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Private Equity

Inequality in Asia: Education, productivity and the female contribution to economic growth

Simon Ogus, CEO, DSG Asia

Economic growth is a function of both the supply of factor inputs – land, labour and capital – and the productivity of these factors. By mobilising inputs, it is theoretically relatively simple to produce a growth spurt in a poor economy with a rapidly growing population and a low initial capital stock. Yet maintaining growth spurts beyond middle income status has historically been rather harder, requiring institutional changes conducive to sustainably boosting factor productivity.

This paper will restrict itself to a gender-specific discussion of the labour productivity puzzle across (east and south) Asia. Intuitively, improved female access to education leading to higher rates of female participation in the labour force should be meaningfully growth and income enhancing. Indeed, numerous studies including McKinsey’s “The power of parity: How advancing women’s equality can add $12 trillion to global growth” concur¹.

Asia achieved universal primary education enrolment at least three decades ago. Meanwhile secondary enrolment rates, which are strongly related to higher rates of labour productivity, have also continued to rise.²

According to the official data, Asian women, with the exception of those in Pakistan and Cambodia (where overall secondary education enrolment is, in any case, low), appear to have more than equal access to secondary schooling. Moreover, female enrolment rates have improved markedly since the 1980s from an average of 40% for China, Malaysia, Thailand, Indonesia and the Philippines, and sub-10% for the poorer countries sampled here. Equal access to education has failed to fully translate into equal access to employment though, especially in south Asia. Indian and Pakistani female participation rates have remained risibly low while those in Bangladesh have improved but still lag well behind their east Asian competitors. By contrast, the more developed ASEAN-4 have recorded an average 12% improvement over the past four decades while even the traditionally misogynist north Asian economies – driven doubtless by demographic necessity – have seen female participation rates rise by around six percentage points in more recent times.

South Asia, along with poorer ASEAN (and Africa) have strong underlying demographics in terms of young and growing labour forces and low dependency rates – the ratio of the non-working age population compared to that of working age. Their greater challenge is to further develop human capital and to mobilise investment, both domestic and foreign, in order to create better-paid and more productive, formal employment opportunities for those entering the labour force. Of the countries sampled here, only Vietnam appears to be delivering across a broad range of industries though Bangladesh and Cambodia have seen narrower success mainly in clothing and apparel.

In the more developed parts of the region, birth rates have been steadily falling over recent decades and, according to International Labour Organization projections, working age populations have already begun to shrink or will begin to do so by 2030. Interestingly, somewhat richer Vietnam and Sri Lanka have also moved into this bucket in recent years. Increased female education and workplace empowerment would appear to go hand in hand with falling birth rates. Hence the need to further enhance human capital endowments and provide equal opportunity to productive employment to all those who seek it regardless of gender (and other discriminatory factors).

As posited earlier, the greatest marginal returns would seem to be generated by improved access to secondary schooling. Returns to tertiary education are still positive but diminish. A subjective cynic might seek to argue that at college level and above, institutional quality and subject “usefulness” play a far greater role in separating the wheat from the chaff.

At least 80% of the eligible cohort in developed Asia now enrols in tertiary education with no discernible difference in enrolment rates across the sexes. In China (now 47%) and the ASEAN-4 (today 40% on average) tertiary enrolment rates have also risen sharply from less than 10% 3-4 decades ago. Nevertheless, given the demographic challenges outlined above, there seems to be a disappointingly weak relationship between a significantly rising supply of highly educated females and a rather more tepid increase in female labour participation rates.

Why should this be so? This is perhaps attributable to as much economic as to cultural/chauvinistic explanations for throughout the world, the burden of care for both children and the aged continues to fall primarily on working age women. It can be argued, therefore, that if countries wish to endogenously boost their labour supplies in the face of slowing (or even shrinking) overall working population growth, there is a requirement to promote policies that alleviate the burdens of the principal carers’ cohort.

Nevertheless, the cultural/chauvinistic minefield cannot be completely avoided. OECD data suggest that the average gender-wage gap has narrowed from 19.4% in 2000 to 13.5% today. The absolute improvement in the only two Asian countries surveyed – Japan and Korea – has been even greater yet still today, females are paid considerably less than their male peers in comparison to the gaps registered across the rest of the developed economies cohort.

In conclusion, Asia, with a few notable exceptions, generally deserves credit for expanding educational opportunity for both sexes in recent decades. However, the region’s record of creating well-paid employment opportunities for increasingly better-qualified potential female employees is rather more mixed.

For the poorer Asian economies with still relatively young and rapidly growing populations, the challenge is to improve educational access and standards, especially for women. In turn this requires the nurturing of investment environments that will encourage both capital deepening and more productive employment opportunities.

As for Asia’s middle income and more developed economies, demographic dividends have already been harvested. Hence creating institutional structures that better utilise their increasingly well-educated female cohorts is an ever-growing necessity. Demography and culture are not destiny.

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