Is the Last Mile the Longest? Economic Gains from Gender Equality in Nordic Countries

1. Overview

The Nordic countries have long been international champions of gender equality. Denmark, Finland, Iceland, Norway and Sweden – commonly known as the Nordic countries1 – explicitly support gender equality at home, at work, and in public life, and have often moved earlier and faster than most countries in taking action to promote this goal. They were among the first countries in the world to provide women with full voting rights, for example, and some of the earliest to introduce legislation prohibiting dismissal from employment on the grounds of marriage or parenthood (Hilson, 2007[1]; Statistics Sweden, 2016[2]). Over the past 50 years, the Nordic countries have been leaders in the development of modern family and gender equality policy, which promotes gender equality in the labour market. They were some of the earliest to establish comprehensive public early childhood education and care (ECEC) services, for instance, and the very first to introduce the so-called “mother and father quotas” as part of paid parental leave systems (OECD Family Database; Section 2).

The Nordic countries have yet to achieve full gender equality in the labour market, but they have travelled further along the path than most OECD countries. Gender gaps in labour participation and employment are among the OECD’s lowest, particularly among highly-educated men and women (Table 1.1). Mothers are more likely to be in work than elsewhere (OECD Family Database), gender differences in working hours are comparatively small (Table 1.1), and couples tend to share paid work more equally than in most other OECD countries (OECD, 2017[3]). However, some large gender gaps persist. For example, foreign-born women are under-represented in paid work (OECD, 2016[4]), occupational sex-segregation may be falling but is still high (Ellingsæter, 2013[5]; Teigen and Skjeie, 2017[6]), and many women still find it too hard to progress to management positions (Table 1.1). Gender pay gaps vary – from roughly 6% in Denmark to 18% in Finland for full-time employees – but persist (Table 1.1).

Table 1.1. The Nordic countries boast some of the most gender-equal labour markets in the OECD, but there is still more to do

Key measures of gender gaps in employment, Nordic and selected other OECD countries, 2016 or latest available year

Reading note: Shading indicates performance relative to the OECD average and the OECD standard deviation. For measures where a smaller value is generally “better” (e.g. “Gender gap in the labour force participation rate”), “top performer” means a value less than the OECD average by more than half the OECD standard deviation (s.d.), and “bottom performer” a value greater than the OECD average by more than half an s.d. For measures where a larger value is better (e.g. “Female share of managers”), “top performer” means a value greater than the OECD average by more than half an s.d., and “bottom performer” a value less than the OECD average by more than half an s.d. In both cases “moderate performer” means a value within half an s.d. of the OECD average, either way.

Notes: The OECD average and OECD standard deviation are unweighted and refer to the average/standard deviation across all OECD members with available data. Low educational attainment is defined as a highest level of educational attainment at ISCED 2011 levels 0-2, and high educational attainment as a highest level of educational attainment at ISCED 2011 levels 5-8. Average usual weekly working hours refer to usual hours in the main job, only. Data refer to all employed, except for the United States where they refer to dependent employees only. Data on managers refer to those employed in ISCO-08 category one (as managers), or for Canada, Chile, and the United States, in ISCO-88 category one (as legislators, senior officials and managers). Data for the United States refer to 2013 and for Canada to 2014. The gender gap in median earnings is defined as men's median earnings minus women's median earnings, divided by men's median earnings. Data for Sweden refer to 2013, for Italy and France to 2014, and for Denmark, Finland, Iceland, Japan, and Norway to 2015.

Source: OECD Employment Database (http://www.oecd.org/employment/emp/onlineoecdemploymentdatabase.htm); OECD (2017), OECD Education at a Glance 2017: OECD Indicators, OECD Publishing, Paris (http://www.oecd.org/education/education-at-a-glance-19991487.htm); ILO ILOSTAT Database (http://www.ilo.org/ilostat); and Statistics Canada (https://www.statcan.gc.ca/eng/start).

