially imperative to keep the women that they’ve invested in and trained for many years in the workplace for longer times.
RUHM: Yeah, and that’s right.
VOGELSTEIN: So I want to ask about unintended consequences for some of these policies. There is some research coming out of Western Europe that suggests that overly generous paid leave policies actually may be detrimental to women’s economic advancements. So can paid leave policies backfire? Do you have a sense of kind of what the ideal policy looks like, again, to try to capture some of the increases in labor force participation, and ultimately economic growth that McKinsey has found is so instrumental?
RUHM: Yeah, right. I mean, we need to be careful. There are tradeoffs here in almost everything we look at.
So one of the concerns is, if you have a policy that’s too generous, and if it affects one group and not another, employers may try to avoid hiring that group or try to avoid promoting individuals in that group. So there’s some evidence, for example in countries like Sweden, that there might be actually more of a glass ceiling for women than there is in a country like the U.S. And one of the arguments has been that that’s related to these very generous policies. So if I’m going to hire you, and I know that you might take a year off and then I’m required to hold your job or an equivalent position, and then maybe you have a second child and take another year off, I might limit what kinds of positions I hire you into. So we need to be careful about the generosity and the structure of these policies.
In the European context, my work has suggested that there’s really no evidence of negative effects up to maybe six months or more of paid leave. Once we get beyond six months there may still not be negative effects, but you might start to worry.
Personally, I would be a little leery about transferring European experiences directly to the U.S. because we’re a very different institutional environment. So my own view would be, in the U.S. context, I would probably start out even more limited—so, you know, maybe three months of paid leave—and then let that play out for a while and see if it works out, and then maybe expand from there. But I think we need to be careful about thinking we have overly precise answers to those.
VOGELSTEIN: I’d like to ask you both one final question before we open up the conversation. You’ve both spoken about the economic effects of increasing women’s participation in the labor force, of the policies that you’ve studied that help amplify that outcome. If the return on investment is so strong and so clear—you know, Kweilin, the numbers that you have cited are astoundingly high—why aren’t policies to promote women’s economic participation higher on the agenda of economic policymakers? And what do you think we can do to increase this issue on the economic agenda?
ELLINGRUD: Yeah, it’s a—it’s a tough issue. I do think it is getting higher on the priority list. I do think connecting this to the right economic thing to do, the smart economic thing to do, tied to growth, is part of the solution because—presumably most of the people in this room care about it because it is the right thing to do, but not necessarily the economic thing to do. And as politicians connect their political futures to bringing back growth, economic growth, I think some of the policies that have helped women both get in the workplace, stay in the workplace, and progress to higher levels, I think that will become more of the politically astute thing to do in the future. So a lot of work left to do. But as we connect not just the right thing to do, but the economically smart thing to do, I think that will help accelerate a number of these policies.
RUHM: Yeah, I think, you know, part of it, it is—it is hard to change cultural norms. So, for example, on the—on the leave front, one of the things that I think fathers taking more leave does is it changes the norm, what is—what’s expected of fathers and of mothers. But I think those are—those are changes that are slow to make. I think the kind of work that Kweilin’s doing, showing that there are big economic benefits, is a piece of it, to really say there’s something tangible here.
I also think changing the conversation a bit in terms of what is a family value. You know, I think sometimes there is an image that has been portrayed of what that means, and I think it’s not correct. So I think that’s a piece of it also.
VOGELSTEIN: Well, I’d love to open the conversation to questions. So please raise your placard and state your name and affiliation, and we’ll get to as many as we can. Joseph.
Q: Excuse me. Let me identify myself. I’m a lawyer. I have counseled the Springboard ventures—Kay Koplovitz, Amy Wildstein, founders of Springboard enterprises.
What I am sensing is that we’re overlooking a very significant portion of our economy, and I mean in every way, shape, or manner, which is the start-up economy. We’re confused about GDP doing this or that. The start-up economy is booming. And the start-up economy, Springboard enterprises an example—Springboard ventures is featuring women-owned, women-led companies. And if I were—by the way, parental leave if a woman owns a company is superfluous because—(laughs)—she’ll be working from the hospital bed. And as you know, Muhammad Yunus, all his loans go to women throughout Africa, I think 100 percent.
