Why European Economies Need Feminist Economic Strategies for Sustainable

Recovery

Diane Elson, Emeritus Professor, University of Essex, UK

Seminar Presentation, Helsinki, 2016

Lack of Sustainable Recovery in Europe

• Fiscal retrenchment was supposed to lead to recovery in growth rates, employment, and living standards

• Mechanism via a positive impact on business confidence and low interest rates to stimulate private investment

• But investment has fallen as share of GDP (e.g. from 26% to 19% in Spain, 23% to 20% in Germany, 19% to 16% in UK)

• Growth rates, employment, and living standards have not, in general, recovered to levels achieved before the 2008 financial crisis

• And challenges of population ageing , climate change, inequality, insecurity and social tension have intensified

An Investment Plan for Europe?

• Some recognition of the failures of retrenchment

• European Commission President Juncker put forward an Investment Plan for more investment, especially in economic infrastructure

• But it represents annually only 0.75% of EU GDP, compared to US government annual stimulus package of 2.8% GDP in 2009/10

• An assessment by Griffith Jones and Cozzi (2016) found that the combination of the Plan, and continued fiscal retrenchment, would lead to an EU growth rate of only 1.5% for 2015-16 , well below the pre-crisis level of 2.3%

• The Juncker Plan pays no attention to gender issues

Women’s Labour Force Participation and the European Employment Strategy

• European Employment Strategy, associated with the 1992 Lisbon Treaty, had gender equality as one of its four pillars

• Increasing women’s labour force participation was a crucial component, to raise economic growth and tax revenue

• Targets for childcare coverage of pre-school population of member states, though no targets for care provision for frail elderly

• But fiscal retrenchment has swept aside these concerns, as shown in Bargawi, Cozzi and Himmelweit (eds) 2016

• Need to recover, and extend, a gender focus in macroeconomic policy

Feminist Approaches to Strategies for Sustainable Recovery

• Rethink the objectives of macroeconomic policy

• Rethink the boundaries of the economy

• Rethink the design of fiscal consolidation

• Rethink the assessment of fiscal space

• Rethink the scope of investment : invest in social infrastructure

• An Example : Plan F for the UK economy, developed by UK and Scottish Women’s Budget Group

• Reorient scope of gender budgeting and gender impact assessment

Rethink Objectives of Macroeconomic Policy

• Feminist economists raise the question of what is the economy for and who is the economy for

• Emphasise well-being of people and environment as goal, as well as growth of output and employment

• Growth of GDP needs supplementing by other indicators ( see for instance Stiglitz at al 2009)

• Ability to buy more does not necessarily improve physical and mental health

• Aggregate employment is not a good indicator of work that promotes well-being: insecure, precarious work is growing

• Prioritise a caring economy above a competitive economy

• Consider care deficits as well as budget deficits

Rethink Boundaries of the Economy

• Unpaid production of services in households and communities is outside the production boundary in the system of national accounts and not counted as a part of GDP

• Unpaid work in households and communities improves well-being of those who directly benefit from it

• And also produces a vital input for the economy: labour

• Disproportionately done by women, constraining their participation in the paid economy and in public life

• Burden reduced by spending on public services but increased by cutbacks to public services

• Recognise the importance of unpaid work and factor it into economic decision -making ,including rethinking ‘efficiency’

Rethink Design of Fiscal Consolidation

• Need to consider the gender implications of revenue and expenditure choices

• In many countries women , more than men, are employed in the public sector, use public services, and receive a higher proportion of their income from social security payments

• Women ,on average, also pay a lower share of their income in direct taxes than men

• This is because they have more unpaid care responsibilities than men and lower earnings from employment than men

• Fiscal consolidation that relies more on retrenching public expenditure than on raising revenue will disproportionately affect women

Example of UK Fiscal Consolidation, 2010-20

• Measures implemented and in pipeline: just under 90% public spending cuts and just over 10 % net tax revenue increase ( taking into account some tax reductions)

• Changes to taxes and benefits hit women more than men in poorest, middle and richest income groups, with greatest losses as share of income in 2010 for Black and Asian women in poorest group (11.4% and 11.5%) ( See fig 1 for cash losses)

• Changes to taxes and benefits plus losses due to cuts to public services hit lone mothers lose most (18.5%) and working age couples without children least (3.4%); single women of working age lose more than single men of working age , and single women pensioners lose more than single male pensioners (See fig 2)

• Source WBG (2016)

Figure 1. 2010-20 cumulative individual impact of changes in taxes and benefits (real-term £ per annum by 2020) by household income

groups, gender and ethnicity

Figure 2. Cumulative impact of changes in taxes, benefits and spending on public services for 2010-20 for different family types (change per annum in 2020 as % of household living standards)

