Moody’s Investor Services notes that household debt has increased in many advanced economies over the past decade.
The increase in and diversification of household income sources as a result of increased female integration into the labor market should act as a buffer to higher individual debt levels and consequently reduce the risk of broader financial instability.
Moody’s Investors Service also says that policies to promote greater female labor market participation in high-income countries will, if they are successful, boost sovereign creditworthiness.
In particular, sovereign creditworthiness will improve through three main channels: economic growth by partly offsetting shrinking labor forces, government balance sheets by widening the tax base and easing pension pressure, and, potentially, financial stability by shoring up household finances.
Moody’s conclusions are contained in its just-released report titled “Sovereigns — Advanced Economies: Higher female labor force participation mitigates demographic pressures”.
Among high-income economies in member countries forming the Organisation for Economic Co-operation and Development, Moody’s sees the greatest scope for positive credit impacts in countries where populations are ageing fastest and where governments have highlighted female participation as a key priority, particularly Japan (A1 stable) and Korea (Aa2 stable).
Moody’s report identifies three main advantages to sovereigns of higher female employment: 1) a higher number of workers and higher productivity growth would partly offset the growth impact of shrinking of working-age populations, 2) a broader tax revenue base would enhance public finances, and 3) a higher share of two-income households would likely support greater financial stability.
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