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How boosting workplace diversity would lift the economy

Hanna Barczyk for the Boston Globe

If we do nothing, it will take another century before women can close the gender gap in the highest ranks of corporate America.

That’s according to research from McKinsey & Co., and to change that trajectory, the consulting firm estimates that we as a country will need to spend about $300 billion by 2025 on essential services such as access to affordable child care and paid leave. It is money that will help level the playing field for women in terms of participation in the labor force, pay, and representation in the ranks of management.

Now many will say this is money we don’t have, but can we afford the status quo?


To explore this issue, we devoted this Sunday Business section to the power of parity and some of the players trying to make it happen. Then we used new research out of McKinsey’s Boston office to better understand what’s holding back women in Massachusetts.

Just as diversity in the workplace can be good for corporate bottom lines, McKinsey found that advancing women can give the economy a boost. Enabling a truly female-friendly workplace could generate an additional $2.1 trillion in US economic output in 2025; Massachusetts alone could see an extra $73 billion in gross domestic product. If you have a hard time wrapping your head around the magnitude of that figure, it’s like adding an economy the size of New Hampshire to the Massachusetts GDP.

Assuming that the American economy continues to grow at a healthy pace, the gain comes from higher female labor participation, narrowing the gap between men and women who work part time and full time, and getting more women into sectors with higher-quality jobs.

“What we are talking about is the size of the opportunity,” said Nav Singh, managing partner for McKinsey’s Boston office.


It’s an aspirational goal, but if done right, it can translate into job creation: about 6.4 million in the United States. When we entice more women to stay in the workforce, someone needs to fill behind them at home. For starters, that means we need to build a new social infrastructure that requires training and hiring child care and preschool workers. Men also need to pick up the slack at home. Women in Massachusetts, according to McKinsey, do 1.7 times the unpaid care work that men do.

But there’s another reason why we need tap female talent. The US economy needs more skilled workers, especially here in Massachusetts, where we have an older workforce. As baby boomers retire in droves over the next decade, we’re facing a labor shortage.

Many educated women in Massachusetts have opted out. The female labor participation rate is 61 percent here compared with 74 percent of men. The single biggest factor in closing the gender gap is to get more women to work, according to McKinsey.

“There are supply-side constraints,” said Singh. “There are a lot of structural barriers that are preventing women from participating in the workforce.”

Not everyone wants a paying job. But the numbers reveal that many women are dropping out because workplace policies don’t accommodate their lifestyles. Women crave flexible schedules and part-time opportunities that don’t pigeonhole them as lacking commitment.

That’s why programs like reacHire are so important. Started by serial entrepreneur Addie Swartz, the local startup helps women who have stepped off the corporate ladder find a way back. Swartz came up with this ingenious idea in 2013 to put these women through a boot camp to refresh their skills and boost their confidence. Then reacHire works with blue-chip companies like EMC Corp. and Putnam Investments to place these women in short-term and project-based work, which can lead to full- and part-time jobs.


I met Swartz two years ago, and today her company has trained more than 100 women. About 90 percent have found permanent or long-term positions. [See related stories on page 4].

Then there are a whole group of women who need to work, but can’t because they don’t have access to affordable child care and preschool.

Consider the dilemma of single mothers. Nearly a quarter of families with children are households headed by females, and their median household income is just under $28,000, which is less than half of the overall household income.

If you further consider that Massachusetts has the country’s highest day care and preschool costs — about $17,000 a year for infants and about $12,800 a year for preschool — it stops making financial sense for some women to go back to work.

That’s what happened to Tracey Humphries of Dorchester after her daughter was born in 2008. A human resources administrator, she returned to work, but quit six months later because day care costs ate up more than 20 percent of her annual salary.


She went on welfare. When her daughter turned 3, she was able to get free preschool through Boston public schools. That allowed Humphries to cobble together temp jobs and then secure a full-time position a year ago.

Her daughter is now in first grade, but affordable preschool was a lifeline.

“It is stressful financially and emotionally,” said Humphries, 32, of being a working single mother. “I felt like I can’t do this. When they say it takes a village, the pre-k was my village.”

Across Massachusetts, only about a quarter of children are in a public preschool program, according to early-education advocates Strategies for Children.

A good chunk of the $300 billion investment McKinsey discusses would go toward building a child care and preschool industry. If it seems excessive, it’s not, when compared with other countries. Public spending on early education in the United States represents less than 0.5 percent of our GDP ; it’s over 1 percent in France, the United Kingdom, and the Nordic countries like Denmark and Sweden.

Nobody said creating a female-friendly workplace would be cheap. But that investment may be our best shot at creating the most robust economy possible by tapping talent that has been sidelined.

By the numbers

There would be a 12 percent boost to the Mass. economy in 2025. That’s an additional $73 billion beyond business as usual — or the equivalent of New Hampshire’s economy.

There would be $2.1 trillion in extra economic output nationally in 2025. That would add almost 1 percent to annual GDP growth.


SOURCE: McKinsey & Co.

Shirley Leung is a Globe columnist. She can be reached at shirley.leung@globe.com. Follow her on Twitter @leung.