Rethink Assessment of Fiscal Space

• Stability and Growth Pact stipulates limits to fiscal space-fiscal deficit no more than 3% GDP and debt to GDP ratio no more than 60%

• But these are arbitrary limits that do not allow for borrowing to distribute the costs of adjusting to shocks over a longer time period

• Austerity policies can increase these ratios rather then reduced them by depressing economic growth and tax revenues

• Well designed deficit-financed investment can have a positive impact on employment, output , productivity and tax revenue in context of a stagnating economy, leading ultimately to falls in budget deficit and debt ratios, as well as reductions in gender inequality

• For example, investments that increase women’s employment and improve the ratio of female to male employment. See Bargawi, Cosi and Himmelweit (2016) chp8

Rethink the Scope of Investment in Infrastructure

• Public investment in infrastructure is narrowly interpreted to mean spending on physical structures, such as roads, railways, broadband networks, buildings, and even weapon systems

• European System of National Accounts was revised in 2010 so that expenditures on weapon systems (comprising vehicles and other equipment such as warships, submarines, military aircrafts, tanks, missile carriers and launchers etc.) are now classified as fixed capital formation

• Public spending on people is classified as public consumption-salaries of teachers, heath workers, care workers for instance

• Education, health and care services are not considered as part of the infrastructure

Investment in Social Infrastructure

• Feminist economists are arguing that spending on education, health, and care services should be considered investment in social infrastructure (Bargawi, Cozzi, Himmelweit (eds) chp 1

• These services do not just produce immediate benefits that are consumed as they are produced

• They produce long lasting economic returns like physical fixed assets do, in terms of increasing productivity and enabling increases in women’s labour force participation, as well as increasing well-being and reducing insecurity

• Investment in an expansion of public child care services in the EU in the range of 1%-2.5% GDP has been estimated to raise GDP in the range of 1%-2.4% a year by 2020 ( Bargawi, Cozzi, Himmelweit (eds) chp 9

Plan F: A Feminist Economic Strategy for the UK Economy

• Reverse cuts to public services and social security that have had particularly adverse impacts on low income women

• Invest in social infrastructure, including ensuring access to affordable publically-provided care services

• Improve support for people who provide unpaid care for families and communities and promote fairer sharing of this work

• Invest in social housing, renewable energy and environmentally friendly public transport

• Reverse tax reductions that have benefited mainly higher income men (such as increases in tax thresholds) and large businesses ( such as cuts in corporation tax

• Take effective action on tax avoidance and evasion• Cut spending on nuclear weapons• Source: WBG (2015)

Reorient Scope of Gender Budgeting and Gender Impact Assessment

• Gender budgeting and gender impact assessment has been endorsed by OECD in a report on gender budgeting in OECD countries ( OECD 2016)

• And by IMF in a series of Working Papers and a Conference on Gender Equality and Fiscal Policy ( see Stotsky 2016 and http://www.imf.org/en/news/events/conference-on-fiscal-policies-gender-equality )

• Both OECD and IMF argue that gender budgeting is better budgeting

• But most gender budget reports and gender impact assessments focus on individual tax measures and spending programmes

• Need to scale up to look at macro-level decisions and cumulative impacts and alternative economic strategy options

References

Bargawi, Cozzi and Himmelweit (eds) (2016) Economics and Austerity in Europe: Gendered Impacts and Sustainable Alternative London: RoutledgeGriffith Jones and Cozzi (2016) ‘Investment-led Growth: a solution to the European Crisis’ in M. Jacobs and M. Mazzucato (eds) Rethinking Capitalism: Economic Policy for Sustainable and Inclusive Growth, London: Whiley-BlackwellOECD (2016) ‘Gender budgeting in OECD countries’ Report to Annual Meeting of OECD Senior Budget Officials, Stockholm, JuneStiglitz at al (2009) ‘Report by the Commission on the Measurement of Economic Performance and Social Progress’ www.stiglitz-sen-fitoussiStotsky (2016) Gender Budgeting: Fiscal Context and Current Outcomes, IMF Working Paper , WP/16/149Women’s Budget Group ( 2015) Plan F: a Feminist Economic Strategy for a Caring and Sustainable Economy http://wbg.org.uk/analysis/plan-f-a-feminist-economic-strategy-for-a-caring-and-sustainable-economy/Women’s Budget Group (2016) http://wbg.org.uk/news/new-research-shows-poverty-ethnicity-gender-magnify-impact-austerity-bme-women/