Workplace gender disparity costs Canadian economy $160 billion

19 September 2017 5 min. read

A new study finds that Canada could add up to $160 billion to its economy by increasing female participation, sectoral mix, and working hours. While improvements have been made in the education system, women are still highly underrepresented within corporate managerial ranks. And though Canadian corporations are pledging to change this, a substantial gender pay gap also remains.

The economic costs and benefits that full female participation in the global workforce would bring are massive. McKinsey & Company’s research arm, the McKinsey Global Institute, estimates that improving female participation around the world to the level of the best-in-class country would bring an economic benefit of $12 trillion.

In a new report, titled ‘The Power of Parity: Advancing Women’s Equality in Canada’, the strategy consulting firm considers the situation in Canada, highlighting where the country is performing relatively strongly, but also major areas of concern – particularly the corporate environment where women are continually barred advancement to high-ranking positions.

Female addition to GDP

The study estimates that the Canadian economy is losing $150 billion in incremental GDP due to systematic differences in treatment, participation, and hours worked by women. 42% of the shortfall arises from the sectors in which women are employed, with another 42% deriving from labour participation rates. 16% stems from the number of hours worked, e.g. part-time vs full-time employment.

There are considerable differences across provinces and territories in Canada, in terms of their respective contribution to a loss of additional incremental GDP. In Quebec, for instance, the largest segment of lost GDP – at about $34 billion – is due to the sector mix of employment. In Saskatchewan, on the other hand, GDP loss stems from lower levels of labour force participation. In Ontario – where gender parity would contribute around $60 billion in additional GDP – the result derives broadly from all three factors.

Female representation improvement

The research also sought to identify and analyze the various areas of gender disparity, mark the changing gap over the past two decades, and forecast how long it would take to reach parity at the current rate of change.

One area that has seen the level of gender inequality actually shift towards inequality for men is that of higher education. The Canadian higher education system has seen the number of women as a ratio to men increase from 0.88 to 1.12. As such, women now outnumber men at universities. Labour force participation has seen a slight increase, from 0.8 to around 0.85. At the current rate, it will take 32 years to reach labour participation parity, and another 29 years to reach wage equality.

The research found other areas in which there are considerably higher levels of disparity, with little or no change over the past 20 years. Entrepreneurship, for instance, has a disparity level of 0.6, with current rates seeing parity 180 years; managerial level positions, meanwhile, declined with a compound annual growth rate of -0.1. One area of relative improvement is political representation, which has improved by a CAGR of +2.5% in the last 20 years to reach 0.45, with another 31 years needed to achieve parity.

The corporate environment

The study also sought to identify in how effectively corporations are promoting women to more senior roles. As seen in the previous section, women are chronically underrepresented in management; the study found, however, that the higher one looks on the corporate ladder, the lower the level of female representation is likely to be. McKinsey found there to be 25% female representation at executive level, and only 15% at CEO-level. Entry into the managerial ranks, and then subsequent promotion between director and vice president were noted by the report as being the largest bottlenecks for promotion.

Gender pay gap

Aside from disparity between men and women in in the makeup of various senior roles in the corporate sphere, the research also found that a gender pay gap was prevalent across all levels of the organizations studied.

At entry level, the pay gap stood at 11%, falling slightly to 7% for managers, and then still further to 4% for directors. However, from vice president onwards, the gap in pay increased significantly, rising from 11% to 14% at the C-Suite (CEO, CFO etc.) level.

Initiatives dont correlate with success

Businesses say that they are increasingly ‘on board’ with dealing with gender inequality. CEOs, in particular, note that fixing the gap is a key to improved business performance, while 25% of company heads also cite it as a very important issue, and 31% say it is a high-level priority.

Obviously, gaining visible support for the issue is less a problem than actually achieving an effective resolution to the problem of gender-based disparity in the workplace. Pumping money in corporate female advancement initiatives, unfortunately, does not correlate with greater diversity in leadership. When mapping the number of initiatives against the number of women in senior leadership, no clear correlation actually arises. Clearly, either advancement initiatives categorically have no effect, or the initiatives are flawed in their conception or implementation. Either way, additional and more effective avenues need to be explored in order to solve the socially and economically damaging effects of gender disparity, both in Canada and the rest of the world.