So I would like to hear more about sponsoring gender diversity and support for women-owned enterprises and women-led enterprises, because I think that’s where the money is. And when I continue to read in The Times and The Wall Street Journal, we’re confused. The economy is powering along, but the GDP doesn’t seem to be doing X and Y. You are not measuring the economy I’m talking about where people don’t even have salaries. They work for nothing 24 by 7 because they own the company. Anyway, I’d like to see what you think about that.
ELLINGRUD: Happy to answer, and Doctor, please jump in. So I’m very familiar with Springboard and actually spent two years working in a nonprofit helping women start businesses and managed Springboard New England for a year.
But you’re absolutely right. Women are the growth engine of this economy, and start a number of businesses. I think some of the statistics that we looked at at that Fortune 500 level, right, starting at 45 percent and going down to 17 percent in the C-suite, that gets better and better the smaller we go. So if you look at sort of medium-sized businesses, that’s a little bit better. If you look at small businesses, many of which are started by women, that’s even better. And so I think thinking about that by size of business, and women tend to start smaller businesses, is very important.
I also think tackling this issue in terms in angel funding and venture capital, right, the quintessential old boy’s network, although there’s many women starting the businesses they’re not really getting a lot of the high dollar venture capital funding. So why don’t we see more female-led unicorns, right? There’s a little bit of a gap here between women starting a lot of small, you know, 10-person and below or medium-sized businesses, versus starting the really high-growth, big economic stakes businesses.
Q: And I would—in that regard, I started in the venture capital business with Greylock in 1961, ’62. I would look at angel capital. I would look at golden seeds. I would look at—because the start-up economy is more a product of angel capital than venture capital mezzanine growth. And by the way, Kay and Amy’s first investment was in a unicorn, led and owned by a woman, and a billion-dollar private company. It can happen.
VOGELSTEIN: Thanks for that insight. Agnes, please.
Q: Yes. I just wonder—is it on?
VOGELSTEIN: It’s on.
Q: The other side of the problem is how disruptive is it for the company, and have they—has anyone maybe educated them or taught them how to incorporate this kind of policy? I’m trying to figure out how it will really work. What do they have to do in order to be able to provide for these kinds of leave?
RUHM: So, you know, that’s a really good question. And it’s always one of the concerns. The data we have so far indicates for the most part it’s a non-issue, that there’s a lot of concern about, for example, providing paid leave. It doesn’t seem to be a major issue. Now, having said that, I think the data aren’t that great. And so one of—one of the things we’re doing in our work in trying to look at employers more carefully and see, because presumably there are going to be some disruptions at some points in time. It just doesn’t seem to be a major issue. You know, there are lots of things employers have to deal with. And, for example, coordinating your workforce so that somebody can be absent for a period of time is not trivial, but does not seem to be that major, based on what we know so far, anyway.
Q: And could there maybe be some tax incentives or something to be able to provide for either whatever loss they might incur or just—
RUHM: Personally, I would be concerned about providing tax incentives because what you tend to do is you benefit the companies that are already doing it. And, you know, there are lots of companies—if we look at parental leave—there are lots of companies that are already providing it. They’re providing it for in many cases good competitive reasons. You know, if you’re in Silicon Valley you’re providing paid leave. The issue actually comes towards the workers who are kind of lower-wage workers. But the issue is how do you incentivize providing a new benefit without essentially subsidizing people who are already doing it.
VOGELSTEIN: Interesting challenge. Suzanne, please.
Q: My name is Sue Woolsey. I’m on the boards of several companies and also nonprofits like universities.
My question—I have—basically the question is similar to yours, which is at the level of the institution, the company, or the university, the nonprofit, understanding—and can tell people what’s going to be their particular effect of various changes? I think we’ve gotten—I think we’ve gotten a little too concentrated—although I appreciate your research, Dr. Rahm—but there are other issues in addition to paid leave, obviously, that cost money at the outset, may well return very quickly. But do we have the kind of information that could tell—could help people understand that when they’re focusing on the C-suite and what they’re going to do, that can help people understand how fast the return will be and give them information to prioritize among various options? I think very much most people want to do the right thing. They really think it’s going to be too expensive, and that’s part of our cultural—unfortunate cultural heritage.