Promoting gender equality is likely to carry a number of benefits for societies and economies. Providing girls and women with equal opportunities is an issue of human rights and holds intrinsic value in and of itself, but there are also social and economic effects that mean wider society is better off when women are treated fairly. Societies that are more gender-equal tend also to be happier (Looze et al., 2017[7]), healthier (Van de Velde et al., 2013[8]; Holter, 2014[9]), and more trusting (Cho, 2016[10]), for example. They are often also more equal and inclusive. Previous work by the OECD, for instance, has shown that having more women in work can help reduce income inequality, especially when it involves full-time work by low-skilled women (OECD, 2015[11]).

There are also strong economic reasons to strive for gender equality. More gender-equal economies tend to be more prosperous economies (Goldin, 1995[12]; Klasen, 1999[13]; Klasen and Lamanna, 2009[14]), for various reasons. Promoting women’s employment and hours can help boost labour supply (Østbakken, 2016[15]), for example, while making better use of the increasingly-well-educated female talent pool and improving job match can help deliver productivity gains (Esteve-Volart, 2004[16]; Hsieh et al., 2013[17]; Cuberes and Teignier, 2015[18]). Indeed, OECD (2012[19])found that gains in educational attainment can account for roughly half of all economic growth in OECD countries over the 1960-2007 period – much of which can be traced back to increased educational attainment among girls and young women and the associated benefits for employment and productivity. Put simply, gender equality is good not only for women, but also for men and for families, for growth, and for society as a whole.

Increasingly, policy-makers around the world are recognising the economic gains that can be made from promoting gender equality. For example, at their November 2014 Summit in Brisbane, the leaders of the G20 countries committed to reducing the gender gap in labour force participation by 25% by 2025 (OECD et al., 2014[20]). Achieving this goal would bring millions more women into the workforce worldwide, and significantly increase growth across the OECD and the G20 (OECD, 2017[21]).

This report explores the extent to which past improvements in gender equality in the labour market have contributed to economic growth in Nordic countries (and G7 countries for comparison), and how much more could be gained from closing gender gaps still further. For data reasons, it concentrates on the quantitative aspects of labour market equality – how much do women work, and how does this compare to men? – leaving aspects like potential productivity gains aside.

The analysis shows that the Nordic countries have benefited hugely from the progress in women’s employment in recent decades, but that there is still more to be gained. Potential benefits from narrowing and ultimately closing gender gaps in labour participation and in working hours are smaller in the Nordic countries than elsewhere, largely because the remaining gaps themselves are comparatively small. Alas, the last mile may well prove to be the longest one. Completing it would bring economic and social gains to the Nordic countries and also provide important lessons for policy development across the OECD and beyond.

1.1. The Nordic approach to family- and gender-equality policy

All OECD countries provide family and gender-equality policies in at least some form, though the types and intensity of support often differ. Differences in countries’ histories, labour markets, attitudes towards families and gender norms, the role of government, and the relative weight given to the various underlying policy objectives all mean that each country takes its own approach to family and gender policy (see, for example, Thévenon (2011[22]) and Adema (2012[23]) for a discussion and overview).

The Nordic approach to family and gender-equality policy grew largely out of the principles of ‘work friendliness’ and full participation embedded at the centre of the wider Nordic welfare state (Kuhnle and Hort, 2004[24]; Brandth et al., 2012[25]; Pedersen and Kuhnle, 2017[26]). The model is geared towards facilitating employment for all adults where possible, with the state expected to provide them with the services and supports necessarily to do so – including family supports like childcare and paid leave needed to help men and women find and stay in paid employment (Esping-Andersen, 1999[27]; Kuhnle and Hort, 2004[24]).

