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

3. Progress and the pay-off: How investment in gender equality in the Nordic countries have contributed to economic growth

There are several ways in which improving women’s economic opportunities could lead to better economic performance. First and most obviously, allowing and encouraging women to engage in the labour market is likely to boost output by increasing the supply of labour. Across the OECD, workers are a key productive asset – indeed, in almost all, labour still contributes the bulk of national production (OECD, 2015[84]) – and adding more workers to the labour force should lead to more output.

On top of this, however, there are a number of additional routes through which gender equality can influence growth. Making better use of female workers could lead to productivity gains, for example, perhaps by improving job match, or by making more efficient use of the available talent pool. Increasing women’s economic power could also lead to improved consumption and savings behaviours, at least in the context of less‑developed countries (Stotsky, 2006[85]). Encouraging women to work more is likely to come with costs, especially in terms of a decrease in unpaid domestic work, which, if properly accounted for, would contribute substantially to national production (OECD, 2016[34]). However, even here there may still be net welfare gains, if goods and services previously supplied by unpaid workers (like childcare and elder care) are produced more efficiently outside the home than within it. All these mechanisms can play an important role, but due to data and methodological issues the focus of this section falls largely on the first mechanism mentioned – the contribution of women’s labour input (in numbers and hours work) to economic performance.

The aim of the section is to measure the economic gains from the promotion of gender equality in the Nordic countries. It seeks to address two main questions: first, to what extent have changes in women’s labour input contributed to past economic growth in the Nordic countries; and second, how much do Nordic countries continue to gain from their current relatively high levels of female employment and gender equality in the labour market? To do so, it draws together historical time-series on macro-economic performance and women’s employment, and combines them with growth accounting (Box 3.1) and development accounting (Annex B) techniques. The overarching objective is to capture and quantify how much the Nordic economies have benefited (and are still benefiting) from their comparatively gender-equal labour markets and high levels of female employment.

Box 3.1. Measuring the contribution of changes in women’s employment to economic growth using growth accounting

Much of the analysis in this section is based on growth accounting – a procedure used to identify and decompose the sources of economic growth. A detailed overview of the procedure is given in Annex B, but the basic idea is to use information on observed trends in macroeconomic indicators to split growth into its main components parts – that is, under standard macroeconomic theory, into labour, capital, and total factor productivity (Solow, 1956[86]). Data permitting, the contribution of each of these main components can then be further decomposed into their own sub-components. For example, the contribution of labour input to growth can be split between changes in employment in the different sectors of the economy, while the contribution of capital can be divided between ICT-related capital (e.g. computer hardware, telecommunications equipment, and computer software) and non-ICT capital (more traditional forms of capital, like machinery and transport equipment).

In this report, the focus is on the contribution of labour input to growth and, in particular, on the contribution of women’s labour input. Growth accounting is used to identify and separate the contribution of labour from the other two main components – capital and total factor productivity, from here on labelled together as “labour productivity” – and then to decompose the contribution of labour input itself. Labour input is, in this instance, separated into three parts: changes in the size of the working-age population, the employment rate, and, where data allow, average hours worked per employed person. The contribution of the size of the working-age population is separated out first, to capture and control for the effects of shifts in demographic structure. The contributions of changes in both the employment rate and average working hours are then decomposed by gender and, where possible, by age group too. The latter two factors (the employment rate and average working hours) are where the main interest lies – they provide information on the extent to which changes in men’s and especially women’s employment rates and working hours have contributed to economic growth.

There are some limits to this exercise that are important to state at the outset. The estimates shown here do not account for the impact of any changes in female paid work on unpaid work and household production, for instance. As a result, they may possibly overstate the boost to actual living standards enjoyed by households following an increase in female employment. They also do not account for any gender differences in productivity, and implicitly assume that one additional hour of labour input produces exactly the same output regardless of sex, age, education, and so on. This assumption is largely unavoidable, because of a lack of adequate time-series data disaggregated by at least sex and age that could be used to capture worker productivity. Nonetheless, it should be kept in mind when interpreting estimates of the amounts of economic growth or output that can be accounted for by a certain group of workers.

