Declining female labour force participation rates in India : causes and

implication

What is the possible reason for low participation of women in India? The decision of and ability
for women to participate in the labour force is the resultant of various economic and social
factors that interact in an intricate fashion at both the domiciliary and macrolevel. Based on
global suggestion, some of the most vital drivers contain educational attainment, fertility
rates and the age of marriage, economic growth/cyclical effects, and urbanization. In
accumulation to these issues, social norms shaping the role of women in the public domain
continue to affect outcomes. In India, much of the conversation on the falling trends has
focused on four key explanations: 1) rising educational acceptance of young women; 2) lack
of employment opportunities; 3) effect of household income on participation; and 4)
measurement. Over the last decade or so, India has made significant progress in increasing
access to education for girls as increasing numbers of women of working age are enrolling in
secondary schools. Nonetheless, the nature of economic growth in the country has meant that
jobs were not created in huge numbers in sectors that could readily absorb women, especially
for those in rural areas. Despite insufficient job creation, household incomes did rise, which
possibly reduced women’s participation, especially in subsidiary activities (“income effect”)
due to change in preferences. Finally, though most women in India work and contribute to the
economy in one form or another, much of their work is not accounted for in official data, and
thus women’s work tends to be under-reported. In India, a substantially high share of females
report their activity status as being confined to domestic duties. In 2011-12, 35.3 per cent of all
rural females and 46.1 per cent of all urban females in India were attending to domestic duties,
whereas these rates accounted to 29 per cent and 42 per cent respectively in the year 1993-94.
Therefore, mis-measurement may affect both the level and the trend in the participation rate. It
is interesting to note that significant proportion of women usually engaged in domestic duties
reported their willingness to accept work if the work was made available at their household
premises. Of the total women frequently engaged in domestic duties, 34 per cent in rural areas
and about 28 per cent in urban areas described their readiness to accept work and tailoring was
the most desired work in both rural and urban areas. Among the women who were willing to
accept work at their household premises, about 95 per cent in both rural and urban areas
preferred work on regular basis. About 74 per cent in rural areas and about 70 per cent in urban
areas chose ‘part-time’ work on a regular basis while 21 per cent in rural areas and 25 per cent
in urban areas sought regular ‘full-time’ work.
Female labour force contribution and entrée to decent work are important and necessary
components of a comprehensive and sustainable development process. Women endure many
barriers to enter labour market and to access decent work and disproportionately face an array
of several challenges relating to access to employment, choice of work, working conditions,
employment security, wage parity, discrimination, and balancing the competing loads of work
and family responsibilities. In addition, women are profoundly represented in the informal
economy where their exposure to risk of mistreatment is usually utmost and they have the least
formal protection. Considering these insights, policy makers in India and all over the region
should take a comprehensive approach in improving labour market outcomes for women by
improving access to and relevance of education and training programs, skills development,
access to child care, maternity protection, and provision of safe and accessible transport, along
with the promotion of a pattern of growth that creates job openings. Beyond standard labour
force participation rates, policy-makers should be more worried about whether women are able
to access better jobs or start up a business, and take advantage of new labour market occasions
as a country develops. A policy framework encouraging and enabling women’s participation
should be built with active awareness of the “gender-specific” constraints that most women
faces. Gender responsive strategies need to be contextually developed. In the long run, the goal
is not merely to increase female labour force participation, but to provide opportunities for
decent work that will, in turn, contribute to the economic empowerment of women.

Increasing levels of education are associated with declining rates of Female Labour Force
Participation

We divide variations in female LFPR over time into part that can be accounted for by changes
in visible characteristics, and the part that can be accounted for by changes in the returns to
these characteristics. Our results reveal three broad patterns:

1. Changes in individual characteristics (like increasing education levels and fluctuating age
distributions) and household factors (like increases in household wealth and enhancements
in men’s level of education) fully account for the fall in women’s labour force involvement
between 1987 and 1999.

2. Changes in these variables justify for a much smaller share (just over half) of the
deterioration in LFPR between 1999 and 2011. We do not find solid evidence that evident
variables correlated with social stigma against women working outside the home (example,
 caste, religion) can account for a significant proportion of the decline in women’s LFPR in
either period.

3. Growing levels of education among rural married women and the men in their households
are the most noticeable attributes contributing to the deterioration in LFPR in both decades.

Figure 1 shows a U-shaped relationship between women’s education and their participation
in the labour market. As women move from being uneducated to having primary and middle
levels of schooling, LFPR falls. LFPR only start to rise as education increases to
accomplished secondary schooling and to the graduate level.