Today, the Nordic countries provide some of the most comprehensive packages of family and gender-equality policy in the OECD in line with the principles of the OECD Gender Recommendations (OECD, 2017[28]; OECD, 2016[29]). The specifics vary from country to country, but the general emphasis is on encouraging continuous full-time employment for all men and women, including single parents, and promoting a “dual earner-dual carer” family model (Section 2.4). Recognising that gender gaps often emerge in full around the time of parenthood, policy looks to provide families with children with a ‘continuum’ of supports allowing parents to stay in paid work as children grow up. Parents can access generous paid leave when children are very young, followed by a place in subsidised early childhood education and care (ECEC) and out‑of‑school‑hours (OSH) care activities once children enter full-time education. Tax and benefit systems are also largely individualised (Pedersen and Kuhnle, 2017[26]), so as not to discourage paid work by second earners, and fathers and mothers are encouraged to share care responsibilities by means of individualised “use it or lose it” paid leave entitlements (Section 2.4.2).

However, there are some important policy differences across the Nordic countries. For example, both Finland and Norway provide “home care” or “cash-for-care” allowances to parents with very young children when at least one parent stays home (OECD Family Database). Even though actual payment rates may not seem high, they can discourage second-earners from engaging in paid work, at least in the first few years after childbirth (Section 2.4.2). These variations do matter, and may help explain some of the small but important differences in outcomes between Nordic countries. The Finnish home care allowance, for instance, helps to explain why Finnish mothers with very young children are less likely to be found in paid work than mothers in the other Nordic countries (OECD, 2005[30]; OECD, 2016[31]).

1.2. The Nordic model has helped deliver large gains in gender equality in employment over the past half-century

The Nordic policy approach has helped deliver and sustain large improvements in gender labour market equality over recent decades. The scale of some of the gains made in the Nordic countries, especially on female employment rates, is remarkable. In Sweden, for example, the working-age (15-64) female employment rate increased by almost 30 percentage points (from 52.8% to 81.0%) over the 25 years between 1965 and 1990 (OECD Employment Database) – equivalent to jumping from a level that would today be one of the OECD’s lowest to its second highest in just 25 years. Female employment has fallen slightly since, especially following the economic crisis in the early-1990s (see below), but remains more than 20 percentage points higher than it was in the mid-1960s (Figure 1.1, Panel A). Denmark, Iceland and Norway have made similar gains since the mid-1960s or early-1970s, while Finland, which already had a high female employment rate in 1970, has made much smaller gains (Figure 1.1, Panel A).

Figure 1.1. The Nordic countries have made large gains on female employment in recent decades, even from an already high base, and these gains have boosted economic growth

Note for Panel A: For countries marked with an *, data for the earliest available year are estimated. See Annex B for more detail. For Germany, the earliest year (1991) is much later than for the other countries so should not be compared directly.

Note for Panel B: Estimates based on the decomposition of national accounts data using labour force survey estimates. Differences in the time periods covered mean estimates are not fully comparable across countries, especially for Germany (1991). See Section 3 and Annex B for more detail.

Sources: Panel A: OECD Employment Database (http://www.oecd.org/employment/emp/onlineoecdemploymentdatabase.htm), and OECD estimates based on data from the OECD Annual Labour Force Statistics Database (http://stats.oecd.org/index.aspx?queryid=451), Eurostat (http://ec.europa.eu/eurostat/data/database), and national statistical offices (see Annex B); Panel B: OECD estimates based on data from the OECD National Accounts Database (http://www.oecd.org/std/na/), the OECD Employment Database (http://www.oecd.org/employment/emp/onlineoecdemploymentdatabase.htm), the European Commission's AMECO Database (http://ec.europa.eu/economy_finance/ameco/user/serie/SelectSerie.cfm), Eurostat (http://ec.europa.eu/eurostat/data/database), and national statistical offices (see Annex B).

What is particularly impressive about these gains is that they occurred on top of initial rates that were already comparatively high. Some other OECD countries have also seen female employment increase by the same or sometimes even greater amounts over similar periods, but for the most part they started from a lower base (Figure 1.1, Panel A). For example, France, the United Kingdom and the United States have all seen the working‑age female employment rate increase by between 15 and 25 percentage points since the early-1960s or 1970s, but all started the period on rates of roughly 45% (Figure 1.1, Panel A). Denmark, Iceland and Sweden, by contrast, built their gains on female employment rates that were already around 55% – rates that are higher than several OECD countries, including Chile, Italy and Mexico, even today (OECD Employment Database).

