What are the effects of Gender Inequality on an Economy?

Roshni Khatri

8th Mar'22
What are the effects of Gender Inequality on an Economy? | OpenGrowth

Gender inequality comes often in reports, news and political debates. But what is it? How does it affect the economy of a nation? Here we try to find the answers to these questions, by taking an overview of gender inequality and its impact on the economy. 

Despite substantial progress and growth, there is a gender gap in many nations. These gaps are inequitable and reduce economic performance. Gender inequality can affect a nation's GDP, which can be in health, education, and employment.

The global trend towards income and wealth strengthens the economic and political power of individuals. Women entrepreneurs should know about the rise of the economy, as female business owners are the core part of economic development. However, around the world, women are underrepresented in high-level income and overrepresented in low-level pay. Besides this women of color and transgender individuals have to face more discrimination.

The nations with gender inequality experience poverty, unemployment and economic hardships. Gender inequality diminishes the growth of females and the whole economy.


Basis of Gender Inequalities  

Gender inequality is the prime obstacle in economic development. A nation's economy is determined by employment, income, and poverty rates. If there is gender inequality, then the economy cannot boost, as this affects the economic growth. Here some prime basis of the gender inequality which are liable for least economic growth are described as under:


 Gender Income Gaps

There are gender income gaps in many countries. These gaps reflect the lower economic development of the nations. Within the OECD group of higher-income nations, South Korea has a high level of gender income gaps. Where the Men are earning 37% more than the women. On the other hand, the country with the least gap is Luxemburg, where the men earn just 3.4% more than the women.

The international labor organization states that more work needs to be done to get more accurate data about the gender income gaps. Thus gender inequality affects the economic growth of the nation. While calculating the GDP, the men’s share of income is much higher than women's.

One factor that needs to be focused on is that women do more unpaid work. In the UK, a new regulation is implied that the organizations have to show the pay gaps between men and women to reduce this gap. So women have the right to get fair remuneration as we must know whether women are equally paid for their work or not. In financial institutions, there is a scarcity of women employees in top positions.

In 2018, HSBC reported a high level of pay gaps with the female employees of banks averaging 41% as much as a male employee of the UK. The survey was conducted on the 10,000 firms and the median income of male employees was 9.7% more than the women.

So this data shows inequality in the incomes of the developed nations' male and female employees. This directly affects the economy of the nation. If the women employees are also paid at a higher level, then the per capita income will increase, which would enhance the nation’s economic growth.

Gender Income gaps

Gender Poverty Gaps

As per the global economic poverty census in 2016, 13.4% of women aged 18-64, were in poverty. Whereas the men were 9.7% in the same age group. According to the National Women’s Center of U.S. the household led by single women with children has a poverty rate of 35.6% which is twice of households led by single men that is 17.3%. Thus this poverty gap is a big obstacle to economic development.


Trans Gender Economic Gap

As far As Transgenders are considered, they have a higher level of poverty and employment issues. Transgender has to cope up with the high level of unemployment issues due to gender inequality. The unemployment rate is even higher in Americans, Indians, Latinos and Middle Eastern transgender people.


Impact of Gender inequality on an Economy

Gender inequality has become a matter of concern all over the world. Therefore it should not be avoided that women entrepreneurs are shattering the glass ceiling. They are the pillars of economic growth and development as the economy is the combination of all the financial activities and operations in a particular nation. If there are gender gaps, then employment, education, health and every sector are affected. Here some prime elements that create an impact on the economy are described as under:

effect on economy

Reduce the GDP

Gender inequality affects the GDP rate, as there is no equal pay for women employees. Women are often paid less than men, and their hard work is not completely valued in monetary terms, which adversely impacts the GDP rates. GDP plays a vital role in economic development and growth and it is the combination of male and female residents who are engaged in services and employment. Gender inequality reduces the GDP of a nation, as the wage gap affects economic structure.


Low per Capita Income

In the labor market, women receive lower pay than men, while they are performing with the same potential and hard work as men do. This is known as the gender wage gap, and it discourages female participation in employment. This downcasts the investments and wage earnings ratio between men and women.

Discrimination prevents the equalization of marginal rates in production. This inefficiency is about the lower wages to women which also diminishes the aggregate economic output level. There is a high level of discrimination between males and females in the labor market. It affects the Gross National Income and reduces the per capita income of a nation.

We find that a 50% enhancement in the gender wage gap leads to a 25% reduction in per capita income. This directly affects the output as women work for shorter working hours and are even paid at lower levels. The data reflected by Global Gender Report Index shows that nations with higher gender inequality measures, indeed have lower-level participation of females in the labor market.


Decrease the Output

It is revealed that due to gender inequality, there is a high level of difference in the aggregate output of the nations. For the regions such as Ireland and Saudi Arabia wage discrimination shows a higher difference in output,  While in Egypt, gender discrimination data reflects almost 65% of the difference in output per capita than the U.S. As far as fertility rate is concerning gender inequality reflects approximately 37% difference in output in a nation. 

Thus in other economies, indirect fertility is liable for decrease in the aggregate output. In short gender inequality is a significant aspect and plays a vital role in economic development. This reflects that it is more complex for females to enter the labor market. So gender inequality is associated with a country’s social, cultural and economic development.



Gender inequality is majorly found in four areas: economic, political, health and education access. No nation has managed to eliminate the gender gap. This tends to result in variations across countries' national income, slower progress and thus is subject to setbacks. So it is important to analyze gender inequality so that economic growth cannot be affected. As it is a combination of male and female hard work. An economy’s GDP and GNP is the factor that denotes the success of the nation. Therefore it is important to eliminate the gender gap as this can directly improve economic growth and progress. Thus the article describes how gender inequality can affect a nation’s economic growth.


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A keen observer, who loves to spend time with nature. A fun loving person, enjoys to explore the new aspects of life. Passionate about reading and learning new things. Roshni is dedicated towards her work and has worked in different professions.