Organizational mission statements almost universally claim to embrace diversity, equity, inclusion, and belonging (DEI&B), but words aren’t enough. Women continue to experience lower labor force participation rates, receive less pay for the same job classifications, and have more difficulty progressing into top leadership positions than men do. Let’s look more closely at the problem, then consider how gender-responsive budgeting (GRB) can help organizations recognize and address inequities at the resource allocation stage.
THE GENDER GAP
A survey of more than 8,500 accounting and finance professionals conducted jointly by IMA® (Institute of Management Accountants), the International Federation of Accountants, and the California Society of CPAs found that 12% of female respondents left the profession due to negative experiences they perceived to be rooted in bias against people like them. Many women in the global accounting profession don’t see the workplace as living up to organizations’ stated ideals of equity and inclusion. Another report by McKinsey & Company indicated the COVID-19 crisis exacerbated gender gaps.
The World Economic Forum’s Global Gender Gap Report 2022 argues that gender inequities are an emerging crisis, with parity levels having fallen for the last two years. The overall gender metric is subdivided into four areas: (1) economic participation and opportunity, (2) educational attainment, (3) health and survival, and (4) political empowerment.
The global gender parity index in July 2022 was 68.1% closed, the worst rate since the survey began in 2006. The gap in educational attainment is 94.4% closed, and the health and survival gap is 95.8% closed. The biggest problem areas are economic participation (60.3%) and political empowerment (22%).
Only 10 countries have closed the overall gap by at least 80%: Iceland (90.8%), Finland (86.0%), Norway (84.5%), New Zealand (84.1%), Sweden (82.2%), Rwanda (81.1%), Nicaragua (81.0%), Namibia (80.7%), Ireland (80.4%), and Germany (80.1%).
The United States (76.9%) and India (62.9%) saw very slight improvements over last year, while China (68.2%) stayed steady but improved its overall ranking in the index by five places.
Some countries have decided that it isn’t enough to merely track gender discrepancies after the fact and have taken steps to ensure that gender impacts are addressed in the budgeting process. The Organisation for Economic Co-operation and Development (OECD) includes 38 nations in Europe, the Americas, and the Pacific. Approximately half of OECD members have committed to some form of GRB.
Although there are many variations in how GRB is implemented, the International Monetary Fund describes it as “an approach to budgeting that uses fiscal policy and administration to promote gender equality, and girls and women’s development.” Inequitable impacts should be addressed, but GRB doesn’t imply that there should be separate budgets by gender or other demographic designations.
GRB initiatives often begin at the national level with a constitutional or similar mandate, but that isn’t always the case. Mechanisms used to support GRB initiatives will necessarily reflect differences in legal and cultural environments.
GRB programs have been adapted to economies as varied as those in Japan, South Korea, Mexico, Uganda, and other sub-Saharan African nations. It isn’t fully integrated into the budget process in Germany at the national level, but it has been used in the state of Berlin since 2003, and Bologna, Italy, began a GRB initiative as early as 1997. In other cases, GRB programs emphasize cooperation with nonprofit partners.
HOW GRB WORKS
In robust GRB programs, fiscal officers undertake gender impact assessments before and after implementation of new spending initiatives. Assessing gender impact involves more than just comparing computational differences in amounts of money spent on men’s and women’s programs.
For example, many countries released stimulus dollars for infrastructure projects in the aftermath of economic problems related to COVID-19. Road-building projects—a common target for economic stimulus funds—historically have been viewed as gender-neutral. Yet road-building crews are more likely to be male. Further, in many countries, men are more likely to drive cars while women use public transportation.
A rigorous ex ante gender assessment would raise questions about putting more stimulus dollars into public transportation or childcare facilities to support women’s participation in the workforce. Some gender budgeting programs require each major capital expenditure project to include an assessment of expected impact by gender. An ex post assessment is also needed to assess spending impact.
Some countries put most of their focus on operating or capital expenditure budgets, requiring each major agency or capital budgeting project to specify gender-based goals. Other countries emphasize the revenue side, looking at how different forms of taxation may have disparate impacts by gender or other demographic factors.
GRB AND MANAGEMENT ACCOUNTANTS
GRB is a phenomenon that those charged with financial responsibilities will want to follow closely. A notable obstacle in creating impactful GRB programs is that many financial professionals haven’t been trained to recognize the indirect effects spending patterns have on DEI&B.
Successful gender budgeting efforts seem to need at least three factors: (1) institutional support from the government or board, (2) a robust system of measurable performance metrics, and (3) willingness to go outside the accounting and finance area to partner with those who can provide background on the subtleties of gender impacts from spending programs.
Companies that sponsor health plans know that medical costs differ across dimensions of age, race, and gender. Can financial professionals really afford to ignore organizational factors that influence these costs? Organizations can ask young mothers for input when an organization sets the hours for a new company-based gym—or ask if women prefer on-site childcare facilities over a gym.
It can be challenging to manage additional stakeholder input systems, but proactively addressing DEI&B issues in an organization can generate momentum that helps attract a more diverse employee and customer base. Though some may see GRB as threatening to entrenched interests, gender impacts aren’t a zero-sum phenomenon.
The OECD estimates that ignoring gender inequities results in a loss of 7.5% of global gross domestic product. This hurts everyone. To ensure that an organization’s DEI&B commitments are more than just words, finance officers need to explicitly take into account differential impacts of budget choices by gender and other demographic variables. For finance teams willing to embrace a new mindset, GRB is an opportunity to enhance economic outcomes, improve organizational culture, and add to quality of life—not just for women, but for all members of society.