Why India needs more working women

There are just not enough women in the labour force. The difference in the labour participation rate of the two main genders in India is over 50 percentage points, one of the highest among G-20 nations, according to World Bank data. In fact, the most dynamic economies over the past few decades have a far higher proportion of women at work—and without creating male unemployment as some geniuses believe.

A new study by the McKinsey Global Institute released last week has tried to estimate how much output is lost in India because too few women work outside their homes. The think tank said India’s gross domestic product (GDP) in 2025 can be higher by as much as 60% if women’s participation in the economy were on par with that of men. The recent update of the Asian Development Outlook by the Asian Development Bank (ADB) makes a similar point. It says that if women’s participation in India increases to the level prevailing in the advanced countries, annual GDP will be higher by 4.2%.

However, closing the labour participation gap may be easier said than done. As economist Claudia Goldin has shown in her seminal work, The U-Shaped Female Labor Force Function in Economic Development and Economic History (1995), women labour force participation in relation to men follows a U-shape. Participation is higher at lower income levels, when people are more dependent on agriculture. However, as the income goes up due to the inevitable shift in economic activity from agriculture to industry and services, the level of participation drops. But then, over time, as the level of female education improves, women tend to come back to the labour market.

India is in a situation where participation is declining with rising income (and that is also why rural women enter the labour force during drought years while they withdraw during years of good harvests). Therefore, steps will be required not only to arrest the fall, but to reverse it meaningfully. The government will have to work on multiple fronts to achieve this.

Ninety percent of Indian workers are employed in the unorganized sector, where not only are wages for women lower, but the inability to provide flexibility, childcare benefits and maternity leaves creates disincentives for women to seek work outside the home. It is thus important that labour market distortions are addressed effectively.

Further, efforts to boost manufacturing and industrial activity will have to be enhanced so that India becomes an important part of the global value chain. The ADB in its report has highlighted the fact that China’s integration in the global economy resulted in disproportionate benefits for women, as it created employment opportunities for them. For example, women’s share in managerial jobs in China went up from 10% in 1982 to 25% in 2010. There is no reason why such things cannot happen in India, provided policy action is focused in the right direction.

To be part of global value chains, an enabling environment will be required, not only in terms of increasing industrial activity, but also where Indian women are able to acquire the necessary education and skills to be part of the workforce.

Also, the state will have to create a safe and secure environment to facilitate greater labour mobility among women. This will require increasing investments in infrastructure and public administration. Besides, Indian society will have to discourage gender discrimination in all forms.

No country can attain its full potential if half of its human capital is unable to contribute fully to its growth and development. India is no exception.

Is it important for India to close the gender gap? Tell us at views@livemint.com

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