ELLINGRUD: Yeah. So at the company level there is a lot of correlation, but it’s tough to prove causation, right? We can’t put companies through a controlled experiment and then—and look at the results on the other side. I will share with you the correlation business case, but the naysayers will continue to be naysayers if they don’t want to approve this. So it is tough, I think, to tie a very specific case to it. So let me tell me what these are broader data shares, and then I’ll share with you a specific company example where they have tied it much more concretely to their own results,
So at the broader level across a number of countries—U.S., U.K., some countries in South America—there is an improved—there’s correlation to diversity. So at the management team level, a 10 percent increase in the diversity of your management team, which basically means one additional person on your management team who is diverse, is correlated to a 1 percent improvement in EBIT. And that is true for both ethnic diversity and gender diversity. Now, that’s at the overall level. Naysayers would say, well, that’s correlation not causation. Maybe those boards were—you know, those management teams were better anyway. They probably were, because they wanted diverse people on their management team, I would say.
At the company level, the best example I’ve seen is Sodexo. You and were talking about this earlier. Sodexo may run the cafeteria in many of your companies. And they have a highly female workforce, but it’s more at the sort of junior levels. And what they did is, as they looked across their teams within their company, any team that 40 percent or more women was getting better growth results, was getting better profit margins. And they said, wow, we know team-by-team we know that this works. We don’t what the secret sauce is. And again, it’s correlation not causation. But we know that our business results are better when we have more women on the team. And not women as a token, but women as a sort of broader we want inclusive thought and sort of more inclusive teamwork.
And so they looked at those results, and they tied 15 percent of senior compensation to getting their teams to 40 percent or more women. And, surprise, when you tied 15 percent of comp to it actually happens. So those would be the business results, I would say, at the individual company level. But it takes looking at your own results and making that case within your own company to tie that all together.
VOGELSTEIN: Powerful data. Why don’t we come to this side? Please go ahead.
Q: I guess my question is, is complete gender parity even really desirable? I mean, I’m thinking of some of the studies of Claudia Goldin that found that especially under high-earning women that the biggest determinant of the pay gap is not only having children, but some even women who have children still don’t have much parity if they have a lower-earning spouse. And there’s a lot of ways you can interpret that, but one of them is that some women really, you know, when they have children not only immediately after they’re born but throughout their childhoods want a less-demanding work track because they want to be present. And you know, is that necessarily a bad choice? Because as long as that’s true, and it probably always will be, some women are going to want to earn less.
ELLINGRUD: Absolutely. It’s a great point. And I think full parity is not necessarily what we would aspire to. And I think that’s exactly why we said what is more realistic, more allowing of personal choice in this matter—because you’re exactly right, not everybody does want that full parity. And that’s why we thought that best-in-region scenario, more the 12 trillion versus the 28 trillion was more realistic to accommodate for that personal choice in the matter.
RUHM: Yeah, if I could add to that. I mean, I think you’re completely correct. The issue, I think, is what we want to do is create the opportunities for people to be able to achieve what they want in life. And if it’s you want to spend more time at home, have that opportunity. If you want to focus more on work, have that opportunity. Where it gets tricky is, you know, economists talk about preferences versus constraints. And how does a preference come about? Is there something in—you know, in the way society functions that kind of creates those preferences? And so it’s very complicated. But I agree with you that, you know, what the ultimate goal is is not completely clear.
VOGELSTEIN: Jewelle please.
Q: I’m Jewelle Bickford. I’m a partner at Evercore.
And I’m working with Don Barton on a paradigm for parity movement to help women move up the ladder. And as a result, I’ve read your report thoroughly. And it’s just an amazing contribution that you’ve made to the whole arena. But you haven’t mentioned, either of you, today which I think is interesting, the unconscious or conscious bias. And we feel that’s one of the biggest cultural impediments. And I wish you would speak to that, because your report is very eloquent on that issue.
