Together, Korea’s Women and Economy Can Soar

Keynote Speech to Korean Network of Women in Finance Christine Lagarde, Managing Director, International Monetary Fund

September 6, 2017

Introduction

Prime Minister, Ministers, distinguished guests—Anyoung haseyo. It is my honor to address the International Conference on Women’s Empowerment in Financial Services.

Thank you—Sang-Kyung Kim and the Korean Network of Women in Finance—for your warm welcome. Your goal to promote gender diversity in the financial sector is critical.

Indeed, empowering women is not just the right moral choice; it is also the right macroeconomic choice. That is why many of us care—including the IMF. Helping women participate in the economy boosts growth, diversifies economies, reduces income inequality, and mitigates demographic change. [1]

These factors are relevant across the globe—but especially here in Korea.

Think, in particular, about growth. For the last five years, the working-age population increased by 200,000 every year, boosting growth by 0.7 percentage points. [2] Over the next five years, the workforce will shrink by 100,000 a year, subtracting 0.2 percentage points from growth. Enabling more women to work can dramatically alleviate the adverse effects of demographic change.

There has never been a more critical time for Korea to invest in women. This challenge is the focus of my remarks.

• First, despite progress, further actions are needed—by government and society—to help women participate in the economy;
• Second, from the corporate perspective, more ambitious steps are required to harness the substantial dividends from having more women in senior positions.

1. Empowering Women in Korea’s Economy

Let me start with Korea’s progress. The proportion of women in the workforce—the female labor force participation rate—has increased from 46 percent in 1980 to 58 percent in 2016. [3] Between 1990 and 2010, the share of women in regular jobs rose from 20 to 40 percent. [4]

On the global stage, many Korean women are shining—figure-skaters; musicians; golfers like Park Sung-hyun, recent champion of the U.S. Women’s Open.

Yet, Korea still has one of the lowest rates of female labor force participation in the OECD— 20 percentage points below the best performers. [5] Women are paid about 37 percent less than men. [6] Females take up just 2 percent of senior management positions—compared to the OECD average of 20 percent. [7]

With many women leaving the workforce in their 30s to have families, they typically miss a decade or more of prime working life. [8] Re-entering the workforce is a challenge. For those who do, opportunities can be limited. Many take non-regular jobs, or never reach the next rung on the career ladder.

I. Policies

The good news is that steps are being taken to remove these barriers. As the Korean proverb goes: “Beginning is half the task.”

Korea has had legally-compulsory gender budgeting for over a decade. It is one of only a few countries that collect and analyze gender-disaggregated data to assess the effectiveness of its approach. [9]

Building on this, parental leave provisions have been expanded, and investments made in childcare. Steps have been taken to help mothers return to work after an absence, alongside efforts to make workplaces more family-friendly. These priorities have been part of the IMF’s discussions with the government for several years.

Most recently, President Moon has honored his pledge for women to take up 30 percent of his Cabinet. The government is planning other crucial steps. These include making 175 employment centers available to women seeking work, and letting mothers work reduced hours for an extended period. [10]

Further efforts are needed, including to strengthen childcare, flexible working, and job search and training support. These can pay big dividends.

An IMF study looked at the potential impact of reforming secondary earner taxation, increasing childcare benefits, and boosting tax incentives for part-time work. It estimated that these reforms could help increase female labor force participation by 8 percentage points over the medium term—reducing the gap between male and female participation by one-third. [11] [12]

I also know the importance of family-friendly working practices from my own personal experience.

I was about to be made partner international law firm Baker McKenzie when I became a new mother. To care for my son, I changed my working hours, and took Wednesday afternoons off. This did not resonate well with some male partners—but I was determined to do it. Still, it delayed my conversion to partner by a year.

II. Culture

Indeed, as much as can be achieved through policies, it is critical to address social norms that inhibit women.

There are even areas where progress can be made not only without undermining cultural identities—but by affirming them. Consider your national flag. The Yin-Yang circle in the middle of Taegukgi symbolizes that achieving harmony requires both women and men to play their part.

Think, first, of the mothers. Amy Chua’s book, Battle Hymn of the Tiger Mother, prompted some heated debate, but an underlying observation resonates. That is the amount of time spent by mothers to educate their children at home, often at the expense of paid employment. Improving public education can support changing social attitudes to help more women combine family and work.

Women’s attitudes themselves are shifting. The percentage of Korean women wanting to keep their jobs regardless of marriage and childbirth increased from 17 percent in 1988 to 56 percent by 2009. [13]

Moreover, one concern that has been raised about having more women in the workforce is that it could reduce fertility—which would hinder efforts to address demographic change.

