How Can Countries Reduce Poverty? Invest in Women's Human Capital
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How Can Countries Reduce Poverty? Invest in Women's Human Capital

Investing in women's health and education is not just a moral imperative but also makes sound economic sense – policies that foster female empowerment are particularly powerful because they can make a vast contribution to economic growth. In a recent Credit Suisse Research Institute study on "Eradicating Extreme Poverty", we look at why investment in women's human capital can make a big difference to poverty levels.

Many studies have shown that getting women into the workforce is a major way for countries to boost economic growth and reduce poverty. As paid members of the workforce, women contribute directly to the economy as taxpayers and consumers. However, investing in women also makes a number of indirect contributions to economic development, which should not be ignored.

Breaking out of the Poverty Trap

Thanks to technological progress, today’s jobs increasingly demand brain-power over physical strength, allowing women to overcome their comparative disadvantage in competing for physical jobs and play to their comparative strength in "brain".  Consequently, women in low-income countries should have an increasing number of employment opportunities, raising their earnings potential and their standing at home and in society.

Working women in low-income households can help their families escape the poverty trap by being able to invest in their children’s education and health, leading to better prospects for the next generation. On a national scale, investing in women’s empowerment can therefore generate more sustainable growth in developing countries.

61

million children were out of school worldwide in 2015 (29 million boys and 32 million girls)

14

increase in wages for each additional year of schooling a woman has in Sub-Saharan Africa

6

of countries had a female political head of state in 2015 (11/195)

Educated Women: A Catalyst for the Economy

While it’s not surprising that better health conditions and a greater access to education lead to economic growth and less poverty in general, not all investments in people lead to the same returns.

Devoting resources to women’s human capital appears to bring unexpectedly large returns relative to the size of the investment. Improving female health outcomes can also have a particularly positive effect on the economy. Healthier women tend to be more economically productive and earn more. Through better education, women can become more conscious of family size – in turn, this leads to smaller families with more resources and life chances.

Policies aiming to improve women’s health and schooling can be extremely powerful in combination. Healthier women can make better use of their education, increasing the lifetime return on investment of money spent on schooling. Meanwhile, educated women take better care of themselves and their families, for example by making sure their children are immunized.

The potential for female empowerment to fuel economic growth and reduce poverty is a strong incentive for policymakers to invest in women's health and education.

Making Change Happen for Women

Many studies report that female access to healthcare and education remains unequal in developing countries. Women and girls experience worse health outcomes, less healthcare spending and less education. Often when girls do receive schooling, it is of a lesser quality than schooling for boys. With strong evidence that these inequalities harm economic growth, what can policymakers do to reduce poverty?

Firstly, spend more on health and education overall – investing in more and better quality schooling for boys and girls alike is good for the economy in general. Secondly, focus on getting more girls and women into secondary and tertiary education to boost the potential of female labor force participation, and avoid the damage to economic growth caused by educational inequalities. This requires everything from improving school infrastructure to increasing the density of schools so students have less distance to travel.

Thirdly, improve access to birth control – if women can control their fertility, they will be empowered to steer their family planning, contributing to reduced poverty levels. And fourthly – make sure women have equal access to good jobs, executive positions and political offices, to increase aspirations for young women and their families and allow them to reach their potential while having a positive effect on economic growth.

Investing in women’s health, education and empowerment can pay enormous dividends. Beyond the simple moral imperative to improve women’s lives because it’s the right thing to do, the potential for female empowerment to fuel economic growth is a strong incentive for policymakers to think carefully about how to invest in women and reduce poverty at the same time.