3.1. Gains in female employment have made large contributions to Nordic economic growth

Many OECD countries have made progress on narrowing gender employment gaps over the past few decades (OECD, 2017[21]), but the Nordic countries started earlier and moved faster than most. Even as early as the mid-1980s, the five Nordic OECD members could boast that at least two-thirds of working-age women (15-64) were in paid employment (Figure 3.1, Panel A). At this time in countries like France, less than half of all working-age women were employed (Figure 3.1, Panel B). In Italy, it was roughly one-third.

Figure 3.1. The Nordic countries have seen large increases in female employment over the past 50 years, but growth has slowed

Female employment rate, 15-64 year-olds, 1960-2016, selected OECD countries

Note: Dashed lines reflect estimated data points (see Annex B).

Source: 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).

Much of the growth in female employment in the Nordic countries took place in the years prior to 1990 (Figure 3.1, Panel A). Female employment rates were already fairly high in the Nordic countries in the 1960s (Figure 3.1, Panel A), but further major gains were made across especially the 1970s and 1980s. In Sweden, for example, the employment rate for working-age women grew from 52.8% to 81.0% over the two-and-a-half decades between 1965 and 1990 – an average rate of increase of more than one percentage point per year (Figure 3.1, Panel A). By comparison, in both France and the United Kingdom, the working-age female employment rate increased by only around 20 percentage points over the five decades between 1965 and 2015 (Figure 3.1, Panels B and C). Denmark and Iceland also made large gains in female employment during the decades prior to 1990 – although for these two countries we must rely on estimated data (see Annex B) – as did Norway, at least in the years since consistent records began in 1972 (Figure 3.1, Panel A). Gains were slightly smaller in Finland, largely because female employment was already very high in the 1960s. Nonetheless, even there, the working-age female employment rate still increased by 10 percentage points between 1970 and 1990 (Figure 3.1, Panel A).

Employment gains in the Nordic countries slowed after 1990 (Figure 3.1, Panel A), as the economic crisis in the early 1990s led to large employment losses for women as well as for men (Figure A A.1. Panel A). In Finland and Sweden working-age female employment rates fell by around 12-13 percentage points from their highest points in 1990 to their lowest in 1994 and 1998, respectively (Figure 3.1, Panel A). Female employment has stablished and recovered slightly since, but gains have been much smaller and slower than those seen prior to 1990 (Figure 3.1, Panel A). Iceland has seen the largest increase in working-age female employment since 1990, at 8 percentage points.

Despite the slow-down, current female employment levels remain high in the Nordic countries. Female employment rates in Finland and Sweden are still slightly lower than their pre-crisis peaks (Figure 3.1, Panel A) but, taking a wider perspective, women in the Nordic countries remain far more likely to be found in paid employment today than they were four or five decades ago. In Denmark, Iceland, Norway and Sweden, working-age female employment rates are currently about 20-25 percentage points higher than in the 1960s or early-1970s. Finland has seen smaller gains but, even so, the working-age female employment rate is still about 6 percentage points higher than in 1970.

The gains made on female employment by the Nordic countries have provided a considerable boost to economic growth over the past half century. Figure 3.2 summarises results from a first growth accounting exercise, with growth in GDP per capita decomposed into parts that can be accounted for by changes in: labour productivity, the working-age share of the population, and male and female headcount employment (see Box 3.1). This first exercise covers the contribution of headcount employment only, with changes in working hours left out for the time being (see Section 3.2 and Box 3.2). Some caution should be used when comparing across countries, as differences in the length of available time-series mean estimates are not fully comparable.

Figure 3.2. Except for in Finland, gains in female employment account for between 10% and 20% of average annual growth in the Nordic countries

Average annual rate of growth in GDP per capita and disaggregation of growth into its primary components, longest available series, Nordic and selected other OECD member countries

Note: 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. See Annex B for more detail.

Source: 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).

Box 3.2. Summary of the data used in the growth accounting exercise

Data sources used for the growth accounting exercise

The data used for the growth accounting exercise is taken from national accounts databases and supplemented by estimates based on information from labour force surveys (Annex B). Data for the first stage of the process, which involves decomposing growth into its main components like capital and total labour input, are taken from the OECD National Accounts Database. The data series used include Gross Domestic Product (GDP), total population, total employment, and average working hours per person employed. On occasion important series are missing in the OECD database. Where this is the case, values are filled or interpolated using information from alternative national accounts databases, such as the European Commission’s AMECO Database or those published by national statistical offices.

