On a recent visit to Ottawa, Christine Lagarde, President of the International Monetary Fund, took aim at Canada’s economic and social policy. She asked: where are all the women?
In a blog on the IMF website, Lagarde asserts that increasing women’s labour force participation is good for economic growth and that there is considerable room for improvement in Canada . The labour force details are familiar and implacable: an increase in well-educated women has not translated into proportional labour market participation; women’s overall participation rate remains 10 per cent below men’s; women experience a vexing gender wage gap above the OECD average; and women make up only one-in-four senior managers.
The result? Canada’s real GDP is 4.5 per cent lower than where it might be if more women, especially the pool of well-educated women, were in the labour force. Increasing growth potential does more than help the economy overall: it raises standards of living and tackles poverty.
Lagarde rightly notes that Canada’s social policy architecture plays a huge role in the kinds of decisions individuals and families can make to balance work and care. Canada (outside Quebec) is a consistent low spender on early childhood education and care. Lagarde notes that Employment Insurance (EI) funded parental leaves and certain tax measures have had positive effects on women’s labour market participation rates.
What should the government of Canada take from this challenge?
First, there should be significant investment in early childhood education and care at a scale similar to the economy-boosting stimulus infrastructure spending underway across the country. This requires negotiating childcare agreements and terms with provinces/territories/First Nations, building bricks and mortar centres, training staff and paying them well, and creating additional jobs in cleaning, transporting and maintenance. High quality, affordable, accessible and culturally appropriate childcare is central to women’s labour market participation.
Facilitating women’s labour force participation means decreased rates of poverty, including child poverty, and will increase income tax revenues. On this front, the Trudeau government is amenable and agrees that “poverty is sexist.” Important first steps include the new Child Tax Credit that effectively lifts a majority of children above the poverty line. Childcare, coordinated with leave policy, should be the next urgent infrastructure investment.
Parental leave policy is the second area that the government of Canada should take up. This will require deviating from the Liberals’ proposed plan to extend parental leave to 18 months at a lower benefit level and make it more flexible. Why? These changes, in concert with a failure to meaningfully invest in childcare, may worsen women’s participation rate in the labour market and widen the gender wage gap.
Currently, qualifying for EI maternity and parental leaves remains a feminized problem. 36 per cent of women outside Quebec are left out of maternity/parental leave benefits. Replacement rates are set at a maximum of 55 per cent of average insurable earnings up to a ceiling, and having a higher income increases the likelihood of benefit receipt. International studies suggest that longer leaves can actually lead women to exit the labour market, especially when the income replacement rate is low. Exit rates increase with the number of children a woman has. Longer leaves can also contribute to deepening the motherhood penalty in earnings — the gap between the earnings of women with children and those without. These outcomes have lifetime consequences for women’s and children’s risks of poverty.
The solution? Move towards universal leave by counting EI contributions over the life course, undertake rigorous study on the effects of longer leaves in Canada, and, in the interim, adopt the Québec parental leave policy (QPIP) for all Canadians. QPIP covers 90 per cent of all parents, includes far more self-employed parents, has a higher replacement rate, and has dedicated “daddy-leave” that among other things may offset the motherhood penalty. Most importantly, it exists in concert with significant investments in affordable childcare. This approach should be emulated.
Implementing policies to increase the participation of women would help significantly to grow Canada’s economy. As Lagarde concludes, “It is not only the right thing to do, it is the smart thing to do.”
Kate Bezanson is an associate professor of sociology at Brock University.