ELLINGRUD: Absolutely. You’re right, it is a huge issue. You know, as we looked at that funnel, the 45 percent to the 17 percent, that is a big issue. We are seeing a number of companies move on this to implement unconscious bias training. But I think the difference between implementing training and then truly working it throughout all of your people processes, that’s a huge difference. And some of the most, I would say, cutting edge companies that have acted on unconscious bias training actually have somebody either for a specific role or a rotating role within their people processes who say: Would we have had the same conversation if that were a man, if that weren’t a woman coming back from maternity leave, or if he had taken, you know, a maternity leave versus leave for a family? And they’re raising some of the great discussions so that everybody is more aware.
I think unconscious bias have been—has had real uptick. So we’re encouraged by that. But I think now translating that into how do you make a real change in the people processes is important. I’ll give you one example. Google in their promotion processes said: We’re going to have you apply for a promotion, seemingly a gender-neutral, you know, effort, and great way to sort of economize on the scarce resource, which is these senior people reviewing people who are up for promotion. It turns out, when you have this policy, men apply for a promotion at a much greater rate than women do, right?
Women wait till they have six of the five required qualifications. Men might—in gross generalization terms—apply much more frequently. And so Google found that they were having very different promotion rates. But when women finally applied they were getting promoted much more quickly, men at a much different rate. And so they had to go back and say: Is this working for us? It’s not—it’s an unconscious bias sort of baked into the policy itself, right, but how do we account for that in terms of how our people are advancing? And so they went back out and said: Let’s change this. Let’s make people more aware and help women apply earlier than they might otherwise.
RUHM: And if I could just add, I mean, the issue of unconscious bias goes far beyond just gender. So certainly race is another place where we see it. And so, yes.
Q: And it’s in both men and women.
RUHM: Absolutely. So one of my colleagues is a psychologist. And her work’s more on race than gender, but she finds it’s both blacks and whites. And usually it’s against the same group. So, yeah, it’s a real issue.
ELLINGRUD: Just on that point, we have seen some interesting blind resume screening, for example. It doesn’t get at the source of the issue, or the heart of the issue, but it does get around it. So there’s a little bit of a debate of do we tackle the root of the unconscious bias, or do we just create Band-Aids to get around it through blind resume screening, maybe performance reviews where you don’t know the name of the person, you just know the feedback, right, but you’ve got sort of baseball cards up and it’s—there’s no photo of the person, there’s no name that can be sort of tied to race or gender.
Q: Thank you. I’m Charlie Landow. Thank you. I work here at the Council.
Kweilin, you mentioned Spain in particular. And I wanted to ask you about that, because as we know Spain has struggled economically with huge unemployment and recession. And perhaps it’s a bit of an outlier, but in fact most of the developed world has had very low growth rates over the last several years. And so I’m wondering if you looked at how underlying economic conditions affect countries’ ability to make progress on some of the measures that you looked at. It strikes me that if you’re looking to increase women’s participation maybe to invest in leave policies or other things that have upfront costs it’s highly desirable to have some job creation ongoing at the start. But maybe that’s not the whole story. So I’d be interested in that.
ELLINGRUD: No, you’re absolutely right, right? This is highly dependent on job growth. And I think connections to two other areas. One is youth unemployment, particularly in the case of Spain and many of the European countries, as well as productivity improvement, right? So overall GDP per capita growth is going to come from either greater employment or greater productivity. And despite a lot of technological advances, we’ve had some productivity stalemates over the last decade, which has been quite surprising for a number of people. So how do we connect all of that together, to your point, to accelerate growth to first spark the job creation and then make sure the women are there to help fill the jobs as we look forward?
You mentioned Spain, but there’s other countries—like Russia, like Japan—where there will be job creation, and there will be a significant shortage of people to fill those jobs. And so we actually here in the U.S. have some of the lowest unemployment rates in a long time. If we don’t get more women to fill those jobs, we’re going to have other issues. But you’re right, in many countries it’s more about the job growth versus filling the people in those jobs.