The second stage of the growth accounting exercise, which involves decomposing the contributions of the employment rate and average working hours by gender and age group, requires data on population, employment, and working hours that are disaggregated by age and gender. National accounts databases do not typically provide breakdowns by age or gender, so these data are estimated using information from labour force surveys. Details of this procedure are given in Annex B but, in short, it involves splitting and allocating the overall population, employment, and hours-worked totals from national accounts databases according to information on the distribution of the given series provided by labour force survey data. The labour force survey data are taken primarily from the OECD Employment Database or from data series supplied by the Nordic national statistical offices in response to an OECD questionnaire. Where data are missing, values are filled using information from alternative sources such as the Eurostat database or alternative information from national statistical offices, or are estimated by trending the nearest observation back or forward using alternative but similar series. More detail is given in Annex B.

Time period covered by the growth accounting exercise

The time period covered by the growth accounting exercise is limited by data availability and varies across countries. Generally, for this exercise, a longer time-series is preferable to a shorter one. Shorter time-series starting in, say, the 1980s or 1990s are likely to miss much of the growth of female employment, and therefore much of the contribution of women’s employment to economic growth. However, consistent and comparable time-series going back to the 1960s or 1970s are not always available; labour force survey data disaggregated by age and gender are usually the biggest constraint, with data on working hours especially scarce. In the best cases the relevant measures are available right through from the early-1960s to 2016.

To maximise the time period covered, several sets of estimates are produced, each progressively more detailed but also more constrained in terms of the period covered. The first set (shown in Figure 3.2 and in Table A A.3) covers the contribution of changes in the employment rate by gender, only; the second (shown in Table A A.4) covers the contribution of changes in the employment-to-population rate by gender and also age group; and the last set (shown in Figure 3.5 and in Table A A.5) adds in the contribution of changes in average working hours by gender. Table 3.1 summarises the time period covered for each country under each set of estimates.

Table 3.1. The time period covered varies across countries and estimates

Summary of time period covered by the different estimates, by country

		Employment rate, by gender (Figure 3.2)	Employment rate, by gender and age (Table A A.4)	Employment rate and average working hours, by gender (Figure 3.5)
Nordic OECD member countries	Denmark	1967-2016	1983-2016	1983-2016
	Finland	1970-2016	1970-2016	1990-2016
	Iceland	1970-2016	1991-2016	1991-2016
	Norway	1972-2016	1972-2016	1975-2016
	Sweden	1963-2016	1963-2016	1987-2016
Selected other OECD member countries	Canada	1971-2016	1976-2016	1976-2016
	France	1962-2016	1968-2016	1983-2016
	Germany	1991-2016	1991-2016	1991-2016
	Italy	1970-2016	1970-2016	1983-2016
	Japan	1970-2016	1970-2016	-
	United Kingdom	1960-2016	1984-2016	1984-2016
	United States	1970-2016	1970-2016	1979-2016

Labour productivity gains (covering growth linked to both capital and technological progress) account for the bulk of economic growth across all twelve of the OECD countries included in Figure 3.2. This is consistent with a number of existing studies (Scarpetta et al., 2000[87]; Duval and de la Maisonneuve, 2010[88]; Johansson et al., 2013[89]) that find that technology in particular accounts for the largest part of recent economic growth in OECD countries.

Figure 3.2 suggests that, except for in Finland, gains in female employment account for around 10-20% of all growth in GDP per capita in the Nordic countries over the past 40‑50 years (Figure 3.2). In Iceland and Norway1, approximately 0.40 percentage points of the average annual rate of GDP per capita growth over recent decades can be linked to gains in female employment, while in Denmark and Sweden this is about 0.25 percentage points (Figure 3.2). Gains are relatively small in Finland, as the female employment rate was already at a high level at the start of the period examined (1970).

How important are these contributions? It is difficult to know exactly what the Nordic economies would have looked like if female employment had not grown over the past few decades, and it is too simple to say that the average growth rate in, say, Denmark would have been 0.25 percentage points lower if women’s employment had simply stagnated. Male employment and hours might have responded to pick up the slack, for example, or perhaps labour productivity would have contributed even more. Nonetheless, to put these numbers in context, removing the contribution of women’s employment from the actual observed rate of growth would mean current GDP per capita would be around USD 5 000-6 000 (2010 PPP) smaller in Denmark and Sweden, USD 7 500 smaller in Iceland, and almost USD 9 000 smaller in Norway (mainland). Even in Finland, where gains in female employment have contributed only roughly 0.05 percentage points to average annual growth, GDP per capita would still be roughly USD 1 500 smaller if it was not for the parts of growth accounted for by changes in female employment. These are big numbers. They equate to losses of roughly 4% of GDP per capita for Finland, about 12-13% for Denmark and Sweden, and close to 17% for Iceland and Norway (mainland). Such losses would see GDP per capita return to levels last seen in the late‑1990s or early-2000s across all five of the Nordic countries.

