Building capacity to help Africa trade better

The gender dimensions of services and global value chains


The gender dimensions of services and global value chains

The gender dimensions of services and global value chains
Photo credit: Business Call to Action

The Gender Dimensions of Services

The service sector makes a substantial contribution to GDP, providing jobs, crucial inputs and public services. In 2014 the service sector accounted for almost 71 percent of global GDP (World Bank 2015). Services are key to promoting inclusive growth – they provide jobs for the poor, form the backbone of the economy, and offer key opportunities for growth through trade. Through output growth and productivity gains, services have the potential to contribute more to economic growth, job creation, and poverty reduction than manufacturing.

Globally, services account for almost 50 percent of female employment, and as demonstrated in this paper, service sector competitiveness can contribute to gender equality indirectly through the economic growth channel, and directly through the consumption and employment channels. Enhanced competitiveness of the service sector can therefore play an important role in the achievement of Sustainable Development Goal (SDG) 5, gender equality, in terms of the empowerment of women and girls. With the right policies and regulation in place, the service sector can also contribute to achievement of SDG 8, decent work and economic growth, by generating more productive and higher paid employment opportunities and decent work for both men and women.

By improving the economic performance of the domestic services sector and providing new export opportunities, trade in services can be an important mechanism for enhancing the competitiveness of the service sector. However, as demonstrated in this paper, gender inequalities that manifest themselves in economic transactions, relations, and institutions also affect women’s participation in services, which reduces the competitiveness of the sector and, more importantly, limits the ability of women to benefit from the opportunities created by service exports and service sector growth. Services liberalisation can also carry particular risks for women, and appropriate regulation and complementary policies need to be put in place to ensure that liberalisation delivers the expected benefits in terms of inclusive growth. Through an analysis of the service sector in general, and four specific service industries – tourism, information and communications technology, financial services, and domestic, health and social care – this paper provides an in-depth analysis of the gender-based constraints faced by women in accessing employment and business opportunities in trade in services, and the wider service sector.

Finally this paper recommends a set of policies that support equal access to the benefits of services growth for both genders, and create an inclusive policy and regulatory environment that reduces the gender-based constraints faced by women wage workers and entrepreneurs in the service sector. These relate to capacity building and improving access to productive resources for women, the provision of enabling and empowering policies and regulation for women workers and entrepreneurs in services, and mainstreaming gender in services-related trade policy and aid for trade interventions. A final recommendation relates to greater engagement with the private sector in terms of shifting the organisational culture of businesses concerning pay, working conditions, and the quality of work offered to women.

Gender equality is very much a human rights issue – as 50 percent of the population, women have the right to participate fully in economic, social, and political life. Enhancing women’s access to opportunities in services not only enhances gender equality, but also makes economic sense, as it improves productivity, efficiency and the competitiveness of the economy, leading to more inclusive growth and better development outcomes for all.


Service Sector and Gender Equality

The service sector is a key component of a thriving economy. It contributes to economic growth, drives job creation, and provides crucial inputs and public services for the economy. A competitive service sector contributes to development in four key ways: through output growth and productivity gains; through effects on employment and national incomes; through effects on the range and quality of services, including key social services and business services; and by diversifying the economy and offering a source of competitive and comparative advantage in terms of trade. Services are thus key to promoting inclusive growth – they provide jobs for the poor, form the backbone of the economy, and offer key opportunities for growth through trade. In fact, services have the potential through output growth and productivity gains to contribute more to GDP growth, job creation, and poverty reduction than manufacturing.

Various studies have found a strong positive correlation between economic growth and improvements in gender equality both on a cross-country comparative basis and on a time-series basis for particular countries. As a key driver of economic growth, the service sector can therefore indirectly improve gender equality outcomes. As countries develop and household incomes grow, families are more willing to allocate resources to the education and health of girls. The creation of more jobs through growth allows for the entry of more women into labour markets, and ultimately contributes to changes in social norms and perceptions about gender roles, improving women’s legal, social, and economic status.

Beyond the general economic impact, services also affect women as producers and consumers through the employment and consumption channels. The service sector generally employs more women. Development of the service sector can therefore be an important driver of job creation for women, if they have the required skills. Ghani (2010) finds that countries where services account for a higher share of employment have higher female labour force participation rates. By providing an independent source of income, employment in the service sector can provide women with a higher status, both in their households and in wider society, increasing their decision-making power. The presence of employment opportunities for women in the service sector can also result in women being more highly valued socially and economically, with the perceived returns on investment improving attitudes and incentives towards girls’ education. Wage employment can also be an important source of self-confidence for women by expanding their social opportunities and life choices.