Employment patterns in the Nordic countries do not escape fluctuations with the economic cycle. Across the Nordic countries, women’s employment has tended to hold up better than men’s employment in the immediate aftermath of shocks like the economic crisis in the early-1990s (Finland and Sweden) or the Great Recession (e.g. Iceland), leading to reduced gender employment gaps (Table A A.1 in Annex A). However, in most cases men’s employment also recovered quicker, so that five to ten years later, gender employment gaps had returned to levels similar to before the relevant crisis (Table A A.1 in Annex A). Gender working hours gaps in the Nordic countries seem to be affected less than employment gaps by economic fluctuations, in most cases holding steady through recessions and recoveries. The exception is Iceland, where men’s working hours fell sharply following the Great Recession, leading to a three-hour (or 23%) reduction in the gender gap in weekly working just in the years three between 2007 and 2010 (Table A A.2 in Annex A).

1.3. Gains in women’s employment can account for a large portion of economic growth in the Nordic countries

Gains in gender equality, and especially gains in female headcount employment, have made a substantial contribution to economic growth in the Nordic countries over the past 50 years or so. Growth accounting estimates suggest that, in Denmark, Iceland, Norway and Sweden, increases in women’s employment account for around 0.25-0.40 percentage points of the annual GDP per capita growth rate since the mid-1960s or early-1970s – roughly equivalent to 10-20% of the overall average annual growth rate. The contribution in Finland is smaller, at 0.05 percentage points on average over the years since 1970 (Figure 1.1, Panel B).

As always with this kind of exercise, these estimates should be interpreted with a certain degree of caution – in this instance, it is important to recognise they are based on a mechanical decomposition of the drivers of growth only, and do not account for any gender differences in productivity (see Section 3 and Annex B for details). Nonetheless, these estimates are large. Converting to equivalent cash amounts,2 current GDP per capita in Denmark and Sweden would be around USD 5 000-6 000 (2010 PPP) smaller if the parts of growth accounted for by increases in women’s employment were removed from the historic growth rate. In Iceland, current GDP per capita would be roughly USD 7 500 smaller, while in Norway (mainland) it would be close to USD 9 000 smaller. Even in Finland, current GDP per capita would be about USD 1 500 smaller if the (comparatively small) contribution from changes in women’s employment was removed from historic growth. These are significant numbers. Losing these amounts would be equivalent to seeing GDP per capita return to levels last seen in the late-1990s or early-2000s across all five of the Nordic countries.

There is less evidence of large contributions from changes in women’s working hours. Gender differences in working hours have actually fallen slightly in the Nordic countries in recent decades, but this is due more to a decline in men’s hours (a common trend in most OECD countries) than any real increase in women’s average working hours. Changes in women’s hours in paid work account for only a fairly small portion of average annual GDP per capita growth in the Nordic countries, at least in comparison to women’s headcount employment. Of the five Nordic counties, women’s hours have made the largest contributions in Iceland and Norway, where they account for the equivalent of roughly 8-9% of the overall average annual GDP per capita growth rate. Contributions from changes in women’s hours are much smaller in Denmark and Sweden, and even slightly negative in Finland, where female average weekly working hours have declined by just over two hours per week since 1990.

The muted trends in female average working hours in recent decades contribute to the relatively small effects on GDP growth. It is quite possible that changes in working hours in the 1960s and 1970s (when the development of ECEC systems may have contributed to a move from part-time to full-time employment for many women) were more pronounced. Unfortunately, data on average working hours disaggregated by gender are comparatively scarce, and the time period covered by these working hours estimates (for the most part, the mid-to-late-1980s onwards) is generally much shorter than the period for headcount employment (the mid-1960s or 1970s onwards).

