The Economy Is Growing but Women Are Leaving the Labour Market. Here’s Why

Contrary to global trends, economic growth in India has not led to more women joining the labour market. The International Labour Organisation’s Sher Singh Verick attempts to examine the reasons behind it.

Sher Singh Verick is the deputy director for International Labour Organization’s decent work team for South Asia. He has edited the ‘Transformation of Women at Work in Asia” report along with Sukti Das Gupta from the ILO. This volume doesn’t just examine women’s engagement with the labour market but also goes on to examine the social transformation and other factors that have affected women’s participation in the labour market.

Why is this work important and what are the interesting observations that have come out in this report that you would like to highlight?

Going back over the last 5 years, data that came out of India told us a rather surprising and puzzling trend. Namely that women’s participation in the labour force declined during the 2000s. This was the period when economic growth was averaging around 8% per annum. So, this came as a real surprise to policy makers and academics alike. This led to a lot of research, including by the ILO. And there are a number of key factors which the book highlights in terms of women withdrawing from the labour force because of education, because of rising income in rural households and women shifting to domestic duties but most importantly, it is that the lack of other job opportunities for the women in those rural areas where most of the decline took place. Also important is the question of where India fits with the rest of the Asia. India is not unique, most of the South Asia has very low labour force participation rates for women. Nepal is an exception, but across the South Asia along with the middle east and North Africa this has been the case. What was puzzling was the decline. When you look at the rest of Asia, the critical factor that we highlight in this book is where economies are being able to grow fast and are experiencing a rapid process of economic and social transformation. We look at economies where women have been a central part of that through the labour market. So, this book really gives us a strong comparative insight of the situation in India. Going well behind what we see in this country. A really important message in the book is that if an economy is to maintain a high rate of economic growth that is inclusive, women really have to be the centre of it and this really remains an unfinished development in general in many countries in the region. 

According to the National Sample Survey, the drop in female labour participation was around 10.1% from 2005-2010, which was more significant in the rural areas than the urban areas. Say around more than twice in fact. So, do you think it is just because of the migration of the female labour in search of better job opportunities, better quality of jobs. Or are there more factors in play?

You are correct to put the focus on the rural labour market because really the vast majority of women who withdrew were from rural areas and this continued in 2011-12 if you look the NSS data. Now it is difficult to have a good understanding of what happened with migration but we know migration wasn’t the major factor. It is hard to get very clear numbers on that. What has happened is women have withdrawn from agriculture in rural areas. They’ve withdrawn from agriculture and are now being listed by the NSS as engaging in domestic duties. So, as we discuss in the book, there is no clear distinction between working on your farm versus being in domestic duties – there’s a lot of overlap. This is a measurement issue and measurement is a dimension that we highlight and there’s a lot of debate around that. Are women still working? Of course, they are working, even if they classify it as domestic duties and contributing a lot to the household economy and care economy of course. But rather than going into that debate, which is an important one, this book says “well, look, that maybe the case but women who have withdrawn in rural labour markets in India aren’t going into jobs outside of their home, either in terms of factory work or office work, service sector etc. So they are not hiding there, they are hiding in their household. That has its own legitimate part to it and this is not a criticism of that process, but what we know for sure is that women aren’t hiding, those numbers aren’t hidden in the labour market outside their homes. So, this is the fundamental issue about the rural labour market. The real test for the coming years is how jobs can be created in the rural areas so that women living in rural areas can access them. You see more and more of that happening in the south – this is growing and one should recognise that diversity within India. India is not one country, it is a continent and has a very diverse labour market. You can see the growth of jobs in the south but it’s really the north where a lot of challenges remain.

How does this fit in the U- shaped hypothesis that you have described in this book. Can you elaborate what exactly do you mean by it?

That’s a really good question because if you look at this whole discourse, not only in India but globally, for the last few decades, there has been this stylised U-shaped hypothesis which basically said that “look in countries that are poor, especially low-income countries, everyone is working because they have to out of necessity. As countries develop, participation falls as women withdraw.

They don’t get opportunities in other sectors.