With more education and fewer children, rural women’s time may be comparatively more
valuable in home production. This could be because women are objectively more productive
at home with sophisticated levels of education, or because men or women’s preferences for
home relative to market work change with more education. Figure 2, we show that the decline
in rural married women’s LFPR has been supplemented by an almost equivalent increase in
the proportion of women who report domestic work as their key activity in the past reference
year during 1987-2011 (from 55% in 1987 to 69% in 2011). Other results propose that the
deterioration in the LFPR of women aged 25-40 was greater than the deterioration for 40-65-
year-olds in both decades. These younger cohorts are most likely to have children of school-
going age – almost twice as many 6-14-year-old children as women aged 40-65 – in the NSS,
and therefore most likely to experience high yields to child care in the home.

Figure 3 shows distinct increases in women’s time spent in child care and other chores at higher
levels of education, up to higher secondary schooling. Additional education, at least up to
primary, middle, and upper secondary school, indicates more work in the home for mother.
Women with primary education spent extra time at home and the presence of an educated
mother amplified time spent by children studying, relative to less educated mothers. Vivid
improvements in female education and drops in family size only translated into more market
work once women accomplished more than eight years of education. As women (and men)
acquire more education and poverty rates have fallen, the gap between returns to home
production vs returns to market work has grown bigger.
If additional women did paid work, India’s national income would rise radically. One
approximation is that GDP would go up by 20% if women matched men in workforce
participation. The share of women in India’s workforce has dropped dramatically— from about
35% to 25% since 2004. 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. For female wage workers, contrary to self-employed or casual workers, the participation
rate is in single digit. The universal share of women in the workforce is 40%, which means
India is well beneath average. There are some exceptions as well. For instance, 11.7% of India’s
5,100 pilots are females, against a global average of 3%. The severe drop of female LFPR since
2004 is all the more shocking because this was a period of high GDP and employment growth.
This should have increased the existence 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 woman
LFPR is falling. In the case of younger women, this deteriorating trend could be due to higher
levels of school and college attendance, correlated with a rise in family incomes. One big factor
is motherhood. Many women who join the workforce are not able to re-join after having a
child. The landmark legislation of 2016, which sanctions a woman to 26 weeks of paid
maternity leave, should have helped women. But a study by Team Lease estimates that this
increases cost for companies and may have discouraged them from hiring women. Japan made
it a priority to construct almost half a million government-funded crèches to help young
mothers re-join the workforce. Un-availability of quality day-care is one factor which obstructs
women from returning to work after maternity leave. The female LFPR during Abe’s term has
risen by almost 5% in Japan. That has positively helped economic growth. As women obtain
more education and skills, their potential earning power goes up. So they earn more in a lesser
amount of time and with less work, allowing them to devote more time to freedom and home
work. Also, women with higher education tend to get married into households with higher
incomes, which can also hinder their labour force participation owing to sociocultural reasons.
A beneficial and easily implementable idea would be to make women’s salary income-tax-free.
That may sound deep-seated, but it would be a courageous and effective step to increasing
India’s female workforce participation.
This is a significant 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 push per capita growth rates through labour force participation, savings, and investment
effects. But if women principally 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 signifying that employed women have greater bargaining power with positive
consequences on their own well-being and that of their families. The theorised mechanisms for
the decline are a rising discordancy 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.
They also argue 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.
The study finds 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 entrance to finance and infrastructure, and access
to Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) employment.
Using data form 1987-2011, we find that increasing household incomes and husband’s
education, deteriorating labour market attachment of highly educated women, as well as
adverse growth in district-level labour demand, contributed to drop in female participation,
while fertility decline and rising own education worked in the contrary direction, to generate a
net stagnation. We see that growing education and incomes are allowing women to get out of
unskilled and undesirable employment, while jobs considered apt for more educated women
(especially in healthcare, education and public service) have not grown significantly with the
rise in female education, leading to falling participation among more educated groups.
We find that organisational change in India, which led to a rapid decrease in agricultural sector
in favour of a rapidly expanding service and construction sector, mainly contributed to the
declining female labour force participation. The dearth of a shift towards manufacturing and a
persistently low female share in manufacturing confirmed that the labour force as a whole did
not involve more female. In summary, it appears clear that labour supply factors do play a role
in discouraging female incomes. It is tough 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. Predominantly in rural areas, it appears that declining agricultural
employment has left a gap in employment opportunities for women as non-agricultural jobs
have not appeared at the required speed.
On the other hand, the role of macro, trade and structural policies also needs to be explored.
When we compare 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 tactic much prior with similar influence on female employment.
India’s growth strategy has focused on domestic demand and high-value service exports, which
produce few employment opportunities for women, particularly those with medium levels of
education. Lastly, strategies will be needed to tackle the public stigma that appears to prevent
particularly educated women from engaging in outside employment. Here public discussions
of this issue and its impact on women are clearly essential.
Submitted by:
Aishwarya Mishra – UH19071
Amit Kumar Mohanty – UH19074
Duttatreya Mishra – UH19084
Sneha Aggarwal – UH19116
Souro Deep Roy – UH19118