1.4. Further gains from closing gender participation gaps are limited, but potential gains from closing gender working hours gaps are larger

Because the current gender participation gaps in Nordic countries are relatively small, closing these gaps is likely to have a fairly limited impact on future GDP per capita growth. OECD projections suggest that, for the Nordic countries, even fully closing the remaining gender participation gaps by the year 2040 would boost projected average annual GDP per capita growth over the period to 2040 by only roughly 0.05‑0.10 percentage points, with the largest potential gains in Denmark (Figure 1.2). This is a fairly small potential gain compared to the historic gains related to increases in female employment over the past half-century, and pale in comparison to the potential gains still on offer in countries with larger participation gaps such as Italy.

Figure 1.2. Fully closing remaining gender gaps in both participation and working hours could provide a sizeable boost to economic growth

Estimated gains relative to the baseline in the projected average annual rate of growth in GDP per capita over the period 2013-2040, different gender gap scenarios (closing gender gaps in labour force participation and working hours), percentage points, Nordic and selected other OECD member countries

Note: See Section 4 and Annex B for more details.

Source: OECD estimates based on OECD (2014), OECD Economic Outlook No. 95 Volume 2014 Issue 1, OECD Publishing, Paris (http://dx.doi.org/10.1787/eco_outlook-v2014-1-en), OECD Economic Outlook: Statistics and Projections Databases (http://stats.oecd.org/index.aspx?dataSetCode=EO), OECD population data and the OECD Employment Database (http://www.oecd.org/employment/emp/onlineoecdemploymentdatabase.htm).

However, the Nordics could still make large gains from closing remaining gender working hours gaps. These gaps, while small in comparison to some other OECD countries, are still considerable and offer much more scope for progress. Across all five Nordic countries, fully closing gender gaps in both labour participation rates and average weekly working hours through increases by women could add as much as around 0.25-0.40 percentage points to the average annual rate of GDP per capita growth over the period to 2040 (Figure 1.2) – the equivalent of boosting the projected annual GDP per capita growth rate by roughly 15-30%, depending on the country. The largest potential future gains (ranging from 0.35 to 0.42 percentage points) can be made in Denmark and Norway, where women’s current average working hours are relatively low at around 30‑32 hours per week hours per week (Figure 3.4), and in Iceland, where men’s working hours are relatively high at over 43 hours per week (Figure A A.2. in Annex A). In terms of overall growth over the 2013-2040 period, these potential gains are equivalent to boosting cumulative GDP per capita growth by somewhere between 12 (Finland and Sweden) and 19 percentage points (Denmark). In dollar terms, they would translate by 2040 into increases in GDP per capita (relative to the baseline) of around USD 3 900 (2005 PPP) in Finland, USD 4 300 in Sweden, USD 5 600 in Iceland, USD 6 100 in Denmark and USD 8 200 in Norway.

Whether or not it is feasible or even desirable to fully close gender gaps in this manner is a matter for debate. In recent years, much of the discussion in the Nordic countries has centred on the possibility of further reducing working hours to promote well-being – see the 2016/17 six-hour workday experiments in Sweden, for instance – but closing gaps just by raising women’s participation and hours would actually involve a considerable increase in overall hours worked. In Iceland, for example, it would mean both men and women working an average of roughly 43 hours per week. This would limit time available for unpaid work and put strain on families’ abilities to juggle work and care. Closing gender gaps in a more gender-balanced way – say, with men reducing their working hours to some extent, in addition to increases from women – might provide a more realistic middle-ground (though likely with smaller economic gains). Nonetheless, the scenarios summarised above provide at least an illustration of the potential room or scope for further economic gains from closing gender gaps in the Nordic countries.

Notes

← 1.  The Åland Islands, the Faroe Islands and Greenland are not included in this study for practical reasons as it is not possible to extract statistics in the same way as for Denmark, Finland, Iceland Norway and Sweden.

← 2.  Because of potential behavioural responses, of other economic actors, we cannot be certain about what the Nordic economies would have looked like if female employment had not grown over the previous few decades – it is possible those women already in employment might have adjusted their working hours to compensate, for instance, or perhaps men in employment might have reacted differently.