Keep the focus on increasing female labor force participation
The piece is authored by Drashti Shah, NITI Aayog
In 2021, India fell 28 places in the Global Gender Gap Index and ranked 140 among 156 countries. During this time, the gender gap widened by 3% due to declining participation of women in the labour force. Women have been disproportionately affected by unemployment during the pandemic as there is a high percentage of women in the hospitality industry which has been severely impacted.
Unemployment rate (UR) is the percentage of labor force that is unemployed but actively seeking employment & willing to work. UR does not clearly reflect the enormity of unemployment crisis as it excludes those who stop looking for jobs after multiple unsuccessful attempts, and women constitute a huge share of it. In Q4FY21, as per the Periodic Labour Force Survey (PLFS), unemployment among women in urban areas was 3.2% more than men, and more so among the young workforce (15-29 years), where one in four women in the labor force has been unable to find a job. It is no surprise for all quarters since 2018, unemployment for women in urban areas has remained high compared to men.
Unemployment data by Centre for Monitoring Indian Economy (CMIE) shows average unemployment for rural areas stood at 9.3% (5.5%-Jan 2022) and urban areas at 7.6% (8.3%-Jan 2022) as on February 23, 2022. Unemployment rose sharply for rural areas than urban areas, reversing the earlier trend.
Annual PLFS (Jul 2019-Jun 2020) shows unemployment for women declined marginally (4.2%-2020 vs 5.1%-2019). Low economic growth and high unemployment move in tandem with each other. For FY2019-20, Gross Domestic Product (GDP) grew by just 3.7%, while unemployment shows a decline. One of the reasons for different trajectory could be that primary sector (employs 42.6% of labor force) grew 4.3%, and tertiary sector (employs 32.3% of labor force) rose 7.2%, as per World Bank data. Secondary sector (employs 25.1% of labour force) declined 1.2% (manufacturing fell 2.4%) for FY2019-20. Though the share of agriculture (as % of Gross Value Added (GVA)) has declined (1991-35.1% & 2020-14.8%), it employs a large population & creates a significant drag for Indian economy. Share of manufacturing (as % of GVA) has remained stagnant (1991-15.4% & 2020-17.1%) for India. Emerging economies that witnessed high growth were able to reduce employment in agriculture & increase it in manufacturing. As per World Bank, between 1991 to 2019, the share of workforce in agriculture has declined by 34% and 27% for China and Indonesia respectively.
Women’s labor force participation rate (LFPR) (20.0%) is considerably low compared to men (56.0%) as per annual PLFS (current weekly status) 2019-20. LFPR denotes total of employed & unemployed as a percentage of the population. LFPR (2019-20) stands at 38.3% (ILO estimate-46.2%), which is low for India. Among emerging economies, LFPR stands for China (66.8%), Indonesia (66.4%), Brazil (59.2%), Chile (57.3%) & Mexico (56.4%) in 2020. This depicts a significant proportion of people are not even seeking jobs in India and unemployment rate shouldn’t be the only yardstick to track the labour market. It should be complimented by an employment rate which depicts proportion of a country’s population that is employed.
As per PLFS and NSO data, women formed only 28.7% (rural-32.2%, urban-21.3%) of the Worker Population Ratio, with a decline of three percentage points for rural women and rise of 1.8 percentage points for urban women in nine years. World average for employment ratio (females) stood at 44.7% and for China (58.1%), Indonesia (52.0%) and Brazil (47.3%) in 2019.
In labor surveys, many women respondents report as being occupied in domestic duties (proportion of men doing household work is negligible) which constitutes unpaid work. An increase in employment in agriculture for rural women could be distress driven (disguised unemployment) and not necessarily shows an improvement in employment for rural women unlike men.
Low absorption of Indian women in workforce could be attributed to lack of jobs (manufacturing not being labour intensive), dearth of time due to domestic chores, cultural norms and patriarchal culture. Employment levels can improve in India by two ways particularly –pick-up in private investment and improvement in work policies.
Work by Hausmann et al. (2006) on growth accelerations highlight demand-led growth must prioritise investment over consumption. Gross fixed capital formation declined by 10.4% (2021 vs 2020). Contribution of private investment (as % of GDP) rose only marginally (11.2%-2012 to 14.6%-2020). It is a vicious circle of joblessness-less discretionary spending-weak demand-less profits-low investment, thus shrinking the lower middle-class. Alternative jobs in industry & services need to rise at a fast pace and jobs should focus on providing decent wages, job security, reasonable work hours and insurance.
India’s unemployment problem lies deeper due to absence of women (missing women) in labor force. India needs to adopt innovate work practices followed world-wide like flexible work schedules, strict rules for work-life balance, gender equal policies (maternal and paternal leave), affordable childcare, location flexibility, gender balance at workplaces and an option for four-day workweeks/ five-hour work per day for those who are unable to work full time. The above measures will help to retain its female talent and increase their participation considerably. Portugal has passed a law (Nov 2021) which makes it illegal for bosses to contact employees (through text/email) outside work hours and is part of new laws dubbed as “right to rest”. A “right to disconnect” law has been introduced in countries like France and Spain.
Women are going to play a crucial part in shaping India’s growth story. It is important to create an inclusive environment in which women can thrive and put their best foot forward. Concerted effort of policymakers is needed, and they need to ask themselves on timely basis -- Are we doing enough to change the stereotypes and bring more women in labor force? If India wants to reap the gains of its demographic dividend, it cannot miss out on its women workforce.
The piece is authored by Drashti Shah, NITI Aayog