Women’s Empowerment and Its Economic Impact

Part 5: Positive Correlation between the Ratio of Female Employees and the Company's Business Performance

Consulting Fellow, RIETI

One of the methods for measuring the economic effect of women's empowerment is to analyze the correlation between a company's ratio of female workforce and its business performance. The traditional "discrimination-based economic modeling" by Gary Becker and Stefan Szymanski, has assumed that employing women, who represent a cheap and underutilized labor force, would improve companies' business performance. For companies, if the level of profits and productivity brought in by women is greater than the cost of hiring them, employing women and business performance should have a positive correlation.

University of Tokyo Professor Daiji Kawaguchi found that although companies with a high proportion of female workers earn higher profits, gender-based wage disparity represents only 1/20th of its cause, and that the rest could be attributable to productivity differentials between men and women. I also have confirmed strong business performance among companies with a high proportion of female workers. Yet, a company's business performance does not change just by increasing its ratio of female employees. The ratio of female employees is a proxy variable of employment management for gender equality, and companies could only improve their business performance by transforming employment management through WLB measures, etc.

Keio University Professor Isamu Yamamoto also has pointed to the tendency that companies with a higher ratio of female workers earn higher profits. His study suggested that the effect of the female worker ratio is even more prominent for companies that hire more employees through mid-career recruitment and provide WLB programs. The use of female workers appears to be boosting business performance not only because of their lower cost of labor but also through enhanced productivity.

Jordan Siegel et al. indicated an increase in corporate profitability when companies involve women in management as directors or managers. This is mostly due to labor cost savings, but could be partially attributable to productivity enhancements brought on by women's management involvement.

Many existing studies show positive correlations between the level of female employment and business performance. This does not necessarily mean the causality between increased female workforce and higher corporate performance. Yet, high-performing companies with a large proportion of female employees share other characteristics such as gender equality employment management, highly-fluid employment pattern, and the application of WLB measures. Companies who wish to pursue higher performance by using female workers, should refer to the initiatives of high-performing companies with large female workforce, such as those named in the Ministry of Economy, Trade and Industry's "Diversity Management Selection 100."

>> Original text in Japanese

* Translated by RIETI.

August 26, 2016 Nihon Keizai Shimbun

September 29, 2016

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