x Abu Dhabi, UAE Friday 21 July 2017

'Third Billion' adds up to economic change

DeAnne Aguirre and Karim Sabbagh: A billion women will become more productive as they topple the barriers to the marketplace and become a force for growth.

A huge and fast-growing group of people are poised to take their place in the economic mainstream over the next decade, as producers, consumers, employees and entrepreneurs. This group's impact on the global economy will be at least as significant as that of China and India's billion-plus populations. But its members have not yet attracted the level of attention they deserve.

If China and India each represent 1 billion or more emerging participants in the global marketplace, then this so-called Third Billion is made up of women, in both developing and industrialised nations, whose economic lives have previously been stunted, underleveraged or suppressed. These women, who have been living or contributing at a subsistence level, are now entering the mainstream. "We estimate that about 870 million of them will do so by 2020, with the number conceivably surpassing 1 billion during the following decade. Their presence as economic actors will be widely felt. As they move into knowledge work - in domains ranging from manufacturing to medicine to education to information technology - their sheer numbers will hasten the integration of the regions where they live into the larger economy.

To date, the potential of women as economic players has been unrealised. The reasons became evident recently in a Booz & Company analysis of data from the International Labour Organisation (ILO), a UN group that tracks global workforce statistics. Globally, many women could be considered: "not prepared" (lacking sufficient education); others are "not enabled" (lacking support from families and communities); and a significant number are both. But as constraints are alleviated, the Third Billion's movement into the middle class will accelerate.

We derived the Third Billion figure by combining the estimated number of "not prepared" and "not enabled" women between the ages of 20 and 65 in 2020, using data from the ILO. Most of these women, about 822 million of them, live in emerging and developing nations and about 47 million live in North America, western Europe and Japan. Therefore, 1 billion or more women are clearly about to participate more fully in the mainstream economy, representing a significant force in such regions as Latin America, Asia, the Pacific Rim, the Middle East, eastern and central Europe and Africa.

The past decade has shown the extraordinary effect that huge population segments can have when they are integrated into the global economy, as in China and India. Newly enabled consumers and workers serve as an economic multiplier, creating vast markets and increasing the size and quality of the talent pool. In periods of relative prosperity, their aspirations and persistence are engines for growth, and in slower periods, they represent pockets of economic activity that ameliorate the impact of decline. It is clear then the growth of emerging consumer markets in China and India helped stabilise the global system during the downturn of 2008-2009.

But the multiplier effect of this group of women could be much greater than those of other demographic expansions and in a way that has not yet been fully appreciated. First, the impact will be spread broadly; the women of the Third Billion are not limited to one country, but instead are dispersed in every part of the globe. Second, when women become more active economically, they tend to have fewer children. As the birthrate goes down, the social priorities of a culture change, and it becomes easier for more women to gain preparation and support for leading more independent lives. Finally, these women are likely to invest a larger proportion of their household income than men would in the education of their children. As those children grow up, their economic impact increases further. This helps explain why, as a report issued by the UN Development Fund for Women found, investments in women's enterprises in developing countries yielded greater long-term benefits to the economy as a whole than investments in male-owned enterprises.

The full potential of the Third Billion is still unrealised in many localities where overall labour productivity remains low. These regions are therefore able to reap particularly strong benefits through a co-ordinated approach that helps women overcome their "not prepared" and "not enabled" status. Such efforts must start with an assessment of the specific constraints faced by the Third Billion constituents in a given region. These may include: inadequate infrastructure; legal prohibitions on female advancement; social conventions that inhibit female participation in the workforce; government restrictions on small businesses; outdated approaches to risk and credit; and other social, legal, cultural or financial norms and practices that make it difficult for women to go to school, seek employment freely, benefit from their earnings or manage their lives in other ways.

Some of these challenges can be overcome with better planning at the local level, but the others require intervention from national governments. In either case, the goal should be to harness the power of women in a regional economy to help develop a more integrated and productive activity base. And this is not only an opportunity for governments. Global corporations and non-governmental organisations should also strategically assess what they can do to enable and prepare these women as potential consumers, employees and citizens. As the Centre for Work-Life Policy, a think tank based in New York, has noted, some companies including Goldman Sachs and Google are building recruitment plans around the potential of the Third Billion.

The creativity of the Third Billion may provide the world with an unprecedented resource for driving economic growth and improving the quality of life over the next decade. Reaping this demographic dividend will not be easy, and it may require much social and legal change. For leaders, the next step is to recognise the value of this population of women and the contribution they can make. Karim Sabbagh is a partner at Booz & Company and leader of the firm's communications, media and technology global practice, and DeAnne Aguirre is a senior partner at Booz