Shock to the Indian economy — Female Labour Force Participation drops to 16.1%
Despite improved education and health care outcomes, female labor force participation (FLFP) in the formal and informal labor market has declined drastically in the last seven decades, hitting its lowest at 16.1 percent in 2021. The low FLFP has negative consequences for India’s development. According to the Center for Monitoring Indian Economy (CMIE), only 9 percent of all working-age women are employed, contrary to 67 percent of all men of working age. The gap is enormous and is a potential opportunity to utilize our massive workforce effectively.
India has a complex social structure. Social stigma still exists attached to women working outside the home, directly affecting the FLFP. Further, the constraints in the market’s demand and labor supply exist at multiple levels, directly affecting woman’s willingness to work at the given wage rate and under prevailing labor market conditions. Employers are reluctant to hire at market wage rate. In addition, the burden of unpaid care work at home inevitably falls on women. According to a survey conducted by Social Attitude Research, India (SARI), about 50% of adults disapprove of women working outside the home. Under such circumstances, the choice of paid employment is challenging and considered seen as a secondary source of household income.
According to data, education and marriage have contrasting effects on both men and women in the workforce. Women invest a substantial amount of time and effort in obtaining higher education. The prolonged gestation period delays other life events like employment and marriage. Highly educated women often have difficulty finding jobs matching their wage expectations. So, why would an educated and financially independent woman opt out of the labor market? Often it is the deliberate choice that women make. Women do a conscious cost-benefit analysis to choose childcare over employment.
GoI amended the progressive Maternity Benefit Act of 1965 by extending the maternity leave to 26 weeks from the initial 12 weeks. The law works exceptionally on paper but defies the purpose of hiring. As a result, the organizations show reluctance in hiring young women. Moreover, it adds to the running cost of the company to pay for substitutes when women are away on maternity leave. In a recent study conducted by Ashoka University’s Genpact Centre for Women Leadership (GCWL), when new mothers are reinstated in the system, their roles are retrofitted, usually with lower pay resulting in the dropout from the labor market.
The lower FLFP will affect individual women and society at large. A potentially financially independent woman becomes financially dependent in the absence of paid employment. This means that a woman is left with no financial security. The adverse outcome of this can be women prioritizing their careers over other things like marriage and raising a family. Imagine the domino effect of this. This can result in a reduction of the young population of our country, adversely affecting the labor force market. The impact of this on our economy will be irreparable. The time is not far when our aging population will supersede the young working population.
Social norms only partially contribute to India’s FLFP. As stringent and persistent as they have been, social norms will require transformation through strategic interventions. Diversifying women’s jobs and normalizing women in alternative roles is the need of the hour. There is an urgency to de-feminize unpaid care work at home. For example, the fatal flaw of the maternity policy is that it continues to remain gendered, leaning more towards women. Co-parenting should be encouraged through monetary incentives. In addition, bringing paternity leaves at par with maternity leaves can be a step forward to reinforce gender norms. Finally, there can be policies interventions to offer career-reboot programs with flexible work from part-time or full-time assignments from home. This will allow a smooth transition for new mothers by reducing the skill gaps. The outcome can be a long-term commitment from women employees.
The declining labor force participation rate is a threatening phenomenon that will cripple India’s economy. India struggles to bring back the women’s population to the labor market. Policy interventions can improve the long-term stagnation of female labor force participation.
