Advancing Gender Equality Could Mean $135b GDP Boost for Indonesia: McKinsey

Indonesia could add $135 billion to its annual gross domestic product by 2025 if it can improve gender equality in the workplace, McKinsey Global Institute said in a report unveiled in Jakarta on Wednesday (01/08). (B1 Photo/Mohammad Defrizal)

By : Sheany | on 5:14 PM August 01, 2018
Category : Business, Featured, Labor

Jakarta. Indonesia could add $135 billion to its annual gross domestic product by 2025 if it can improve gender equality in the workplace, McKinsey Global Institute said in a report unveiled in Jakarta on Wednesday (01/08).

The business and economics research arm of global consulting company McKinsey said increased female labor-force participation, a higher share of women working fulltime rather than part-time, and more women working in higher-productivity sectors such as manufacturing instead of agriculture, could allow Indonesia to seize economic opportunities and boost its GDP by 9 percent.

"If Indonesia now steps up efforts to advance towards parity, a significant economic prize awaits," McKinsey Indonesia president director Phillia Wibowo said during the launch of the report titled "The Power of Parity: Advancing Women's Equality in Asia Pacific."

Continuous improvement of various infrastructure, such as transportation, is also important to facilitate women's contribution to the economy, the report said.

McKinsey cited government data showing that Indonesian women currently make up 38 percent of the country's total labor force, but only contribute 29 percent to GDP.

According to McKinsey, participation by women in the labor force has barely budged over the past 20 years.

"There is very high correlation across countries between gender equality at work with gender equality in society – they are found to be completely linked," said Guillaume de Gantes, a partner at McKinsey.

This means companies and the government must step up efforts to achieve gender parity, along with other sections of society.

McKinsey Global Institute's analysis found that Indonesia exceeded the Asia-Pacific region's average on gender equality at work, though it still lags behind in several areas, such as leadership positions.

Based on McKinsey Global Institute's gender parity score, where a higher number means better parity, the Philippines scored the highest in the Asia-Pacific region on women in leadership position, at 0.96.

This was followed by New Zealand, Australia and Singapore, at 0.67, 0.58 and 0.52, respectively. Indonesia has a score of 0.30.

Advancing women's equality could add $4.5 trillion to the collective GDP of countries in the region by 2025, which represents a 12 percent increase.

The report also laid out several measures that could be taken by both the government and the private sector, such as strengthening weak legal protection for women, increasing training for girls and young women in digital skills and entrepreneurship, and investing in campaigns to help shift attitudes about women's role in society and the workplace.

Tackling Key Issues

McKinsey has found that legal protection is weak for Indonesia women in the workplace, especially in the informal sector, which employs around 24 million. Therefore, improving legislation and enforcement to protect women will play a key role in achieving gender equality.

During the launch, Phillia highlighted the value of including part-time work in formal policy, especially because flexible working options in the formal sector can help shift women away from this sector.

While women make up 52 percent of college graduates in Indonesia and will likely take up jobs as entry-level professionals, the number drops significantly when it comes to senior managers and board members, where it stands at 13 percent and 5 percent, respectively.

There is no available data on women in middle-management positions but Phillia said this is likely the level at which most women leave the labor force, mostly because this is usually when they get married and start families.

"What women look for in this period is flexibility – not less work, but flexibility. This is the time when sometimes you need to be at home; a moment in life when flexibility is required. If a company's measures don't allow for that flexibility, things get tough," Phillia said.

She also touched on current attitudes in society towards women and said this is another obstacle to achieving parity. She added that capability programs could assist women to be more successful and address unconscious bias. Furthermore, she said awareness campaigns can also help to shift traditional attitudes.

McKinsey said the spirit of entrepreneurship across the archipelago is a strength that could further boost the economy.

Women make up 51 percent of small-business owners in Indonesia, compared with a global average of 35 percent. However, the country must address various barriers, such as those related to finance and traditional perceptions of female-run businesses being "supplementary" to their spouses' work.

The report also highlighted the role of digital technology to improve access to finance, credit and markets, which is in line with high smartphone and internet penetration in the archipelago.

Improving household infrastructure can also increase women's productivity and participation in the economy.

Thirty percent of Indonesian households still lack access to clean water, sanitation and clean cooking fuel. As women are more likely to do chores that depend on these basic essentials, addressing the issue would enable them to be more productive members of society, the report said.

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