Through the consumption channel, more competitive service sectors can result in lower prices, more choices, and better quality service. In most developing countries, women assume a disproportionate share of family and community-support responsibilities. An improvement in the availability and price of vital services can reduce the domestic and social care burden on women, freeing them up to engage in formal employment. In particular, provision of affordable childcare services is strongly correlated with women’s participation in the labour force. In Colombia the provision of community-based childcare services increased the probability of mothers’ employment by 25 percent, particularly among low-income women. Provision of adequate services that improve mobility, such as public transportation, can also aid gender equality in employment and education. Improved transportation services and infrastructure in Afghanistan, for example, has significantly improved female school attendance. Lower prices of services can also affect discretionary household incomes, allowing families to invest in the education and health of girls, which might otherwise have been a secondary priority. Improved provision of health and sanitation services can specifically support the achievement of SDG 3, which includes a target on universal access to sexual and reproductive healthcare, and SDG 6, which highlights the needs of women and girls in sanitation.

Trade in Services and the Gendered Structure of the Economy

Trade in services can be an important driver of service sector development and economic growth. However, the gendered structure of the economy means that the distributional outcomes of trade can vary by gender, as men and women are affected differently by changes in trade patterns and volumes. Liberalisation of trade in services has the potential to generate substantial increases in employment opportunities for women. There is strong evidence that liberalisation of services in Asia increased participation of women in exports of services such as back-office processing and call centres and increased mobility of women to provide services such as education, health, or professional services abroad. The vast majority of service firms in all countries are micro and small-scale entrepreneurs and services trade can create important opportunities for these entrepreneurs to enter global value chains and e-commerce, provided they have a supportive regulatory and policy environment. By generating new opportunities in wage labour and production, trade can also enhance women’s economic independence, including their propensity to save and invest. For example, women employed in the services sector abroad make a significant contribution to remittances received by developing countries, because they are likely to save more and to remit a larger proportion of their earnings back to their home country than men.

However, trade in services liberalisation also carries potential risks for the domestic services sector. Opening up the service sector to international firms risks displacing less competitive domestic service providers, leading to loss of employment and downward pressure on wages. How this will impact on women will depend on whether the sectors they are engaged in (as wage workers or entrepreneurs) either expand or contract. Micro and small-scale services firms, often owned by women, tend to have lower productivity and might be at particular risk. In the longer term, trade in services liberalisation has the potential to increase productivity of domestic firms as well as more affordable and high-quality services for consumers. However, certain categories of workers, particularly low-income, women and informal sector workers, have fewer assets and capabilities to absorb the adjustment costs associated with trade in services liberalisation. Due to entrenched gender norms and their lower educational attainment, women workers may find it particularly hard to retrain and find employment in sectors that expand.

Wage rates in export-oriented sectors are generally higher, potentially raising incomes for women employed in trade in services. There is some evidence from developed countries that increased international trade diminishes the gender wage gap in high-skilled industries. However for certain labour-intensive products and services, where international price competition and price elasticity of demand are high, gender wage gaps have been a source of competitive advantage. Under the competitive pressure to reduce costs of production, some international firms pursue an active strategy of feminisation of the labour force. According to Seguino (2000) gender-based wage gaps were critical in attracting investment and expanding exports for a number of semi-industrialised, export-oriented countries, thereby contributing significantly to trade-led economic growth. In these cases, producers used existing gender inequalities in the form of the wage gap to cut costs, inadvertently creating new forms of inequalities by employing women in low-paid, low-skilled jobs in export sectors, with few opportunities for advancement and accumulation.

In the longer term, this type of export strategy based on gender inequality is unsustainable. First of all, labour-intensive export industries tend to be footloose, ready to move operations to other locations where costs of production are lower. In addition, in the long term gender wage gaps will lead to lower export prices and a deterioration of terms of trade, creating balance of payment issues for countries using gender wage gaps as a source of export competitiveness. The use of gender inequality as a source of competitive advantage also contravenes international labour standards and conventions as set out by the International Labour Organization (ILO). Increasingly, the greater awareness and brand sensitivity of consumers discourage the purchase of products that reflect exploitative working conditions and discrimination, and will make such practices unacceptable with time.