3.1.1. Most gains have come through increases in employment among women of parenting-age, but older female workers have contributed too

Employment outcomes and the speed and extent of progress are likely to differ across different groups of women. Unfortunately, for the Nordic countries as for many others, long time-series with information on many of the socio-demographic characteristics of employed women (like education, parenthood status, and migrant background) are not available, which prevents the construction of a detailed picture on where exactly progress has (and has not) been made. However, one area with reasonably detailed information over a relatively long period is age and the age-distribution of those in paid work.

Figure 3.3 decomposes growth in the working-age (15-64) female employment rate into parts that can be accounted for by young women aged 15-24, by parenting-age women aged 25-54, and by slightly older women aged 55-64. Again, differences in the time periods covered complicate comparisons, both across countries and also with other series, like the employment rate trends shown in Figure 3.1.2

Figure 3.3. Most of the increase in female employment has been driven by women age 25-54, though in some countries slightly older women age 55-64 have made a substantial contribution too

Percentage point change in the female employment rate, 15-64 year-olds, and contribution by age group, longest available series, Nordic and selected other OECD member countries

Note: Differences in the time periods covered mean estimates are not fully comparable across countries. See Annex B for more detail.

Source: OECD Employment Database (http://www.oecd.org/employment/emp/onlineoecdemploymentdatabase.htm).

For the most part, increases in female employment in the Nordic countries have been driven largely by women of parenting-age (25-54). This is no surprise given it is the widest and largest age-group covered, but nevertheless underlines the value of providing supports to women with dependent children. In Norway and Sweden, employment gains among women aged 25-54 account for about 75-80% of all increases among working-age women since the mid-1960s or early-1970s (Figure 3.3). The contributions of parenting‑age women are slightly smaller in Finland (roughly 50% of all increases), Iceland (40%) and especially Denmark (about 20%), though in the latter two countries this may be as much to do with the shorter time periods covered (1991-2016 and 1983-2016, respectively) as anything else.

Older female workers have also played their part (Figure 3.3). In Norway and Sweden, increases in employment among women aged 55-64 account for roughly 20-25% of all positive growth in the working-age female employment rate. In Finland and Iceland this rises to around 50%, while in Denmark it is as high as 75% (Figure 3.3) – a hugely disproportionate contribution, given that even by 2016 Danish women aged 55-64 made up less than 20% of the working-age female population. These large contributions reflect consistent increases in employment rates among women aged 55-64 – themselves largely the result of a cohort effect, with rates rising as progressively-better-educated women age (OECD, 2017[90]). They also, however, reflect the gradual ageing of the working-age population, with slightly older women making up a much larger part of the working-age population today than four or five decades ago (OECD Employment Database).

Young women have generally contributed less to the overall increase (Figure 3.3). Finland and Sweden have actually seen employment decline among women aged 15-24. This isn’t unusual in the OECD – many other OECD countries, including France, Italy and Japan, have also seen large decreases in the number of employed young women over the past few decades (Figure 3.3) – but does differ from Denmark, Iceland and Norway, where the number of employed women aged 15-24 has remained fairly stable (see OECD (2016[34]) and OECD (2018[35]) for more on young people in the Nordic countries).

These differences across age groups in employment gains translate in turn into differences in estimated contributions to economic growth. Simplifying slightly, and assuming for current purposes that all workers are equally productive regardless of age and other characteristics, the fact that parenting-age women (25-54) have generally contributed most to female employment growth means they also account for the bulk of women’s contribution to economic growth. This is especially the case in Norway and Sweden, with changes in employment among parenting-age women are estimated to have contributed about 0.34 and 0.23 percentage points to average annual GDP per capita growth, respectively (Table A A.4 in Annex A). In Finland, Iceland, and especially Denmark, slightly older women (55-64) play a more important role (Table A A.4 in Annex A). Indeed, in Denmark, of the 0.14 percentage points that women’s employment has contributed to annual growth since 1983, 0.12 percentage points can be attributed to employment gains by women aged 55-64.