Yes, there’s also a part of the social norms that are still there. Women are withdrawing and as economies develop in terms of their structural transformation – from poor and agricultural to increasing manufacturing to the service sector – traditionally, the service sector has been an entry point for women. Now, this is the stylised hypothesis that you can see if you look at a cross-section of data. But it is misleading to think that it will follow a sort of a deterministic process that women will withdraw once the country becomes a little more well-off.  The opposite can be seen in Scandinavia and Australia, etc., because they are the ones where it’s high. And if you look in Asia, you see a very different story. There’s no U-shape in Asia, if you take all the Asian countries together, there is no U-shape. What you have is low-income countries with high participation like Cambodia and Nepal. Bangladesh is more with the South-Asian countries where participation is lower. Bangladesh has traditionally been a country with a low level of participation but it is interesting because participation has increased the fastest during the 2000’s and this pretty much leads to the story about garments. This whole structural transformation process, with garments but also agriculture for marker credits, has been an important way for women to get involved in poultry, farming, livestock, etc. So, the U-shape is misleading because it gives some sort of false assumption that women will withdraw and then return. If you look at the richest countries, the participation rates of women are considerably lower than men. A gender gap remains even in the richest countries like Japan, Korea, Singapore. Participation rates of women remain relatively low. So, this is something that we cannot just say happens by itself and that we follow a U-shape. The gender gap, in link to social norms, continues to be a really important factor, so one has to really target it directly.

Also, when we look at the global trends in the participation of the women in the labour force. How stark is the contrast when we look specifically at India and not just the entire Asia.

That’s right. India has a low level but it has actually declined and this has dragged down the whole South Asia average if you look at the ILO figures for the regional levels. South-Asia is one of the only regions where participation of women is falling. You have middle east and North Africa which traditionally has much lower rates. Even in South-Asia it’s actually increasing slowly, but it’s increasing.

Why do you think that is? Are there some strong sectors which absorb more female labour within them like the garment industry in Bangladesh?

Well, in the middle-east and North Africa service sector jobs are being created. There’s education, health sector where women are entering. You do need manufacturing and it exists in some of these countries but it is not playing the same role as it is in Bangladesh. But you see the biggest increase has been in Latin America and in Latin America, you had economic transformation going on, so jobs are being created. In fact, it is not really being driven by manufacturing as much as the service sector, but women’s education has increased considerably over a long period which has given women the ability to join the labour force in the service sector, in a more formal part of the service sector. So, South-Asia does stand out as the only region where the labour force participation rates have come down during the 2000s and that is driven in particular, by the case of India.

 You also mentioned the occupational segregation. Men benefit disproportionately from the demand of skilled labour in the workforce. So, what do you think are the steps that we need to take so that women can also be equipped and there is more demand for women in the highly skilled labour workforce.

It is a very important aspect to look at because though there has been this discussion around jobless growth especially in the Indian context, all this data tells us is that actually men were benefiting much more from the job growth. Men were being able to work in sectors which are rapidly growing. When women have worked, it has been in sectors that are not growing so fast or infact, declining, like in agriculture. There are both pros and cons of looking at these sectors. The construction sector was the fastest growing sector in terms of job creation. It created many jobs for men, some for women, but mostly for men. But there too, of course, decent work deficits are a challenge, so one can unpack that. But, really the fundamental issue of the occupational segregation tells us that more efforts are needed. A lot is going on in India and one should recognise that. But more efforts are going to be needed in terms of women getting educated even before we start focusing on skill. What we find in India and countries like Sri Lanka is that education only pays when you have at least 10-12 years of schooling. Unfortunately, in the labour market today, even if you are in rural India or in some other country, 8 years of school doesn’t make any difference. It just doesn’t give you a leg up in the labour market.

So, more focus on tertiary education?