On the consumption side, opening up the service sectors can also benefit host countries by improving the quality and reducing the prices of services. However, complementary government policies may be required in order to broaden access to these services. Liberalisation of public services is a particularly sensitive topic for many developing countries, which fear that the entry of private providers will reduce the provision of essential services for the most poor and vulnerable consumer groups, including women. As the primary users of public services, women are more likely to suffer if essential services are reduced or their prices rise. Putting in place regulation relating to pricing practices and codes of conduct and targets in terms of widening access to services can prevent a worsening in inequalities in access to basic resources and services for the poor and for women, though in certain cases cross-subsidisation of essential services may still be required.

Finally, trade in services, such as tourism, can also be an important source of foreign exchange and government revenue, which in turn may enhance the capacity of government to provide key economic and social investments such as education, roads, and health facilities that particularly affect women. Similarly, remittances from service workers abroad have been a vital source of savings and investment for resource-strapped economies, also having a positive impact on the foreign exchange reserves of recipient countries. Revenues from imports and exports of goods and services play a critical role in the new Financing for Development Agenda in terms of mobilising financial resources for meeting development objectives. The effect of increased government spending on women will depend on the extent of redistributive policies undertaken by the government and the types of public investments made. However as raised by the Overseas Development Institute (ODI) in a recent publication, evidence on the effects of government trade revenues on low-income households through increased social spending is still very weak and more research is required in this area.

Gender Equality as a Source of Service Sector Competitiveness

The Organisation for Economic Co-operation and Development defines women’s economic empowerment as their capacity to participate in, contribute to, and benefit from growth processes in ways that recognise the value of their contributions, respect their dignity and make it possible to negotiate a fairer distribution of the benefits of growth. The core of empowerment lies in the ability of a woman to control her own destiny. This implies that to be empowered, women must have equal capabilities (such as education and health) and equal access to resources and opportunities (such as land, capital, and employment). They must also have the agency to use those rights, capabilities, resources, and opportunities to make strategic choices and decisions through independence in the household and community, leadership opportunities and participation in political institutions. For women to exercise agency, they must have security and live without the fear of coercion and violence.

There is a strong instrumental rationale for greater inclusion of women in the economy, including the service sector. Greater labour force participation of women can be a source of competitive advantage for the economy, but also contribute to more inclusive growth, including improving distributional dynamics and well-being within households. Countries that provide more equitable economic opportunities for women are more competitive in the global economy. According to a recent McKinsey report, advancing women’s equality in terms of labour force participation could add as much as US$12 trillion, or 11 percent to global annual GDP by 2025. Women’s access to employment and education opportunities greatly reduces the likelihood of household poverty, and women are known to reinvest up to 90 percent of income earned in their families and communities, creating positive outcomes for the education and health of future generations.

There is a strong positive correlation between women’s participation in the labour force and economic growth. Gender gaps in employment explain a large extent of the growth differential between regions over time, with the Middle East, North Africa, and South Asia particularly lagging behind. Unequal access to employment opportunities results in distortions in the allocation of talent to skilled and unskilled positions through the incidence of “adverse selection,” slowing down economic growth and lowering the competitiveness of the service sector. For example, elimination of gender-based segregation in specific sectors and occupations could increase output by 25 percent in some countries through better allocation of women’s skills and talent. Similarly, discriminatory laws, lack of access to services and resources such as land, credit and technology, and childcare and domestic responsibilities impede female entrepreneurship and reduce their productivity, constraining the growth potential of their businesses and the output of the service sector and economy as a whole. For example, if women farmers had the same access as men to inputs such as land and fertilisers, agricultural output in developing countries could increase by as much as 4 percent. Entrenched gender norms and limited access to productive resources and training can also prevent both women wage workers and women entrepreneurs from entering expanding service sectors.

Figure 1 showcases some of the pathways between increased gender equality and poverty reduction and growth. The diagram shows that increases in female earnings can reduce current poverty and stimulate short-term growth through higher consumption expenditure, while also reducing future poverty and stimulating long-term growth through higher savings. The consumption and savings channels create a multiplier effect that reverberates across the economy in terms of further employment, investment, and economic growth. Rising incomes and more domestic consumption can drive the growth of the service sector, and thereby enhance its competitiveness on the global stage.

