Acceleration in US gross domestic product growth could add $5.87 trillion to global market capitalization in 10 years, if more women entered the workforce, according to economists at S&P Global.
In a report released recently, S&P says an increase in U.S. women’s labour force participation rate (LFPR) to that of other advanced countries would drive US GDP up by 0.2 percent a year, fuelling estimated gains of 0.7 percent a year in the S&P 500.
“We calculate that if the US were to increase women’s labor-force participation rate to that of other advanced countries, it would add an average of 0.2 percentage point annually to GDP in the coming decade, which translates to a cumulative $455 billion in output above S&P Global’s baseline forecast for growth,” the report said.
It said that based on the historical sensitivity of stock markets to economic expansion, an acceleration of US output at the pace calculated under increased female workforce participation could help extend a historically long global bull run in equities, adding a whopping $5.87 trillion to global market capitalization in the next 10 years.
Beyond just the US stock market, the report said that adding more women to the U.S. labor force pushes global equities higher too since historical averages indicate that a single-percentage-point gain in U.S. GDP boosts German equities by 4 percent, Chinese equities by 6.2 percent and Korean equities by 9.3 percent.
While the broader market would undoubtedly benefit from more women entering the workforce, the information technology sector could be among the biggest beneficiaries. That 0.2 percentage point gain in GDP translates to an additional 1.1 percent annual gain in the infotech sector, S&P found.
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The report indicated that the United States lags developed country peers in terms of the share of women in work, and that even if it just catches up with other economies over the coming decade those extra workers would add a total of $455 billion to its economic output over that period, delivering huge additional gains for stock markets in both the world’s biggest economy and around the planet.
This incremental gain could add a total of $2.87 trillion to U.S. market capitalization over the next decade. The current market cap of the S&P 500 is $24.54 trillion, Reuters data showed.
“A concerted effort to increase participation and foster retention of women in the American workforce, particularly in those professions traditionally filled by men, represents a substantial opportunity for growth of the world’s principal economy,” wrote the authors of the report.
Indeed, despite a low unemployment rate, the U.S. labor-force participation, especially among women, remains historically low.
According to the Bureau of Labor Statistics, workforce participation of people above age 16 is at 63 percent, near the lowest level in more than 40 years.
But the number of women in the workforce is even lower at 57 percent, having fallen from about 74 percent in the 1990s, according to BLS data.
The U.S. lags behind virtually every developed country when it comes to female labor-force participation. The biggest obstacle to more women remaining in the workforce is child rearing, the report said.
“The U.S. is the only country in the [Organization for Economic Cooperation and Development] that doesn’t provide income support during maternity or parental leave by law,” the report said.
Caring for children falls primarily on women’s shoulders, who spend nearly half of their income on that endeavor and are forced to take a substantial break from their careers, with some never returning to work.
“A 2012 OECD report showed that full-day care for an infant eats up 41 percent of single mothers’ median income, and a 2013 survey by the Pew Research Center found that 39 percent of mothers had, at some point in their careers, taken off a significant amount of time to care for a child or other family member. More than 25 percent had quit work entirely to do so,” the report said.
However, government-sanctioned policies that would encourage women to enter and remain employed would boost economic growth and the stock market, according to the report.
