Economic growth but decreasing female labour force participation rates: India’s paradox

India has many of the key factors typically associated with increasing female labour force participation rates (FLFPR): an average GDP growth rate of 7.4% between 2014 - 2018¹; an increasing % of girls enrolled in secondary school; a decreasing total fertility rate². Paradoxically, however, FLFPR have dropped in India from 32% in 2005 to 18.6% in 2020³. So, why is this happening?

A key determinant for the decreasing FLFPR lies in India’s unusual (but not unique) U-shaped relationship between education and employment⁴ — the likelihood of employment decreases with educational attainment up until secondary level, before increasing with any further education. This is contrary to the human capital theory which suggests that with greater education, an individual will develop greater skills, potential earnings, and employment opportunities⁵. So why is this theory not applicable to India?

One prevailing argument for this U-shaped trend is the ‘income effect’⁶ — educated women tend to marry men with a similar or higher educational attainment which is associated with greater incomes⁷. Indeed, families take pride in and are seen to have a higher social status, if women in the household can withdraw from work, as this suggests that male members have high enough earnings to provide for their families. Hence, if family income is high enough, women may be discouraged from entering or remaining in the labour force⁸. This adds to the perception of women as secondary earners and has contributed to a significant gender pay gap, which further discourages women from the workplace⁹.

India has many of the key factors typically associated with increasing female labour force participation rates (FLFPR): an average GDP growth rate of 7.4% between 2014 - 2018¹⁰; an increasing % of girls enrolled in secondary school; a decreasing total fertility rate¹¹. Paradoxically, however, FLFPR have dropped in India from 32% in 2005 to 18.6% in 2020¹². So, why is this happening?

A key determinant for the decreasing FLFPR lies in India’s unusual (but not unique) U-shaped relationship between education and employment¹³ — the likelihood of employment decreases with educational attainment up until secondary level, before increasing with any further education. This is contrary to the human capital theory which suggests that with greater education, an individual will develop greater skills, potential earnings, and employment opportunities¹⁴. So why is this theory not applicable to India?

One prevailing argument for this U-shaped trend is the ‘income effect’¹⁵ — educated women tend to marry men with a similar or higher educational attainment which is associated with greater incomes¹⁶. Indeed, families take pride in and are seen to have a higher social status, if women in the household can withdraw from work, as this suggests that male members have high enough earnings to provide for their families. Hence, if family income is high enough, women may be discouraged from entering or remaining in the labour force¹⁷. This adds to the perception of women as secondary earners and has contributed to a significant gender pay gap, which further discourages women from the workplace¹⁸.

Whilst the ‘income effect’ is a large contributing factor to low FLFPR, cultural norms and attitudes are also very influential on a woman’s decision to work, as well as the opportunities she has¹⁰. For example, research has shown that less than 19% of new employment opportunities in the 10 fastest-growing occupations were occupied by women between 1994 and 2010. Only three of such occupations saw an increased share of female employment in this period compared to a decline in the remaining seven¹⁹. This suggests that despite increases in primary and secondary education (though it should be noted that many women still face significant barriers such as safety, security, and dowry²⁰), women have not been able to access these rapidly growing occupations. Moreover, the gender-specific divide in household activities makes full-time participation difficult — on average, women in India spend 5 hours per day on unpaid household activities compared to just 30 minutes for men¹³. Therefore, regular part-time work is highly desirable — the Indian National Sample Survey found that 72% of women would prefer regular part-time jobs if available²¹. Poor childcare facilities and maternity policies like The Maternity Act 2016 also act as a disincentive to hiring^10,16.

Many media headlines have highlighted the overall decrease in FLFPR. However, it should also be considered how this decrease varies significantly between rural and urban areas¹⁰. The decreasing FLFPR trend has been particularly prominent in rural areas, falling from 49% in 2004-2005 to 19.7% in 2018-2019²⁰. Present FLFPR are likely to be even lower because of Covid-19, which is reported to have disproportionately affected female employees²². A contributing factor to this rapid decrease in rural areas is the diminishing proportion of women working in the agricultural sector due to mechanization¹⁰.

In summary, India’s decreasing FLFPR can be attributed to a complex interplay of cultural and economic factors including the ‘income effect’ and gender disparities in unpaid care. The Global Gender Gap Report 2020 ranked India 149th out of 153 countries for economic participation and opportunities²². Sustained efforts will be needed to improve India’s low FLFPR, as estimates suggest that equalising women’s workforce participation to men’s could increase India’s GDP by 27%²³.