Such concerns are misplaced. Nordic countries have shown that high female labor force participation and fertility can go hand-in-hand if aided by supportive policies. [14]

Another country facing demographic change—Japan—has shown that the likelihood of having a second child increases if men are more active in the household. [15]

This brings me to the role of fathers. Despite progress, take-up of paternity leave only recently exceeded 5 percent. [16] Many fathers do not take it because they fear ramifications at work.

Consider the experience of this 34-year old father:

“If I hadn’t taken leave”, he said, “I would have been up for promotion. But I was bypassed. I expect to be at a disadvantage in pay and promotion.” [17]

If men are to play a more active role in family life, corporate culture needs to change. It also needs to change for the sake of women, which brings me to my second point—how to empower women to lead in the corporate sector.

2. Empowering Women in Korea’s Corporations and Financial Sector

Let me begin with an IMF study of 2 million firms in 34 European countries. [18] It found that adding one more woman onto the corporate board can help increase the return on assets by between 8 and 13 basis points.

In creative and hi-tech sectors, the return on assets can be as much as 30 basis points. With the Pangyo Creative Economy Valley under development, this finding should resonate.

Beyond profits, gender-diverse boards can also improve corporate governance. [19] Forthcoming IMF staff research also finds that a greater share of women on bank and banking supervision boards could be associated with greater bank stability. In particular, banks with a higher share of women are associated with higher capital buffers and lower non-performing loan (NPL) ratios. [20] [21]

So how can we get more women onto corporate boards in a country like Korea—where just 14 of the 100 largest listed companies have a female director? [22]

The family-friendly working practices that I mentioned earlier are absolute pre-requisites, but what else is needed? I do not claim to have all the answers—but let me share some thoughts based on three personal experiences.

I. Unconscious Bias

My first story. When I started working at Baker McKenzie in the 1980s—despite my technical abilities and professional knowledge—there were occasions when external clients assumed I was only there to bring them coffee.

Today, sexism is more subtle—but, conscious or not, bias remains. [23] When we talk of unconscious bias, we include the overall corporate culture, but also preconceptions about what breeds success.

It is important to bring unconscious biases out into the open, so they can be recognized, discussed, and addressed.

Options like “fast-tracking” promising women up the career ladder—so they can develop the right experience, skills and networks for senior management. Withholding names from selection committees can also pay dividends—“blind hiring” practices helped the Australian Bureau of Statistics increase the share of female senior executives from 21 to 43 percent. [24]

Addressing bias is a critical step. Another tool, quotas, can also help—as my second story illustrates.

II. Quotas

I used to think that quotas were unnecessary. Then I realized that, without them, it would take 5 generations until 30 percent of partners at my law firm were women. So I was converted to quotas, at least as a short-term solution.

As the debate around corporate quotas continues in Korea, there is much international experience to draw from.

In recent years, we have seen several countries adopt corporate quotas. India did so in 2010, and the share of women on boards rose from 5 to 13 percent. In Malaysia, quotas helped double the proportion of female board members at the largest companies. [25]

Mandatory legal quotas have also been introduced in parts of Europe. In Norway, over five years they supported a fourfold increase in the proportion of women on boards. [26]

We must also acknowledge that international experience with mandated corporate quotas has not been universally successful. Some quotas have been poorly implemented, lacked incentives, or had insufficient buy-in. Quotas cannot be viewed in isolation, but only as part of a wider package of measures.

III. Mentoring

My final story is about mentorship. I was fortunate enough to have a role model, a mentor from whom I learned. She taught me how to “dress,” “address,” and “redress”:

• Dressing is presenting yourself in a way that made others take you seriously;
• Addressing is making yourself understood; and,
• Redressing is resolving conflicts and sticking up for your convictions.

For me, these lessons have stood the test of time.

Male champions of women’s empowerment can also play a crucial role. They can instill in their colleagues their understanding that gender diversity is critical for organizations to thrive—for the benefit of men and women alike.

Aside from my convictions, I can assure you that gender equality is taken very seriously at the IMF.

The IMF is committed to promoting gender equality because—as I said—empowering women is critical for economic growth and prosperity.

So we are developing a body of research on the economics of gender—analyzing the macroeconomic effects, but also identifying the main obstacles and polices.

We are taking gender considerations into account in our country programs and economic health-checks.

Many of our programs include gender-related provisions—most recently in Egypt, Jordan, and Niger.

As part of our economic health-checks, we have conducted 27 country and regional pilots that looked closely at this topic. [27]

For several years, we have also discussed gender-related issues with the Korean authorities. We remain committed to this dialogue as you identify and implement further measures to promote gender equity.

In sum, the IMF will continue to bring women’s empowerment into the economic mainstream, because unleashing the potential of women is a global priority. This is especially the case in Korea. The time for action is now.

In the words of Ko Un, in his poem Arrows: “Let’s all soar together, body and soul!”

I have shared some of my own experiences, but I do not claim to have all the answers. I look forward to hearing your views.

Thank you—Gamsahamnida.