ESG: Family matters in workplace gender equality

Boosting women’s inclusion in the workforce is vital in an ageing society. Fiona Nicolson speaks to Abigail Watt, who with colleagues at asset manager abrdn won the Funds Europe 2021 Thought Leadership Award for research into gender equality.

Climate change, net-zero carbon and COP26 are all familiar terms nowadays – the environmental element of ESG is high on the agenda globally for governments, investors and the wider population. Its prominence in the public eye may sometimes overshadow the other ESG factors – the social and governance elements. Yet these remain high priorities too.

The abrdn Research Institute, however, has placed the spotlight firmly on the social aspect of ESG, with its research series, A Woman’s Place: equality in the 21st century. It has published a range of papers in this series, including ‘A Woman’s Place: boosting female labour-force participation to lift long-term economic growth’. The series won the European thought-leadership of the year award in the 2021 Funds Europe Awards.

The research team involved Nancy Hardy, a macro ESG analyst, Abigail Watt, a quantitative research economist, and Stephanie Kelly, deputy head of abrdn Research Institute. Watt, who is based in Boston, Massachusetts, explains why they chose this subject.

“Obviously ESG has become a much bigger focus for investors in recent years, particularly the ‘E’ in ESG, but we think the ‘S’ has been under-researched.”

The theme of the research is diversity and inclusion, including a focus on male and female participation in the workforce, and in some depth. The team analysed data across 31 OECD countries, using a timeframe of 2002-16.

There is a good reason for delving into this subject, as the working paper in the series states: “Understanding the determinants of labour-force participation rates is important for policymakers seeking to increase the efficiency of the labour market and broader economy.”

Female participation rates lag
This does not always translate into the most effective use of the whole labour pool, though. The research shows that despite improvements over recent decades, female participation rates continue to lag those of men. It also found that the gaps between female and male labour-force participation still appear wide, particularly in countries such as Turkey, Mexico and Chile. Nordic countries show the smallest gaps.

It notes that Covid-19 also took its toll on women’s participation in the workforce, as women were much more likely to work in the type of service industries where demand for labour fell the most. Not only that, but lockdowns resulted in a disproportionate share of care and unpaid work responsibilities for women. This means that economies may not be benefiting from the best use of the skills and abilities that women have to offer. And so, as the research points out, understanding why the participation gap stays wide is a priority when it comes to long-term economic outcomes and policymaking.

The study also makes the point that women being, on average, more highly educated than their male counterparts is another good reason for getting more women into the workplace. As the working paper says, this has the potential to boost output “by increasing both aggregate labour supply and labour productivity through more effective and efficient use of available human capital”. Quite simply, if countries want better-performing economies, they need more women out at work.

There are other good reasons for bringing women into the workplace and keeping them there. Watt says: “If we think about the economic argument, increasing female participation in the workforce is even more important when you consider the issue of ageing populations.

“As our populations are ageing, the labour force is shrinking, so it’s significantly more important to be drawing on your existing labour supply. It’s an under-utilisation of part of your labour supply if you don’t have women participating as actively as men in the labour force.”

So, what is the solution? The study says that part-time, flexible work opportunities may help, but on the other hand, other evidence it refers to suggests that part-time work can also be associated with lower-quality jobs. The paper proposed that policymakers should therefore consider options that would avoid women getting stuck in this kind of work.

The importance of paternity leave
Despite the participation gaps, much progress has been made over the years in getting more women into the workforce and retaining them. Enabling women to work and raise a family at the same time has obviously been key. But another potential solution has emerged: the research discovered something unexpected, as Watt explains.

“We were surprised by the difference in the impact of maternity and paternity leave policies,” she says. “We found that maternity-leave policies have improved so significantly over the past decade that these weren’t necessarily a significant driver of female participation.

“But it was very interesting for us to see the impact that paternity leave could have. We found that higher levels of paternity leave were, on average, associated with higher female participation in the labour force, and we think that there are a number of reasons for this.

“One of the reasons why women tend to drop out of the labour force is because they have an overburden of caring responsibilities for children. It’s a well-studied area within work/time surveys across economies that women tend to take on more of the caregiving roles and responsibilities within the household. So, access to longer paternity leave is a way to equalise that balance between the sexes.”

One of the subsequent ‘deep dives’ into topics covered in the original research focused on leave policies in the UK. The team asked companies about the length of leave provided for maternity, paternity and parental leave, the drivers of their leave policies, why they chose those leave lengths and what the impact of those policies has been. While they found that many companies were just providing statutory paternity leave of two weeks, others such as some asset management and insurance companies had decided to offer more.

This can be beneficial both for businesses recruiting, as well as for the people they hire. “If companies are trying to hire from the same talent pool and one offers a more generous leave policy, then there is definitely pressure on the others to increase the generosity of their leave policy, which can create a virtuous circle,” says Watt. “It came across clearly that these policies are important for talent attraction and retention. Companies are aware that these things matter to employees.”

Ongoing childcare support
Giving the other parent more time to help out at home when there is a newborn is not the only way to support women in the workplace, however. Access to external childcare is an important determinant too, as the researchers found in their deep dive into this topic.

Watt says: “One of the things that we found was that women would, on average, participate more if they could have access to higher-quality and cheaper childcare services.”

Businesses could also enhance their competitive advantage through this means, as she observes: “There have been quite a few findings that could be of particular interest for companies. One of these relates to childcare and the role that companies can play in facilitating access to childcare for employees.

“In our research around incentives for women in the workforce, we discuss how a lack of access to childcare can be a barrier for women and we look at the possibility of providing paid childcarers’ leave or paid carers’ leave as part of the company’s leave policy.

“While there’s an awareness of the need for maternity leave, children still need care after the age of one-and-a-half, and there’s a lack of formal provision of childcare for that. So, if companies can go some way towards plugging that gap, this could ease women’s transition back into the labour force after being on maternity leave. Giving paid caregivers leave is one way to do that.

“We also touch upon other options, such as subsidies for childcare. The provision of back-up childcare is quite popular in large tech companies, for example. They have policies where they work with childcare providers to provide back-up childcare on demand, for employees in situations where they need last-minute childcare.

“Another option, which is clearly more expensive and is more difficult for some firms, is the provision of on-site childcare. However, it’s been found to be a really good way to ease mothers’ return to work, particularly nursing mothers.”

The research undertaken by the team has been extensive, so what did it mean for them to win this award?

Watt says: “I was over the moon that we won. This topic is something I personally feel strongly about, and I am very happy to have had the opportunity to contribute to the conversation.”

© 2022 funds europe



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