In recent decades, India has enjoyed economic and demographic conditions that ordinarily would lead to rising female labour-force participation rates.
- Economic growth has been high, averaging 6-7% in the 1990s and 2000s;
- fertility has fallen substantially; and
- female education has risen dramatically, albeit from a low level.
In other regions, including Latin America and the Middle East and North Africa, similar trends have led to large increases in female participation. Yet 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.
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.
Feminization U hypothesis
One possible explanation for this trend could be that India is behaving according to the feminization U hypothesis, where in the development process, 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.
Demand and supply-side drivers of female labour participation
- After the decline in female participation in rural areas is concentrated among married women aged 25-64, it can be seen 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.
- 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.
- 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, 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.
- Also the lack of availability of agricultural and non-agricultural jobs in rural areas appears to be driving the declining participation in rural areas.
- 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.
- 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.
Factors that need further investigation
- On the other hand, the role of macro, trade and structural policies also needs to be investigated.
- When comparing India with Bangladesh, one notices how an export-oriented, manufacturing-centred growth strategy has led to increasing female employment opportunities there.
- China, of course, also pursued such a strategy much earlier with similar impact on female employment.
- India’s growth strategy has focused on domestic demand and high-value service exports, which generate too few employment opportunities for women, particularly those with medium levels of education.
- Lastly, policies will be needed to tackle the social stigma that appears to prevent particularly educated women from engaging in outside employment. Here public debates of this issue and its impact on women are clearly necessary.