Q: Thanks. So I’m Elizabeth Cafferty. I work at the U.N. on gender equality and women’s empowerment in humanitarian settings. And I just—Jewelle’s question was so important to me, and so thank you for that answer. For the past two years, we’ve been looking at how to, you know, increase women and girls’ empowerment and their status in humanitarian areas. And, I mean, my feeling is people don’t necessarily want to do the right thing. That is not an imperative. People like doing things that’s the way that they like doing them.
Looking at the Philippines and Typhoon Haiyan the other year, we did an assessment of which industries got back up and running the quickest. And when humanitarians came in to help the Philippines government they targeted certain industries, not really doing an assessment of who was working in what industries. And of course, the Philippines has a high rate of women’s employment compared to other countries. And none of the industries that women traditionally worked in were targeted at all. So it took them a much longer time to get back up on their feet.
And so when you were showing the global statistics, I was thinking, well, this is regional. But if we cut it looking at countries that are prone to disasters and/or conflict, you know, those numbers look quite different. And so violence against women, incredibly high. And you talk about access to sort of maternity leave or maternal care. I would look at it more of the sexual and reproductive health care, and do you have access to family planning, do you have access to abortion, contraception, and the full range of things, because without that then women really can’t even get into the workforce.
Last week the U.N. made a new commitment on its new staff. And so when I drafted the commitment I said that the U.N. was going to reach over 40 percent women staff by 2020, which is sort of pathetic, but—(laughter). And then—and I said at all levels. And then they changed it to over 40 percent by 2020 and 50 percent by 2030, but they stripped out at all levels, which is even more depressing, right, because we could all administrative staff to help reach the 50/50.
So that’s why it’s also—I feel like people don’t necessarily want to do the right thing all the time. They want to do the easy thing. And the amount of frustration over the past two years to try to even get the U.N. community, who should be a leader on these issues, to target all of those things that you’re pointing out has been enormous. The amount of effort to get to commitments like that has been enormous. So, sorry, I just did a sort of—I did the thing you’re not supposed to do, which is just make a comment at you. (Laughter.) So you can reflect—you can problematize any of that in your response.
ELLINGRUD: I would absolutely agree. I think there’s both of the stick—so how do we change these policies? And there’s both the stick of using social media in day in age to shame and blame countries or companies. So you have Fortune’s list of all the boards that have no women on them, right? I do think there’s more visibility and more transparency for people who don’t want to necessarily do the right thing, where their actions would suggest that they haven’t really put any concerted effort into doing the right thing. And then there’s also the carrot approach. So how do we celebrate those who are really trying? The U.N. Women Empowerment Principles are a great example of that. I think both approaches, right, trying to change on both ends of the spectrum is all that we can do.
RUHM: And I’ll just say, I think you make an excellent point. I mean, a lot of times people want to maintain their own personal advantage. And there often are losers or at least fear. And I mean, I think we’re seeing it in this country if we look at, you know, the current environment. A lot of what’s going on are fear based. You know, I’m afraid if we have a change I’ll be negatively affected. And sometimes we can address that with evidence that says, well, maybe you won’t be. Maybe it’ll be positive. Sometimes—you know, where it gets really hard is what if there are some groups or some individuals that actually are negatively affected but we still think it’s good social policy? Then it gets really hard.
VOGELSTEIN: Darcy (sp).
Q: Thank you. I’m interested on a global level, when you think about the economic impact in developing countries of some of the things you’re talking about, if anyone has looked at how the U.S. distributes its aid and the kinds of things it’s targeted to think about. Are we getting the most bang for our buck by perhaps focusing on some of these issues more clearly in the use of our resources?
ELLINGRUD: It’s a great point. We have not looked at that. But I would love to—both where the aid is going and the efficacy of that aid. I think both would be extremely helpful.
VOGELSTEIN: And I’ll just jump in to note, having spent some time in the U.S. government at the State Department working on gender issues, that there’s really insufficient tracking of how money is—how foreign assistance is spent to enhance gender equality, really not just limited to that issue, across the board. And that makes it very difficult. There are also many programs for which a focus on gender equality is a secondary priority, not a primary concern. So figuring out how to account for all of that I think is critical to establish the baseline to do exactly the type of deep dive that you’re talking about. And hopefully the U.S. government will get there.
