The significance of diversity in shaping economic perspectives and economic policies

Add a comment

By Dhruv Gandhi (BSc Business Finance & Economics with Placement Year)

Introduction

Diversity has a significant importance in determining economic policies. In the landscape of the modern-day world, countries are increasingly connected, and the recognition of diverse views, experiences and perspectives is critical for crafting inclusive and efficient economic policies. This essay will explore the multiple dimensions of gender, cultural, racial, and socioeconomic diversity and how it impacts economic policies and perspectives highlighting its prominence in promoting equality, boosting productivity, fostering innovation and driving sustainable development.

Gender Diversity

Diversity of gender in economic policy-making is a crucial aspect of creating efficient, sustainable and inclusive economic policies and not just a matter of equity or social justice. As the world economy has faced unique challenges in the recent past, from climate change to the COVID-19 pandemic, the demand for distinct perspectives in economic decision-making has never been more evident.  

Gender diversity brings diverse points of view and expertise to the table like different attitudes to risk and collaboration, which is extremely important for advancement in policy-making. This diversity will bring new thoughts which will lead to resourceful and effective solutions to complex economic challenges. This has been shown even in the past. In the mid-1980s, about 70+ developed, developing and underdeveloped countries had implemented fiscal policies to encourage gender equality. It was realised that advanced economies like Sweden, the Czech Republic and Canada saw an extensive increase in women’s paid work when the government actively promoted policies to increase female labour force participation by switching to using personal income taxation rather than household income taxation (IMF, n.d.). The participation of women in the labour market is vital for the economy to grow and have stability. According to the foreign relations reports it is predicted that closing the gap between gender participation in the workforce will add about $28 trillion to the global GDP in the year 2025 (Council on Foriegn Relations, n.d.).

Whereas developing and underdeveloped countries targeted reducing gender imbalance in education by mainly focusing on secondary and university education. They also launched some other effective fiscal policies such as improved infrastructure, reducing time spent on unpaid care work and giving out an increased number of women the choice to enter jobs where they get paid.  This proved to create more economic opportunities for women and led to the conclusion that greater gender parity at all levels whether unskilled workers or top management positions both leads to increased outcomes.

Cultural Diversity

Cultural diversity is characterized by the presence of multiple ethnic, linguistic and cultural groups within a society contributing drastically to the growth and improvement of the economy. The cultural-economy framework is associated with a wealth of perspectives, skills and ideas that can promote entrepreneurship, production externalities, consumption diversity etc. to boost economic performances.

Diversity of multiple cultures has been found to positively correlate with the economic performances at the regional level predominantly in terms of the GDP per capita and innovations as measured by per capita patent applications (CEPR, 2023). Empirical pieces of evidence from the entire European region have shown a few interesting findings to prove that increased immigration and allowing people from different cultures and backgrounds have led to 80% growth in city’s dynamics, 62% increase in the number of firms, 47% improvement in supply of goods and services and 36% inflow of cheap labour to name a few. However, the relationship between economic outcomes and cultural diversity is not uniform across all regions. This means that densely populated areas saw a heavier correlation between economic outcomes and cultural diversity in regions with low population the impact was not evident. This can be highlighted in Figure 1 below that Northern and Central Europe saw a stronger cultural diversity impact being a populated area as compared to Southern and Eastern Europe. (Dohse and Gold, 2014)

This shows how having people from multiple cultures helped boost the economy and hence this diversity can lead to more economic policies being introduced to ease the immigration process and let the economy grow further.

Racial Diversity

One of the most multifaceted aspects of society that drastically influences the shaping of economic policies in the UK is racial diversity. To understand a diverse consumer base inclusively, racial diversity is the key factor.

As mentioned before, the UK’s labour market is made up of diverse racial backgrounds with each of them uniquely contributing to the economy. However, some minority groups still have a higher likelihood of being economically inactive compared to their white counterparts. This disparity of not being active in the labour market is highest amongst ethnic groups of South Asians, especially Bangladeshi and Pakistani women. Figure 2 suggests that Asians, blacks and mixed-ethnic people were more economically inactive as compared to the white British by an average of 4-5%. (www.ethnicity-facts-figures.service.gov.uk, 2023)

Having representation of people from such backgrounds can help introduce economic policies to ease the difference and reduce economic inactivity.

Government spending plays an important role in addressing the racial disparities and promoting inclusivity. The UK government’s answer to the Commission on Race and Ethnic Disparities highlighting the “Inclusive Britain” report shows the understanding that socio-economic outcomes through a full approach considering factors beyond race like economic capital are very valuable (Inclusive Britain, n.d.). This method will enable to target interventions that speak about the upstream causes of disparities, such as family support and education. Hence, the government will ensure that they are spending efficiently on these aspects to contribute to reducing racial inequalities and fostering a more inclusive economy.

Socio-Economic Diversity

Socio-economic diversity influences the workforce representation, organisational performances and social mobility in the country and the rest of the world. Therefore, it is also one of the most important factors in shaping economic policies. A business with employees from different socio-economic backgrounds in the workforce can have better decision-making skills and creative ideas for innovations. Socio-economic inclusions can also improve retention rates and social licence to operate (CEPR, 2023). However, statistically 89% of senior-level employees in UK financial services are from a higher socio-economic background whereas employees from lower socioeconomic backgrounds take 25% longer to progress through each level of seniority in terms of career progressions. (Bridge group 2021a). This lack of diversity at senior levels can hamper talent progression which will lead to the limited representation of individuals from non-professional backgrounds. (Breaking the Class Barrier, 2022)

To solve these challenges which are linked to socioeconomic diversity, businesses are encouraged to carry out collecting data on their employees’ socio-economic backgrounds across multiple levels of seniority. This data collection can be in the form of questionnaires to ask in surveys and then used for analysing how the workforce has changed over time and exploring intersectional trends of diversity by getting a holistic view and how employers can improve it within their firms. Regulators can also mandate the collection of background data and take strong measures against organisations that are non-compliant. Also, embracing diversity in terms of cognitive and Identity/background will enhance the quality of economic analysis and policy advice within governmental institutions. (quarterly.blog.gov.uk, 2017)

Conclusion

Addressing the challenges mentioned above requires a multidimensional approach that includes policy changes, educational reforms and an effort to change the culture within the economics profession. However, it is necessary to recognise that promoting diversity is not only about increasing numbers but also about creating an environment where diverse perspectives are valued. Embracing diversity in not just Gender, Race, culture and socioeconomic but all other forms will provide diverse perspectives catering to the needs and demands of all the people in the country. This will make all the voices be heard and then take decisions towards the growth of the economy because economic policies formed by diverse perspectives are more inclusive, resilient, and effective, leading to better outcomes for individuals, communities and societies as a whole. This will also foster innovation, promote equity, enhance productivity and be better equipped to meet the challenges of the 21st Century. Through the empirical pieces of evidence shown above, it can be seen that having diversity and fair representation can influence economic policies and perspectives to a greater extent. Lastly, diversity is not only a moral imperative but also a strategic asset for an economy in shaping economic perspectives and policies.

Bibliography

Leave a Reply