Monthly Archives: February 2017

The power of parity

Bridging the gender gap in the United Kingdom could increase GDP by billions of pounds over the next decade and add 840,000 female employees to the workforce.

Moving toward gender equality is not only a moral and social issue; it is also important to future economic growth in the United Kingdom. A new report from the McKinsey Global Institute, The power of parity: Advancing women’s equality in the United Kingdom, explores the economic potential of narrowing gender gaps at the national level as well as across UK regions; it also examines the opportunity to address gender disparities within various occupations and sectors of the economy. Gender equality in work necessitates gender equality in society, so this research adopts a holistic view, assessing how gender inequality impacts a woman through her life and identifying a comprehensive set of interventions to help UK stakeholders take action on gender inequality in the short and longer terms. Here’s a look at some of the main findings of our research:

  • Bridging the UK gender gap in work has the potential to create an extra £150 billion on top of business-as-usual GDP forecasts in 2025, and could translate into 840,000 additional female employees.1In this scenario, every one of the United Kingdom’s 12 regions has the potential to gain 5–8 percent in GDP, with the largest opportunities in London, the North West, and South East.
  • Some 38 percent of this extra GDP could come from increased female participation in the labor force—with the rate rising from 76 percent for business-as-usual forecast in 2025 to 79 percent in 2025; 35 percent from more women working in the more productive sectors; and 27 percent from a rise in women’s working hours by an average of 25 to 30 minutes a day.
  • Today, women work in less productive sectors and are concentrated in lower-paid occupations, which affects their financial stability. They are least represented in high-productivity sectors—including science, technology, engineering, and math (STEM)—and higher-salaried occupations, including skilled trades and managerial and leadership positions, which report the highest densities of skill shortages. Paving the way for women to occupy such roles could support productivity gains and act as one of the levers for the United Kingdom to narrow the productivity gap to its peers.
  • Data from the past decade indicate there has been little improvement in work indicators on a national level; at current rates, the United Kingdom will not achieve parity within the next three decades. MGI’s global Power of parity report also showed that, worldwide, enhancing women’s economic potential has gone hand in hand with achieving greater gender equality in society.
  • Analysis of UK indicators of gender parity in work and society shows that inequality most affects women as they enter the workforce or take on a parenting role (exhibit). Areas of extreme inequality include STEM careers,2single parenthood, and political representation. There is high disparity in relation to leadership and managerial positions, unpaid care work, entrepreneurship, breadwinning ratio, teenage pregnancy, and access to credit. This picture varies only slightly between UK regions.

The time for growth is now

The driving forces of the country’s growth—including urbanization, a rising middle class, and increasing consumer spending—are ripe for companies to seize upon.

India stands to become one of the largest growth engines in the world, according to research in a new McKinsey Global Institute (MGI) report, India’s ascent: Five opportunities for growth and transformation. In this episode of the McKinsey Podcast, McKinsey senior partners Noshir Kaka and Alok Kshirsagar and MGI partner Anu Madgavkar talk with McKinsey’s Cecilia Ma Zecha about the way forward in a growth- and productivity-powered India.

Cecilia Ma Zecha: Hello and welcome to this edition of the McKinsey Podcast. I’m Cecilia Ma Zecha, an editor with McKinsey Publishing in Singapore. Twenty-five years ago, India embarked on a journey of economic liberalization, opening its doors to globalization and market forces. The IMF [International Monetary Fund] expects GDP to grow more than 7 percent this year, making India the world’s fastest-growing large economy. Powered by a rising middle class that’s expected to more than triple to 89 million households by 2025, India has an attractive long-term future and compares favorably with other emerging markets.

What’s the road ahead? Our guests today are Noshir Kaka, a senior partner in McKinsey’s Mumbai office, and Anu Madgavkar, a partner of the McKinsey Global Institute. They are the authors of a new MGI report on India’s ascent, which outlines five opportunities for India’s growth and transformation. Also joining us to look at the implications for domestic and multinational companies is Alok Kshirsagar, a senior partner and leader of McKinsey’s Asia Risk Practice. Welcome, everyone. Noshir, let me start with you. What is the road ahead for India’s economy?

Noshir Kaka: Thank you, Cecilia. First, as you outlined, we are in an exciting time for India and companies in India, both multinational as well as domestic. India’s going to be the third-largest incremental GDP growth engine for the planet by 2030. That’s significant if you think about India’s size relative to the other massive geographies out there, like China or the US.

What’s powering that growth is two or three things that are pretty unshakable. First is the trend toward urbanization, which is going to increase consumption power massively, as well as economic leverage. The demographic changes that India’s going to go through are, again, unshakable and undeniable. But I think powering those two or three things, along with changes in the way the government is functioning as well as changes in technology, are ensuring that this growth engine has several more cylinders than the few that we used to originally think about.

Capturing China

It won’t be easy, but shifting to a productivity-led economy from one focused on investment could add trillions of dollars to the country’s growth by 2030.

After three decades of sizzling growth, China is now regarded by the World Bank as an upper-middle-income nation, and it’s on its way to being one of the world’s advanced economies. The investment-led growth model that underpinned this extraordinary progress has served China well. Yet some strains associated with that approach have become evident.

In 2015, the country’s GDP growth dipped to a 25-year low, corporate debt soared, foreign reserves fell by $500 billion, and the stock market dropped by nearly 50 percent. A long tail of poorly performing companies pulls down the average, although top-performing Chinese companies often have returns comparable with those of top US companies in their industries. More than 80 percent of economic profit comes from financial services—a distorted economy. Speculation that China could be on track for a financial crisis has been on the rise.

The nation faces an important choice: whether to continue with its old model and raise the risk of a hard landing for the economy, or to shift gears. A new McKinsey Global Institute report, China’s choice: Capturing the $5 trillion productivity opportunity, finds that a new approach centered on productivity could generate 36 trillion renminbi ($5.6 trillion) of additional GDP by 2030, compared with continuing the investment-led path. Household income could rise by 33 trillion renminbi ($5.1 trillion), as the exhibit shows.

The challenges independent work presents

Working nine to five for a single employer bears little resemblance to the way a substantial share of the workforce makes a living today. Millions of people assemble various income streams and work independently, rather than in structured payroll jobs. This is hardly a new phenomenon, yet it has never been well measured in official statistics—and the resulting data gaps prevent a clear view of a large share of labor-market activity.

To better understand the independent workforce and what motivates the people who participate in it, the McKinsey Global Institute surveyed some 8,000 respondents across Europe and the United States. We asked about their income in the past 12 months—encompassing primary work, as well as any other income-generating activities—and about their professional satisfaction and aspirations for work in the future.

The resulting report, Independent work: Choice, necessity, and the gig economy, finds that up to 162 million people in Europe and the United States—or 20 to 30 percent of the working-age population—engage in some form of independent work. While demographically diverse, independent workers largely fit into four segments (exhibit): free agents, who actively choose independent work and derive their primary income from it; casual earners, who use independent work for supplemental income and do so by choice; reluctants, who make their primary living from independent work but would prefer traditional jobs; and the financially strapped, who do supplemental independent work out of necessity.