Q: This question’s both for Kweilin and for Christopher. I think you both might have answers to this. If you’re looking at what’s happening in Japan, and there’s an absolute crisis with respect to women. There are more registered cats and dogs in Japan than there are children under the age of 15 at this point. And speaking from Prudential Financial’s perspective, we have more employees in Japan than we have in the U.S., so this is very important to us. Could you speak for a minute about Abe’s measures—the Abe administration’s measures and the likelihood of success or effectiveness of some of those initiatives?
ELLINGRUD: So, yeah, I’m happy to share. I don’t—I’m not deep on Abe’s measures or recommendations. What I would say, having actually lived in Japan for a year and gone to an all-women’s—all-girl’s high school there, is the cultural challenges and barriers run deep. And this is not something that we’re going to be able to change quickly. We have seen some improvement. We’ve seen greater political representation, sort of greater political activism. But then now translating that to economic participation has been a big challenge. So I foresee continued challenges in that space. I don’t think that we’re going to be able to overcome that in the next 10 years as we think about it here.
RUHM: Yeah, I don’t feel like I have the expertise to talk about the measures he’s taken. Is part of your question, though, about the low fertility rates in general, or?
Q: No. Well, there’s a combination of the fact that young women are leaving the country in droves or choosing not to have children in order to have careers because they know that they can’t get off the track and get back on. And so they’ve got 1.27 jobs for every employable person in Japan and a burgeoning—you know, a growing older population with nobody to care for them because women are essentially leaving the country.
RUHM: Yeah. So, I mean, I think generally—I mean, I completely agree with what Kweilin said. It’s going to be complicated to change that. I do think there’s some evidence that in countries with kind of more family-friendly policies there is some effect in terms of things like increasing fertility and increasing labor force participation. So if Japan could make a significant change, that might have some impact. But it will be difficult, and probably would need to be multifaceted.
VOGELSTEIN: Darren (sp), please.
Q: Thank you. How do I turn that on? Oh, it’s on. OK.
So thank you so much for these comments. They’re great. And I’ve actually been really inspired by your report to work more on these issues. I’ve been working on the French corporate board quota and doing some empirical work. I’m a law professor. And so one of the things that I think is a little bit of a challenge to implementing some of the conclusions of your report and of your research is that while there are a lot of instrumental arguments as to why including women is a powerful and effective way to move society ahead economically, there’s a real resistance in terms of the normative arguments. And I think some of the comments we’ve heard reflect that.
Even Rachel’s question about why hadn’t this already happened? To me, the obvious answer is there’s structural bias which is preventing it from happening. So I was just wondering if the two of you could reflect on ways in which the normative argument for parity or equality or inclusion or however you want to frame it should be made, or if there are people out in the marketplace of idea who you think are making that argument effectively so that the instrumental and the normative argument can move forward hand-in-hand.
RUHM: Well, I would say a piece of this is to be very careful about how we talk about these kinds of policies or objectives in terms of saying if it comes across, we know the answer for how society should be structured. That’s going to create a lot of resistance, and I actually think appropriately it’ll create a lot of resistance. I think if we say there are barriers to allowing people the full opportunities in their lives, that’s a stronger argument. And kind of the outcomes are going to be what they may. So you know, personally I’m a little concerned if we—and this came back to the question earlier—of saying there is a point—a target to which we should achieve. That’s a good outcome. I actually don’t know what it is, but I think what is clear is that currently there’s a lot of groups, certainly women but others, who are being prevented from full opportunity. And so I think that is a more powerful argument.
ELLINGRUD: I would also say it’s not just sort of the what do we aspire to, but how do we get there. And what are the examples that have been both effective, but also efficient economically. And so there’s a couple examples here in the U.S. So on the topic of teenage pregnancy, Upstream, for example, has implemented a model where we want to enable women to have children when they’re ready. And it’s more around long-term acting contraception. So it turns out when you depend on a teenager to take the birth control pill or any other sort of contraception at the same time every day, it doesn’t happen. But if you give them long-acting birth control, you can actually stop them from having kids before they’re ready.
