Low, stagnating female labour-force participation in India

  Mar 23, 2017

Low, stagnating female labour-force participation in India

In recent decades, India has enjoyed economic and demographic conditions that ordinarily would lead to rising female labour-force participation rates. 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 Factors that need further investigation