3.2. Changes in employed women’s working hours have made a muted contribution to economic growth in the Nordic countries

Total labour input depends not just on how many people are in paid work, but also how long they work, too. Usual working hours differ considerably in the OECD, not only within countries between men and women, for instance, but also across countries as well. For example, in countries like Greece, Korea, Mexico and Turkey, average usual weekly working hours come to well over 40 hours per week. This is 5 or so hours longer than the average in countries like Australia, Germany, and Switzerland, and more than 10 hours longer than in the Netherlands (OECD Employment Database). These differences add up, and can have a huge impact on an economy’s total labour input. Greece, for example, currently has one of the lowest employment rates in the OECD. However, the lengthy days worked by those in employment mean the Greeks actually work more hours per person per year (770 hours per head) than some countries with far higher employment rates, like Germany (720 hours per head each year) or the Netherlands (750 hours per head each year) (OECD National Accounts Database; OECD Employment Database).

Women tend to be in paid work for fewer hours than men. Across the OECD as a whole, employed women are well over twice as likely as employed men to be in part-time work and, even when looking just at full-time workers, women’s hours tend to be shorter than men’s (OECD Employment Database). Overall, across the OECD, women’s average usual weekly hours (34 hours per week) are about six-and-a-half hours shorter than men’s average usual hours (40.5 hours per week). This pattern holds in all OECD countries, though the size of the gap differs. In Latvia, for example, the gender working hours gap is just one-and-a-half hours per week. In the Netherlands and Switzerland, it is more than ten (OECD Employment Database).

Gender differences in working hours are comparatively small in the Nordic countries, though to some extent this has more to do with men’s relatively short working hours than women’s hours (OECD Employment Database). In Denmark, Finland, Norway and Sweden, men work for an average of somewhere between 35 and 39 hours per week – the shortest average male hours in the OECD, with the exception of the Netherlands – and women an average of around 31-32 (Denmark and Norway) or 35 (Finland and Sweden) hours per week – close to the average for the OECD (34 hours per week in 2016; OECD Employment Database). Sweden has the smallest gender gap of the five Nordic OECD countries (at just over three-and-a-half hours per week), followed by Denmark, Finland, and then Norway (all at between four and five hours per week).

Iceland is different. Average usual working hours for women in Iceland are around 35 hours per week, but men’s hours are much longer. In 2016, employed men in Iceland worked for an average of more than 43 hours per week (OECD Employment Database). Different factors are thought to have contributed to the relatively long working hours among men in Iceland. Back in the 1970s, national income levels were about two-thirds of what they were in Denmark, Norway and Sweden (Figure A A.3 in Annex A), and with a relatively small welfare state (Figure 2.3) and lower wages than in other Nordic countries, participation rates (also beyond age 65) and working hours among men in Iceland have traditionally been comparatively high (Ólafsdóttir and Ólafsson, 2014[91]). However, since the Great Recession average male working hours in Iceland fell from 47 hours per week in 2007 to 43 hours per week in 2010. They have not rebounded since, so there is some convergence in working hours among men in Nordic countries.

In the Nordic countries, as also in much of the OECD, gender differences in working hours have fallen slightly in recent decades. Men’s average usual working hours have been declining for decades – among the Nordic OECD members, the steepest drop has been in Iceland (down more than six hours since the early-1990s, from an estimated 49.7 hours per week in 1991 to 43.3 in 2016), but Denmark, Finland and Norway have also seen large declines too (Figure A A.2. in Annex A). At the same time, women’s average working hours have remained more or less stable (Figure 3.4). The share of employed women in part-time work has actually fallen over the past couple of decades in all of the Nordic countries except Finland (OECD Employment Database), but shifts elsewhere – including declines in average hours among part-time and, in Denmark and Iceland, also full-time female workers (OECD Employment Database) – have led to the overall average remaining steady. In Denmark, for example, women’s average weekly hours fluctuated around 31-32 hours per week throughout the 1980s and 1990s and, although they fell slightly in recent years, are still only an hour and a half shorter now than in 1983. Even in Finland, which has seen the largest change of the five Nordic OECD members, women’s average hours have fallen only by a little over two hours since 1990 (Figure 3.4).