That has had significant savings in terms of Medicare and other sort of—Medicaid and other sort of state-level funding. And so when you make the economic—not only is it right for the girls and their future education and their future job prospects, it’s good for the state budget. It’s good because we can code these properly at the sort of medical implementation level. When you bring that all together on a solution that works, I think that’s when you start to get a bit more traction, combined with the this is the right thing to do, but here is how tactically we can make it work. And let’s scale that much more quickly.
Q: Great. Thank you.
VOGELSTEIN: Why don’t we quickly have our last two questions, and then we’ll give our speakers a chance to answer both. So we’ll start here.
Q: Bhakti Mirchandani, One William Street. Thank you for your comments this morning. And, Kweilin, great to see you in action, I guess, 11 years later. We were classmates. So it’s great to see Kweilin here.
As the Obama administration draws to a close, I’d love your thoughts on how much progress the administration’s made. So I know from previous CFR sessions that Hillary Clinton when she was secretary of state had made significant progress on some metrics. I’m not sure if those initiatives continued under Kerry. And the White House just had a kind of United States of Women. There’s a White House Council on Women. So I would just love your thoughts on the administration’s progress on these issues.
VOGELSTEIN: Thank you. Ellen, please.
Q: I was actually going to ask the same—or make the same point—ask about your sense of progress, because I do think there’s a tendency, particularly in this presidential campaign, to neglect areas of progress. For example, in response to Darcy’s question, while you were appropriately cautious, Rachel, I mean, there has been changes, like the fact that the State Department signed onto the U.N.’s Women, Peace and Security Agenda, which does at least provide some benchmarks in some places, and particularly in defense, which is a big budget, for gender, or the Equal Futures Partnership.
But also, I wanted to say at the state level—and earlier I raised my placard—there has been some considerable progress in the United States sub-nationally on paid leave, not through models that are voluntary but through legislative models that require tax revenues, you know, and are not voluntarily supported by corporations. And that’s actually quite controversial on the Democratic side of the presidential debate, you know, because Hillary Clinton doesn’t want any tax increases on people under $250,000, and Sanders has called for universal parental leave. So I was going to ask you also the question about progress, but particularly in terms of economic modeling of how you pay for all this.
VOGELSTEIN: So progress and looking ahead to what the future will hold.
RUHM: Yeah, so—and this is really interesting—I think when we look at new policies coming into place, what—the way it often works is it seems like nothing happens for a long period of time, and then suddenly something happens. But really I think what it is, is there are small steps that reach kind of a critical point where there’s much larger change. I certainly think on paid leave—and also, I should say, even on things like paid sick leave, we’re very much seeing that. So I think the Obama administration has put a number of steps in place, part of it being explicitly supportive of these efforts at both the state and the national level.
I think what we’re seeing at the state level is quite remarkable. Now, there are some real structural constraints to other states expanding paid leave policies. One of them—all the states that have it so far have layered on top of a temporary disability insurance policy. And that creates some real issues for other states. But, you know, I think—I forget if I’ve said this here—if you had asked me even a year ago if I thought there was a chance of a national policy in the next few years I would have said no. And the atmosphere has dramatically changed. And I think it’s as a result of things going on at the state level, but also a lot of—a lot of small steps nationally, to the point where if you ask me in the next four years, you know, and even sooner, would we see a national paid leave policy? I would—I would put the odds at 50 percent, maybe more.
VOGELSTEIN: Kweilin, the final word on progress.
ELLINGRUD: Yeah. I think the progress has been pretty good, but could be better. And could be better in a couple of areas. For example, no federal employee leave, right? In our own federal government, we should be walking the talk. And I think we can look to our neighbors to the north and what Justin Trudeau has done in a very short amount of time as really setting the bar on a global level for what can be done in just literally months.
VOGELSTEIN: Well, it is clear that we have seen progress in reducing barriers to women’s economic participation, but that a lot of work still remains. And today’s discussion really reminds all of us that we have a lot to gain by finally unleashing the full economic potential of women.
So please join me in thanking Kweilin and Christopher. (Applause.)
This is an uncorrected transcript.