At the same time, equal access to educational opportunities for girls and women allows for greater accumulation of skills and expertise in the labour force and thus raises the growth potential of the economy, as educated women can undertake higher-value economic activities. Greater decision-making power for women over household resources and family size has the potential to enhance the human capital of the next generation, as children benefit as a result of more spending on food and education. The service sector is more skill-intensive than other sectors, and by improving human capital and productivity of labour for current and future generations, gender equality in terms of educational attainment can contribute to service sector competitiveness. In an increasingly competitive global economy, it is high-skill, high-productivity services that have the most potential to contribute to long-term sustainable economic development through trade. Greater gender parity in terms of access to education and training can ensure that women are part of a high-skilled workforce and are able to take advantage of the opportunities created by trade. The decline in fertility associated with greater gender equality can also have profound economic impacts, creating a “demographic dividend” that reduces dependency and increases per capita outputs, contributing to economic growth.

The evidence cited above creates a strong rationale for ensuring women’s equitable participation in the global processes of growth, including in the opportunities created by trade in services. However, gender equality is also very much a human rights issue: as 50 percent of the population, women have the right to participate fully in economic, social, and political life. Access to employment, equal wages, education, technology, knowledge, markets, finance, and a favourable policy and regulatory environment enables women to access economic opportunities and take control over their own lives, both within and outside the domestic sphere. However, as has been demonstrated in this section, greater gender equality also makes economic sense, as it enhances productivity, efficiency, and the competitiveness of the economy, leading to more inclusive growth and better development outcomes.

The Gender Dimensions of Global Value Chains

This paper seeks to integrate gender into the global value chain (GVC) framework, to assess the gender dimensions of integration and economic and social upgrading in GVCs, and to offer GVC-related policy recommendations that support economic and social development.

Policymakers are increasingly turning to GVCs as a means of driving development, including generating employment and raising incomes. Access to and benefits from participation in GVCs are closely related to gender issues. The opportunities associated with GVCs differ for men and women as a result of gender-based segregation and constraints that exist to different degrees in all societies. Not seeing these inequalities is problematic from a gender equality perspective and can hinder the broader effectiveness of trade and development policies. Taking gender issues into account and addressing them is critical to harness the potential for GVCs to contribute to both sustainable economic and social goals.

The prominent role female workers play in many export-oriented industries integrated in GVCs often leads to claims that GVC participation results in positive development benefits for women in developing countries. But overall female employment share says nothing about the nature and quality of the work, the implications of how women and men participate in chains, and what this means for the type of integration into GVCs and economic and social upgrading prospects. An increase in employment opportunities for women often contributes to female empowerment, but this does not necessarily lead to reduced inequalities, such as gender segregation in types of occupations and activities, gender gaps in terms of wages and working conditions, and gender-specific constraints in access to productive resources, infrastructure, and services. The case literature reviewed in the paper shows that such gender-specific dynamics and outcomes exist in GVCs and are an important additional dimension of power relationships that span the local, national, and global level.

Policies have to take these issues into account to ensure that both men and women can access GVCs, improve their positions, and gain from upgrading.

First, as a basis for policy interventions, a gendered GVC analysis is essential as this improves understanding of the roles men and women play in these chains, how access to and exclusion from particular activities differ by gender, and the gender-intensified constraints and opportunities in GVCs.

Second, trade-related policies should mainstream gender aspects. Leveraging multilateral trade interventions, such as Aid for Trade, is particularly effective to help countries mainstream gender issues into trade support through information sharing, capacity building, and targeting aid programmes at areas where women are concentrated and/or face particular challenges.

Third, actions by all GVC actors, including governments, lead firms, industry associations, trade unions, and NGOs should be leveraged. Particularly, lead firms can play a pivotal role, as their production and sourcing policies may reinforce gender issues. These firms can drive change by including a gender lens to their employment, training, sourcing, and corporate social responsibility policies, as well as supporting their suppliers to adopt gender-sensitive policies.

Fourth, complementary policies focusing on overcoming gender-based segregation and constraints embedded in laws or in socially constructed gender norms need to be aligned with trade-related policies. Most important are improving access to information and networks for women; increasing access to training, as well as finance, and productive resources for women; and reducing the burden of reproductive work on women.

The above papers were produced under ICTSD’s Programme on Development and Least Developed Countries (LDCs) as part of a project focused on global value chains which is aimed at empowering LDCs and low income countries to effectively utilise value chains to achieve sustainable and inclusive economic transformation.


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