Figure 3.4. Women's average working hours have remained largely stable in the Nordic countries, and declined slightly in some other countries

Female average usual weekly working hours, all ages, 1975-2016, selected OECD countries

Note: Data refer to average usual weekly working hours in the main job, and cover all employed (both employees and self-employed) of all ages. Data for the United States refer to dependent employees, only. Dashed lines reflect estimated data points (see Annex B).

Source: 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).

The general ‘flatness’ of the trend in women’s average working hours means they have not contributed a huge amount to economic growth in recent decades. Figure 3.5 summarises results from a second growth accounting exercise, with growth in GDP per capita broken down into parts that can be accounted for, as before, by growth in labour productivity, by the working-age share of the population, and by male and female headcount employment, but also this time by changes in male and female average working hours too. It should be pointed out that, because time-series on working hours are typically shorter than those on headcount employment, the period covered by this exercise is shorter than the period covered in Figure 3.2. This means that the overall average growth rate and estimates for the contributions of the various factors may differ slightly from those discussed earlier.

Figure 3.5. Changes in women's working hours have generally made little contribution to economic growth

Average annual rate of growth in GDP per capita and disaggregation of growth into its primary components, longest available series, Nordic and selected other OECD member countries

Note: 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. See Annex B for details.

Source: 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).

By and large, changes in women’s working hours seem to have made little (if any) contribution to economic growth in the Nordic countries over the years covered by Figure 3.5. Of the five Nordic OECD members, Iceland and Norway have seen the largest estimated contributions to average annual growth from women’s working hours, at roughly 0.15 percentage points each. This corresponds to around 8-9% of the total overall average annual growth rate in both countries. In Denmark and Sweden, changes in women’s hours worked have contributed less than 0.05 percentage points to the average annual rate of growth, while in Finland they have made a small negative contribution (‑0.09 percentage points).

It is important that these comparatively small contributions are considered in context. First, the overall trend is actually for declining average working hours, and changes in men’s hours have contributed negatively to recent economic growth in all of the Nordic OECD members bar Sweden, sometimes by as much as around half a percentage point (Iceland) or more (Norway) (Figure 3.5). From this perspective, although women’s hours might not have made much positive contribution to economic growth in recent years, they at least do not represent a historic drag on growth in the same way as men’s hours. Second, because for data reasons the time period covered by Figure 3.5 is limited mostly to the mid-to-late-1980s onwards, these estimates take no account of any progress made on women’s hours during the 1960s and 1970s, or indeed during earlier decades. It is possible that women’s hours made more substantial contributions to growth in earlier years, for instance, but that such contributions are not being picked up here. Put differently, it is still possible that changes in women’s working hours have contributed to past growth in the Nordic countries, though unfortunately there is little evidence of it here.

3.3.  The Nordics’ gender-equal employment outcomes continue to contribute to their relative prosperity

The economic gains from promoting women’s employment are not a one-time thing. A lasting increase in labour input contributes to economic output on a continual basis so, as long as gains is retained, boosting female employment and improving women’s economic opportunities should continue to pay dividends year after year. The Nordic countries have maintained their exceptionally high levels of female employment for decades now – indeed, as discussed earlier, even though almost all OECD countries have made progress on gender in recent years (OECD, 2017[21]) the Nordics continue to boast some of the smallest gender employment and working hours gaps in the OECD (see Table 1.1, for example). They are also, to differing extents, relatively prosperous countries with comparatively high levels of GDP per capita. This raises questions, then, around how much the Nordics continue to gain even today from their comparatively high levels of female employment; how much of their current relative prosperity can be accounted for by their relatively gender-equal labour markets, for example, or how much is the maintenance of their top-performer status on gender worth in terms of current economic output?

