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Photo: iStock
Photo: iStock

Reversing women’s decline in the Indian labour force

If more women did paid work, India's national income would rise dramatically

Consider this statement: “When my wife started working, our family income doubled." Or this one: “When our daughter got her job, we got a jump of 33% in our household purchasing power." Sounds familiar? Why can’t we apply it to the whole nation, and enhance gross domestic product (GDP) substantially? Why can’t more women do paid jobs, rather than toiling at home or on the fields in unpaid work?

If more women did paid work, India’s national income would rise dramatically. One estimate is that GDP would go up by 20% if women matched men in workforce participation. The worrying trend is exactly the reverse. The share of women in India’s workforce has fallen dramatically— from about 35% to 25% since 2004. The fall is even sharper if you look at women in the age group of 15-24. According to a report of the International Labour Organization, India’s female labour force participation rate (LFPR) fell from 35.8% in 1994 to merely 20.2% in 2012. It has fallen for other age groups as well. For female wage workers, as against self-employed or casual workers, the participation rate is in single digits. By comparison, the female LFPR in Sweden is 88%.

The global share of women in the workforce is 40%, which means India is well below average. There are tiny exceptions. For instance, 11.7% of India’s 5,100 pilots are women, against a global average of 3%. A few years ago, more than half of India’s banking sector (by asset size) had female chiefs. On the whole, however, India lags behind the world in female workforce participation, and is ranked 11th from the bottom among 131 countries.

The sharp decline of female LFPR since 2004 is all the more surprising because this was a period of high GDP and employment growth. This should have increased the presence of women in the workforce. Under MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), launched in 2005, women’s participation is almost 50%—a positive feature of the programme. Yet, the overall female LFPR is falling.

In the case of younger women, this falling trend could be due to higher levels of school and college attendance, correlated with an increase in family incomes. Yet, this does not explain the large fall. Maybe there are non-economic, social and cultural factors which prevent women from entering the workforce. One big factor is maternity. Many women who join the workforce are unable to rejoin after having a child. The landmark legislation of 2016, which entitles a woman to 26 weeks of paid maternity leave, should have helped women rejoin. But a study by TeamLease estimates that this increased cost for companies and may have discouraged them from hiring women. The estimated loss of female jobs was between 1.1 to 1.8 million for the fiscal year 2017-18, over and above the usual job loss due to attrition related to maternity.

While India passed this very progressive maternity benefits law, it is clear that some of the cost of this legislation should be socialized, i.e. subsidized. This is because the low female LFPR needs to be nudged higher. Once it crosses 50%, the subsidy can be removed. One key ingredient of Japanese Prime Minister Shinzo Abe’s economic revival strategies was to increase female LFPR. Abe made it a priority to build almost half a million government-funded crèches to help young mothers rejoin the workforce. Availability of quality daycare 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 5% in Japan. That has definitely helped economic growth.

Recent research by Sonalde Desai and others has found a U-shaped relationship between female workforce participation and income. As women acquire more education and skills, their potential earning power goes up. So they earn more in less time and with less work, allowing them to devote more time to leisure and home work. Also, women with higher education tend to get married into households with higher incomes, which can also inhibit their labour force participation owing to sociocultural reasons. This partly explains the falling LFPR. The authors claim that there are also supply side effects, wherein certain jobs like clerical and sales are denied to educated women. This research is based on sample data, but the findings are quite telling.

Recently, the Indo-Tibetan Border Police was asked to reserve around 15% of its positions for women. But the forces have expressed their reluctance to hire even 2%. The Union ministry of home affairs wants to increase women’s share in employment in all Central security forces substantially, but that is meeting with resistance. The presence of women taxi drivers, bus conductors or plumbers is still a rarity. In Bangladesh, more than 90% of the garment workers are women, far ahead of India.

The issue of wider, deeper and more meaningful participation of women not just in the workforce, but also in legislatures, police, armed forces and the judiciary, is a complex but very critical issue. While lower-tier governments have achieved gender parity through reservation of legislative seats, a similar Bill for Parliament has been pending for decades. As for the workforce, much needs to be done, beyond maternity benefit entitlements and other quotas. A useful and easily implementable idea would be to make women’s salary income-tax-free. That may sound radical, but it would be a bold and effective step to increasing India’s female workforce participation.

Ajit Ranade is an economist and a senior fellow at the Takshashila Institution, an independent centre for research and education in public policy.

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