Special Report

More women are needed in the workforce

More women are needed in the workforce

India’s female labour force participation rate (LFPR) has fallen steeply in the past thirteen years. This is the ratio of females who are doing paid work as a proportion of the total women of working age.  The decline is actually a longer term phenomenon. As per a report from the International Labour Organization, the LFPR for females aged 15 to 24 was 35.8 percent in 1994, and it fell sharply to 20.2 percent in 2012. It has continued to fall since then. The decline is seen for other age groups as well as for the overall female workforce. This is surprising on many counts. Firstly the period especially after 2004 was a time of high economic growth. So there was large-scale job creation and women’s participation rate should have increased. Secondly, the employment created by the scheme based on the National Rural Employment Guarantee Act has almost fifty percent participation by women, so that should have skewed the LFPR higher. But despite these two reasons, the participation rate has declined.

The decline for younger women could be attributed to higher school and college attendance rates, which keeps them away from the labour force. But that argument is insufficient to explain why the rate declined for all age groups. It is true that if one looks at the dis-aggregated data of working women, the proportion of women doing wage and salaried work is increasing, albeit slightly. In rural areas, women wage workers in 2012 were only 9.4 percent of all female employment. Salaried work is obviously more stable, offers a decent income and status, as against self-employment or casual work. In comparison, the female LFPR in a country like Sweden is 88 percent.

For men, the most important factor that affects their LFPR is economic. The job market conditions and prevailing wages mostly explain male LFPR. In India overall this rate has been as high as 85 percent. But for women, their participation in the labour force depends not just on economic factors, but also social, religious, cultural and reproductive factors. For instance in countries like Iran and Saudi Arabia, the level of education of their female citizens is very high, but LFPR is relatively low. That is due to non-economic factors. In India too there would be plenty of examples where women are kept out of the workforce due to social, cultural or family sanctions.  But the effect of that is lesser income, autonomy and dignity for women, and lesser GDP and economic benefits for society at large.

The Managing Director of the International Monetary Fund, Christine Lagarde said in a speech at Davos earlier this year, that if women were brought to the same level as men in terms of economic and workforce participation, then India’s GDP can go up by 27 percent! This is based on IMF research. This includes increasing the female LFPR as well as eliminating the gender pay gap, and ensuring equal pay for equal work for both genders. (The equal pay is indeed implemented in NREGA projects).  It was the same Ms Lagarde who had famously said in 2008 that if Lehman Brothers was Lehman Sisters, we wouldn’t have had the global financial crisis! The IMF this past week again reiterated that if India focused on getting more women into the workforce, then its growth rate would go up substantially. The IMF comments also included an indirect reference to the horrendous and tragic headlines of rapes in India. We don’t need to feel defensive about being singled out thus, even though the malady of violence against women affects all countries.

The strategy of increasing female LFPR is also one of the key ingredients of Abenomics, of Prime Minister Shinzo Abe in Japan. Indeed under his tenure as PM, he has made it a priority to build almost half a million government funded creches to help young mothers rejoin the workforce. Availability of quality day-care is one factor which inhibits women from returning to work after their maternity leave. The female LFPR during Abe’s term has gone up by almost five percent in Japan. That has definitely helped economic growth.

Hence, India’s female LFPR should be a focus of public policy. Not only has it declined sharply over time, despite otherwise high economic growth, we also see that across income categories it follows a U-shaped curve. As women’s income rises, they pull out of the labour force. In a recent research paper by Sonalde Desai and others, the authors explore this paradox of rising education, skills and income and declining women’s employment in India. They examine comprehensive micro level and family level data using two waves of India Human Development Survey. Their finding suggests that as women get more education and skills, their potential earning power goes up. So they earn more in less time and less work, allowing them to devote more time to leisure and home work. That reduces their LFPR. Educated women also tend to marry into families with higher incomes which too reduces their workforce participation. Of course there are cultural and social explanations too. But apart from such “income effects” i.e. reduced workforce participation due to higher incomes, there is a more serious impediment.  This is the availability of suitable jobs for educated women. If there is implicit sex segregation which excludes women from sales and clerical jobs, then that too would reduce their workforce participation.

The garment industry in Bangladesh, for instance, is more than ninety percent run by women, who work in three shifts. Garment exports from that country exceed that of India. But India does not allow three shifts. Textile spinning mills in Indonesia have majority women workers. Not in India. Thailand has plenty of women cab drivers. In India, this trend is hardly visible. So, the challenge of increasing women’s LFPR has dimensions of public policy, labour laws, cultural and social norms. But benefits of increasing LFPR as well as reducing the gender pay gap will have immense benefits to society and economy.

Ajit Ranade is an economist and Senior Fellow, Takshashila Institution. (Syndicate: The Billion Press)


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