Figure 3.6 summarises results from what is known as a development accounting analysis – an exercise similar to growth accounting, but focused on differences in economic output across economies at a single point in time rather than within a single economy over time (see Annex B). In this case, GDP per capita in each of the Nordic countries (plus selected other OECD members) is compared to the OECD-30 total – an aggregate stretching across all OECD countries except for Chile, Iceland, Japan, Mexico, and Turkey, who are excluded for data reasons – with any differences or ‘gaps’ in GDP per capita then decomposed into their constituent parts. Denmark, Iceland, Norway (mainland) and Sweden all have positive GDP per capita gaps – each have levels of GDP per capita higher than the OECD-30 total, by about USD 8 000 (2010 PPP) (Norway), USD 2 400 (2010 PPP) (Denmark), USD 2 200 (2010 PPP) (Sweden) and USD 140 (2010 PPP) (Iceland). Finland’s GDP per capita is slightly lower than the OECD-30 total (by about USD 4 000 (2010 PPP)). Similar to the earlier growth accounting analyses, these gaps are decomposed into parts that can be accounted for by differences in labour productivity, by differences in the working-age share of the population, by differences in male and female headcount employment, and by differences in male and female working hours. Values are expressed in 2010 U.S. Dollars at purchasing power parity (USD 2010 PPP).

Figure 3.6. The Nordic countries’ higher-than-average levels of female employment contribute substantially to national income, but the contribution of working hours is mixed

Gap in GDP per capita relative to the OECD-30 total and decomposition of the gap into its primary components, USD 2010 PPP, 2015, Nordic and selected other OECD member countries

Note: Estimates based on the decomposition of national accounts data using labour force survey estimates. Differences in definitions and the data used mean estimates are not fully comparable across countries. The OECD-30 total is the weighted total across 30 OECD countries, with Chile, Iceland, Japan, Mexico and Turkey the five countries not included. See Annex B for more details.

Source: 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).

Figure 3.6 suggests that gender equality contributes a considerable amount to the current relative prosperity of the Nordic countries. Female employment is generally not the most important driver of the gaps in GDP per capita: in both Denmark and Norway (mainland), for example, above-average labour productivity accounts for the bulk of their above-average GDP per capita, while in Iceland long working hours are more important (Figure 3.6). Nevertheless, across the five Nordic OECD members, women’s comparatively favourable employment outcomes continue to make a positive contribute to their relative GDP per capita.

The Nordic countries’ comparatively high levels of female employment are particularly important. Relative to the levels seen across the OECD-30 as a whole, the Nordics’ higher-than-average female employment rates account for roughly USD 2 000-2 500 (2010 PPP) of the GDP per capita gap in Denmark, Norway and Sweden, and almost USD 5 000 (2010 PPP) in Iceland (Figure 3.6). Even in Finland, where the GDP per capita gap is negative, female employment makes a positive contribution of just under USD 1 000 (2010 PPP). Again, as with the growth accounting estimates discussed earlier, it is difficult to predict what the Nordic economies would look like without their current high levels of female employment – in those fictitious economies, the remaining female workers might work much longer hours, for instance. The loose suggestion, though, is that if female employment rates were typical for the OECD and equal only to those seen across the OECD-30 as whole then, depending on the country, annual GDP per capita might be somewhere between USD 1 000 and 5 000 2010 PPP smaller than it actually is today.

Working hours make less of a contribution to current relative levels of GDP per capita. In Iceland, women’s relatively high working hours account for roughly USD 1 800 (2010 PPP) of the gap in GDP per capita with the OECD-30, while in Finland this is about USD 800 (2010 PPP) and in Sweden roughly USD 300 (2010 PPP). However, in Denmark and Norway, women’s lower-than-average working hours might actually make a negative contribution to current GDP per capita, in both cases of around USD 3 000 (2010 PPP). Causal claims are tricky here, and it is difficult to know what would happen if women would increase their hours in paid work. For example, labour productivity is currently much higher in Norway and Denmark than it is across the OECD-30 as a whole, and pushing workers to put in longer hours might see productivity fall. Nevertheless, in these two countries in particular, women’s comparatively short working hours represent one area where it is possible that further economic gains could be made.

Notes

← 1.  For Norway, this estimate is slightly higher than a similar estimate produced by Østbakken (2016[15]), who found that roughly 0.20 percentage points of average annual GDP per capita growth over the period 1972-2013 can be linked to changes in female employment. There are several differences in methods and data between the two studies. For example, unlike this study Østbakken (2016[15]), included men’s and women’s hourly wages as measures of male and female productivity. Given that women’s hourly wages have historically been (and still are) lower than men’s on average, this is likely to produce smaller estimates of the contribution of changes in women’s employment, ceteris paribus.

← 2.  For both Denmark and Iceland, for example, the time period covered in Figure 3.3 is shorter than the period covered in Figure 3.1 and Figure 3.2.