The U.S. economy is on strong footing, and so too are U.S. stocks, which have enjoyed a nine-year bull market. But now geopolitical tensions over talks with North Korea and ongoing trade negotiations, not to mention midterm elections, are contributing to heightened volatility and raising questions for investors. How long can the bull keep running?
But there’s one surefire way to boost stocks over the next 10 years, says a new report from S&P Global: Increase the number of American women participating in the job market.
“S&P Global believes that a concerted effort to increase participation and foster retention of women in the American workforce, particularly in those professions traditionally filled by men, represents a substantial opportunity for growth of the world’s principal economy,” Jodie Gunzberg, Beth Ann Bovino and Jason Gold write in a new research report for S&P Global.
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They predict that if the U.S. were to increase women’s labor force participation to that of other advanced countries, it would add an average of 0.2 percentage points to gross domestic product — or roughly $455 billion above S&P Global’s baseline forecast for growth — each year over the next decade.
“Even for an economy now exceeding $20 trillion, an extra few hundred billion dollars goes a long way,” the report says.
And because GDP gains can translate into even higher gains for stocks through a multiplier effect, S&P Global predicts the total gains could amount to an additional $2.87 trillion in market capitalization over a decade.
The economy stands to benefit from heightened female participation in the labor market in ways that extend well beyond the stock market, says Marianela Collado, CEO and senior financial advisor of Tobias Financial Advisors in Plantation, Florida.
“Benefits range from companies having women in leadership roles who can grow the business with a new perspective, households having more discretionary income resulting in increased spending and investing, and raising children with role models that encourage working by both mom and dad who will then feel more compelled to join the workforce by example,” Collado says.
There’s a problem though. In the U.S., women’s participation in the job market has lagged that of other advanced countries for a long time. Only about 57 percent of women over age 16 are in the U.S. labor force — meaning they either had a job or were looking for one — according to the Bureau of Labor Statistics.
That compares to 79 percent in Iceland, 70 percent in Sweden and 67 percent in Norway, according to the Organization for Economic Co-operation and Development, which finds overall, 15 countries had higher rates of female participation than the United States in 2017.
Once you narrow the focus to women ages 25 to 54 to strip out potential college students and retirees who may not be looking for jobs, the United States falls even lower on that list, with 30 countries recording higher rates of female participation in 2017.
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About 75 percent of American women of so-called prime working age participate in the job market. Whereas there have been huge gains since 1950 (back then, the number was only 37 percent), it’s barely budged since 1990, whereas other countries have continued to enjoy gains. As former Federal Reserve Chair Janet Yellen noted in a speech last year, 75 percent is well below the 89 percent participation rate of prime working age men.
“While some married women choose not to work, the size of this disparity should lead us to examine the extent to which structural problems, such as a lack of equal opportunity and challenges to combining work and family, are holding back women’s advancement,” Yellen says.
If the U.S. could find a way to increase women’s participation, the S&P Global report predicts big gains not only for American stocks, but also for global equities, to the tune of $5.87 trillion over the next 10 years.
Some trading partners would benefit more than others. Equities in South Korea, for instance, would enjoy an additional 1.9 percent bump, and those in China would gain another 1.2 percent, the report predicts.
“All told, if the U.S. were to follow the lead of many other developed countries and implement policies that encourage women to enter and remain in the workforce, the effects could reverberate globally, supporting a stock market boom far greater than the economic growth itself,” the report says.
How can the U.S. achieve higher rates of female labor participation? The “biggest obstacle,” the report says, is caregiving for children.
American women are still far more likely than men to take significant career breaks to care for children or other family members, and the U.S. remains the only country in the OECD that does not provide, by law, some paid maternity or parental leave to workers.
“As a working mom, I can tell you that there are many factors that influence women’s ability to remain in the workforce, but there is one overarching one that really has an impact on the bottom line — child care,” Collado says. “Child care in the U.S. is so expensive, especially in the major metropolitan areas that it can economically not make sense for a mom to continue working.”
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A leading study on this issue, by Cornell University economists Francine Blau and Lawrence Kahn, showed expansion of family-friendly policies like parental leave and part-time work entitlements in other OECD countries explained 28 percent to 29 percent of the decrease in U.S. women’s labor force participation relative to other countries, between 1990 and 2010.
Policies to boost women’s labor force participation are not without their costs, either to the government or the companies that enact them, says Renée Snow, a financial advisor for ASL Financial in Los Gatos, California.
“Government spending through parental leave programs, progressive tax systems and subsidized daycare may offset the boost to the markets,” Snow says. “This does not make them unworthy endeavors, the social benefits of a more egalitarian society might be worth the cost.”
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The $3 Trillion Move That Could Boost U.S. Stocks originally appeared on usnews.com
