An excerpt from World Bank’s “India Development Update: Unlocking Women’s Potential” (May 2017), prepared by Frederico Gil Sander as the main author:
India has among the lowest female labor force participation rates (LFPRs) in the world – well below what would be expected for its level of income and what is observed in neighbors such as Bangladesh, Sri Lanka and Nepal. Not only is India’s female LFPR low, but it declined a further 10 percentage points between 2004-05 and 2011-12.
Low female LFPRs impose constraints on a country’s growth, the empowerment of its women, and the outcomes for its children. In particular, low female LFPR is a drag on GDP growth and an obstacle towards reaching a higher growth path. One estimate suggests GDP growth could accelerate from 7.4 percent currently to over 9 percent if India closed half the female LFPR gap with Nepal. Women are also an untapped source of managerial and entrepreneurial skills.
By excluding women, the pool of such talent becomes shallower and growth suffers. What are the “proximate” or mechanistic causes of low female LFPR? First, some 30 percent of the decline is due to more young women staying in school longer as both secondary and tertiary enrolment rates increased substantially. Second, female LFP declines along the rural-urban gradation; in other words, as areas become more urbanized, women who reside in those areas become less likely to work.
This leads to two related phenomena: first, as more Indians moved to cities, female LFPR converged to the (lower) urban levels; second, as areas that are classified as rural became more urbanized, female LFPR similarly declined, but this appeared as a decline in urban female LFPR. The third cause are retirements. Although still a minor cause, the fact that inactivity rates among older (46+) Indians have increased between 2004-05 and 2011-12 suggests that India is fast approaching an aging demographic profile.
Two observations arise from the analysis of proximate causes of low female LFPR. The first is that participation rates are also low and declining even among educated women. Considering that 42 percent of India’s science and technology graduates are women, this is a significant ‘brain drain’ for modern services sectors. The second is that jobs for Indian women remain primarily in agriculture. The share of women in services and industry is less than 20 percent and lower than the overall female LFPR.
In contrast to India, in Brazil, Indonesia and Vietnam, women workers take a higher share of services jobs. In Bangladesh and Vietnam, which have vibrant textile and apparel industries, women represent a larger share in the industrial sector. Two main hypotheses have been offered to explain the deeper causes of low urban female LFPR. The first is known as the ‘income hypothesis’ and notes that some decline in female LFPR can be expected with development.
At low levels of income and education, women mostly work out of necessity and in poor quality jobs, largely in agriculture. As household incomes rise when men find jobs in industry or services, women may choose to drop out from the labor market as higher household incomes allow women to stay at home, often a preferred household choice. Supply-side explanations are likely part of the overall reason for low and declining LFPR, but cannot explain all the developments observed. In particular, higher household incomes are not closely associated with female LFPR, and the low and declining participation rate of educated women is inconsistent with an economy with a growing modern services sector.
The alternative explanation points to limited job creation overall; given social norms and other gender-specific constraints, these few jobs being created end up going to men. Supporting this hypothesis, many women who are not working say they would like to work, but they cannot find suitable jobs, which are well-paying, close to their homes, and with flexible working hours. Concerns about women’s safety are strong and often genuine, while flexibility, availability of childcare, and adequate pay are important given social norms that require women to reconcile work with household duties.
Regular, salaried jobs may also be attractive as they would provide higher and steadier income that would help women reconcile household duties with work. However, such regular, salaried jobs have been in short supply in India, especially for women. While no definitive answer has been identified, labor laws are relatively restrictive overall but especially towards women. Moreover, female entrepreneurs tend to hire more women, but there are relatively few women entrepreneurs, in part because of lack of access to capital and business networks.
If the overall lack of jobs, especially regular salaried jobs, plays a large role in India’s female LFPR, only a combination of gender-targeted and broader policies towards formal job creation can sustainably raise female LFPR and accelerate India’s GDP growth and broader social development. Policies that promote job creation in ‘women-friendly’ sectors such as apparel, or that help fast-growing modern service sectors absorb more educated women workers would be particularly helpful.
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