women on board

How promoting women could get Japan out of this crisis

January 22, 2013
January 22, 2013

Today’s central bank action aside, Japan must face its current fiscal, and demographic crisis head on. Here is one solution: empower women in the workforce.

Japan is in a fiscal—and demographic—pickle. In 2012, Japan’s debt-to-GDP ratio grew to the highest in the world. That’s more than Greece’s and twice that of the United States. It is also a dying country, more people die per year than are born. The United States is also aging, but it stays young via new immigrants. China is young, and India even younger. The working population (people between the ages of 15 and 64) in these countries is still growing—and becoming more educated.

Incentivizing more women to work—and succeed—within Japan’s male-dominated business is a tall order for conservative Prime Minister Shinzo Abe and the nationalist-conservatives in the governing coalition. Herein lies the opportunity. Ironically, for these politicians, empowering Japanese women is more palatable than the alternative policy solution: a significant increase in immigrants.

The potential return on investment is clear, for three reasons.

First, Japan’s leading companies underutilize its talented women. A 2011 report by Japan’s major business association Keidanren noted that if all new hires were gender blind, more than 70% would be female—but less than 12% were hired. Naysayers complain that more working women means even fewer babies, worsening low birth rates. Not true. It sounds counterintuitive, but making it easier for women to work (Japan’s childcare infrastructure is possibly the worst in the industrial world) actually leads to having more children—not less, as a 2012 analysis by the International Monetary Fund confirms. The same IMF research also found a significant boost to GDP with more women in the workforce.

Second, despite evidence that corporate performance goes up when there are women on the board, Japan has the lowest levels in the industrialized world (a mere 1% of corporate boards have women v. about 15% in the U.S. and Europe). Another missed opportunity.

Third, equal opportunity laws already on the books are rarely followed by domestic firms in Japan, and smart women looking to advance in an organization know this—and seek employment elsewhere. As a result, foreign firms have benefitted (so much so that Mike Alfant, president of the American Chamber of Commerce in Japan says this is one of the strategic “best kept secrets” of leading foreign firms in Japan).

Japan’s newly elected Prime Minister Shinzo Abe launched a $116 billion (10 trillion yen) emergency economic stimulus package this month. The main target is deflation, but the broader aim is to get the Japanese economy back on track for growth—estimates for the first quarter of 2013 anticipate a laggard 0.7%. Measures focus on reducing the value of the yen to boost exports; and more spending on infrastructure.

Pumping money into the economy isn’t going to reap maximum potential return without “absorptive capacity” in firms and by workers to make winning investments. There just isn’t enough fresh talent—properly incentivized—around.

Getting Japan back on track for healthy economic growth requires bold new policies that incentivize women in the workforce which would in turn stimulate both long-term economic, and population growth.

Meanwhile, the demographic future of China, India and Southeast Asia looks rosy. Japan’s—and the United States’ and Europe’s—competitors in Asia are younger, and increasingly educated.

The economies have aggressively gone after inward foreign direct investment—in recent years at the expense of Japan. Most of these countries also do a better job of incorporating women into the workforce. Prime Minister Abe has an opportunity to forge a triple win: a larger pool of professional women can provide his Liberal Democratic Party with much needed new constituents to replace its dying (literally) base, these women will become more likely to have children, and best of all, boost growth in the Japanese economy in the long-term.

Follow Kathryn Ibata-Arens on Twitter @IbataArens. We welcome your comments at ideas@qz.com. 

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