Asmaller share of India’s women works outside the home than in virtually any country in the world—only Pakistan and a clutch of countries in the Middle East and North Africa have lower shares. Just 39.5% of India’s women of prime working age between 25 and 54 were economically active in 2010 compared with 82% in China and 72% in Brazil. It is startling that only 24% women in prime working age have jobs in India’s cities compared with around 65% in urban China.
That is not all. The proportion of Indian women active in the labour force is falling. In just 10 years, the share has fallen from an already low 39% in 2000 to just 30% in 2010—a much steeper decline than the 3 percentage point fall observed in other developing economies.
This under-representation of women in the workforce is a waste of the demographic dividend that India could reap from its young and rapidly growing population. The declining presence of women in the workforce accounts for half of the drop in India’s overall labour participation rate from 62% in 2000 to only 57% in 2010. Today, India’s participation is significantly below China’s at 70% —and even that of Sub-Saharan Africa at 67%.
If India’s participation rates were in line with those of other developing economies, the economy would have around 60 million to 100 million more workers in 2010 generating 10% to 20% additional income (assuming that productivity is constant).
But why are women withdrawing from the world of work? One explanation is increasing incomes. India’s female participation rate is highest (at 55 %) among rural “deprived” households (earning less than Rs.90,000 a year at 2000 prices). But as incomes rise above subsistence level, women stop working outside their homes, either reflecting a social structure that would prefer them to be engaged in household work or the lack of decent job opportunities for women other than unskilled manual labour. Indeed, the participation rate declines in every higher income bracket.
However, this income driver is not the major issue. In rural areas, it has been estimated that only one-quarter of the decline in prime working age female participation is due to households moving into higher income segments. Participation has been dropping within income segments, too, and this seems to reflect a shortage of job opportunities for those with low or medium levels of skills outside agriculture. India needs to create more low- and medium-skilled jobs to give women a route out of subsistence work.
In rural areas, there is huge scope to create employment if basic products and services including financial services, retail, healthcare, and education, were to become more freely available. The Planning Commission is setting out an ambitious plan for job creation as part of its Five-Year Plan running from 2013 to 2017. The proposal looks at sectors such as textiles and apparel manufacturing, leather products, food processing and travel and tourism—all of which could create jobs in the Indian countryside.
India needs not only an employment revolution but also an educational revolution that allows—and encourages—women play their full part in a modern Indian economy. It is well known that female participation in the workforce rises along with educational levels. In India, in 2010, just 18% of Indian women educated to the high school level entered the workforce in 2010, but 31% of those with a college education did. Education not only equips women for the workplace but also breaks down conservative social attitudes.
But the proportion of women who receive formal education is shockingly low. In 2010, around 65% of prime-aged women in rural areas and over 30% of women in cities hadn’t even received primary school education. Initiatives of the Prime Minister’s National Council on Skill Development, along with business and non-governmental organizations, will be vital to ensure women build job-relevant skills, even in the absence of formal education.
The situation of the next generation could be radically different. A doubling of secondary and tertiary education (for girls and boys) accounts for the other half of India’s falling overall participation rate as more young people are in education rather than in work. The evidence today is that the enrolment of girls and women in schools and colleges is on a par with that of boys and men in many parts of the country.
These strides in educational provision will change India for the younger generation. But to transform the lives of the mothers of that generation—and many of the fathers—India needs an adult education and vocational training programme on a mammoth scale.
Anu Madgavkar is a McKinsey Global Institute senior fellow and leads MGI’s India teams.