Insights into Editorial: Low, stagnating female labour-force participation in India

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Insights into Editorial: Low, stagnating female labour-force participation in India 


 

Summary:

National Sample Survey (NSS) data for India show that labour force participation rates of women aged 25-54 (including primary and subsidiary status) have stagnated at about 26-28% in urban areas, and fallen substantially from 57% to 44% in rural areas, between 1987 and 2011. Different age groups or different surveys essentially tell the same story, even though the levels differ slightly. This is despite India enjoying economic and demographic conditions that would ordinarily lead to rising female labour-force participation rates.

What’s the main concern?

This is an important issue for India’s economic development as India is now in the phase of “demographic dividend”, where the share of working-age people is particularly high, which can propel per capita growth rates through labour force participation, savings, and investment effects. But if women largely stay out of the labour force, this effect will be much weaker and India could run up labour shortages in key sectors of the economy. Also, there is a wealth of evidence suggesting that employed women have greater bargaining power with positive repercussions on their own well-being and that of their families.

 

Is India is behaving according to the feminization U hypothesis?

It is being said that the reason for low female labour-force participation in India is mainly because India is behaving according to the feminization U hypothesis, wherein female labour force participation first declines and then rises.

The hypothesized mechanisms for the decline are a rising incompatibility of work and family duties as the workplace moves away from home, an income effect of the husband’s earnings, and a stigma against females working outside the home (generally, or in particular sectors). The rising portion then comes with a receding stigma, high potential earnings of females as their education improves further, as well as fertility decline, and better options to combine work and family duties.

 

Contrasting view:

According to some experts, India is not behaving according to this hypothesis. They cite the following reasons:

  • According to a study, the empirical support for the feminization U hypothesis is feeble at best. There is little support for a U-shape of female participation in the Indian case.
  • Also, the U hypothesis cannot explain the vastly different levels of female participation between countries. In India, female labour force participation rates are 22 percentage points below their expected level in a feminization U curve.

 

What is the real reason behind this trend?

A number of new micro-level studies using NSS data have appeared in the last few years, trying to shed light on this phenomenon, examining labour supply and labour demand factors. Some of them are as follows.

 

Study 1:

A study, after first showing that the decline in female participation in rural areas is concentrated among married women aged 25-64, then showed that from 1987-2011, rising own education, incomes, and husband’s education could account for most of the decline in female labour force participation in rural areas. It also argues that the decline might be driven by increasing returns to home production, relative to market production. This might be particularly relevant if the domestic production is childcare. While the educated women that drop out indeed report being engaged in home production, the direction of causality is less clear. Maybe women drop out of the labour force for other reasons and then report a focus on domestic activities. Also, it would be good to test whether this decline of participation occurs particularly among women with children of school-going age.

 

Study 2:

Analysing data form 1987-2012, the study find a strong income effect, a negative (but over time declining) effect of husband’s education, a U-shaped own-education effect, a negative effect of children, marriage, and the presence of in-laws, and positive effects of access to finance and infrastructure, and access to Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) employment. Labour demand variables, (imperfectly) proxied by local employment structure, do not display a large impact.

 

Study 3:

Using data form 1987-2011, this study finds that rising household incomes and husband’s education, falling labour market attachment of highly educated women, as well as adverse development in district-level labour demand, contributed to declines in female participation, while fertility decline and rising own education worked in the opposite direction, to generate a net stagnation. More generally, they argue that rising education and incomes are allowing women to get out of menial and undesirable employment, while jobs deemed appropriate for more educated women (especially in healthcare, education and public service) have not grown commensurately with the rise in female education, leading to falling participation among more educated groups.

 

Study 4:

This study shifts the focus towards labour demand and argues that the lack of availability of agricultural and non-agricultural jobs in rural areas appears to be driving the declining participation in rural areas.

 

Study 5:

This study focusses on the effect of structural change on female labour force participation using state-level data. They find that structural change in India, which led to a rapidly shrinking agricultural sector in favour of a rapidly expanding service and construction sector, mainly contributed to the declining female labour force participation. The lack of a shift towards manufacturing and a persistently low female share in manufacturing ensured that the labour force as a whole did not become more female.

 

What can we conclude?

In summary, it appears clear that labour supply factors do play a role in depressing female incomes. It is difficult for married women with some education and children to be employed, especially if they have an educated and well-earning spouse. But labour demand also matters. Particularly in rural areas, it appears that declining agricultural employment has left a gap in employment opportunities for women as non-agricultural jobs have not emerged at the required pace.

 

Way ahead:

Many questions remain open. The role of rising female education needs further investigation, as it is not associated with a commensurate rise in labour market attachment. Education appears to play other roles. It is suggested that education also plays a role in the marriage market, and it affects productivity of home production. The role of policies needs to be investigated more clearly. More micro evidence on the effectiveness of employment policies is crucially necessary. Experimental Evidence provide interesting evidence, but more is required here. The role of macro, trade and structural policies also needs to be investigated.

 

Conclusion:

Unlocking the potential of women definitely requires an increase and shift in the composition of overall employment opportunities as well as questioning of societal strictures. As the country commends itself on world-leading economic growth and aspires towards a $20 trillion economy, it becomes necessary to take women along to make this goal a reality. Societal change will be the largest needle mover, but a constant push through the government, organizations and individuals is critical to bend societal norms for the better.