Exactly. The first step would be to get the young girls to upper secondary schools. There has to be an impressive improvement in primary education in India. The upper secondary is key. You need at least 10-12 years of schooling and ideally the tertiary qualifications have to kick in. Now, you have to distinguish between university type of education and formal education, versus vocational education and training. Of course, it’s a big priority now in India. A very important priority is to access vocational education and training as well. These are critical steps to have in place before women will be in a position to take advantage of the new jobs that are being created. Frankly, as technology is developing, the world is getting more integrated. India is a highly integrated economy now and the jobs that are going to be created require skill. And you are going to need a good level of education and skill that are going to give you that edge in the labour market. It’s fundamental to achieve that for young girls and young women who will then able to get into the labour market. There are other factors that one needs to look in terms of the constraints for women to participate. Social norms remain an issue so it’s very important to continue working on awareness around social norms and to improve access to jobs given that social norms are still there and one cannot just wish them away, or should. Social norms are the fabric of society that should develop in the right process and the right way. But, in India, it will be more important to provide jobs where women can access them. Since you mentioned migration – not all women can or should migrate. Migration creates its own vulnerabilities; it creates job opportunities.

Local job creation is very crucial.

Local job creation is the most important message of the book. It is very important because you are going to need more jobs where women live. Most of the population is still within rural areas – 65% of the people in India are still in rural areas. Urbanisation is increasing but will continue to grow at a rather slow pace, women will need jobs in the rural areas.

Also, when we focus on job creation, we must also focus on the quality of jobs that are created. You have also given some suggestions on policy implementation that could increase the labour participation for the women in India. Do you think a push towards more formal jobs rather than contractual jobs and informal labour should be a key point here?

It is a very important dimension – quantity of jobs is one part of the story. We need jobs to be created and people focus on this aspect a lot around the world. It is very critical to look at the quality as you pointed out, in terms of the decent work dimensions. Now, there are a number of angles to that – a very important part is what I mentioned on education and skill development. The critical issue in terms of the quality of jobs is what you can earn – the wages. If you are able to get a reasonable wage, this will act as a pull factor to get you into the labour market. If wages remain very low for you, your incentive as a woman becomes lower. The responsibility to look after a family and the time burden that exists there makes it very difficult. So, the quality of employment is typically linked to your education and skill development. That’s the first step, but that’s of course, not enough. Beyond that, you need to look at the rights that women have in their workplace and their protection. Rights link to many dimensions – prevention of sexual harassment is critical and there’s a sexual harassment act the promotion and implementation which is very important. The right of women to organise and be represented, minimum wages are an important link to the wage issue. Access to social protection and social security is a critical dimension. Because what we know from other countries, is that if women are to join and if we want women to join – or most importantly if we want for them to have the choice to join the workforce – they need better quality jobs. That has been an important pull factor for the women to join in. So, it’s important when we look at the policy response, it’s not only about creating jobs, it’s about creating good jobs which provide access to social protection, opportunities in terms of maternity benefits and the rights around that. Ideally, you have some good cases now in India and at the top are the issues around childcare, etc. The bottom line is that the formalisation of employment will go a long way to getting women into the labour force. It’ll make it that much easier for them and it will be a stronger incentive for them to join. If an employer is able to offer a regular job with employment benefits, paid leave, maternity leave, extra social security, of course, it will act as a powerful pull factor which has very important macroeconomic implications for the country.

You have mentioned the freedom for women to organise, to negotiate with the employers for better wages, better social security benefits. Constitutionally we have been guaranteed a right to organise in India but you know as well as I do that is not really happening on the ground, because we have seen a lot of trade union movements being crushed throughout India. It is also very crucial for men as well – irrespective of gender, the worker should have a freedom to organise and to negotiate, form unions. So, in your research have you also studied the women organising themselves in unions across India?

Well, this is not the key focus of this book because frankly there are many issues that are linked to this whole topic of women in the labour force. But, I would stress that it is a critical factor for the ILO anywhere in the world to see that all workers – and women, of course, in particular – have the right to organise and have the freedom of association, and the right to bargain collectively. And I’m saying this not only because they are fundamental rights, but because there’s also a good economic argument. If you want a productive workforce, you need to engage with your workers. Contract labour has no commitment to the workforce and to the employer, and simply the employer doesn’t have any commitment to his worker, which leads to a sub-optimal outcome for both the business and society. So, I think one has to be very clear on that. There’s a very fundamental economic argument. Now, we are all aware of the challenges that exist for organisation around the world – it is a global phenomenon. It is very important that we look at how we can strengthen trade unions and other stakeholders in order to have a constructive social dialogue. It is critical that social dialogue should take place to promote good economic outcomes for employers and workers, both,  and that there’s a win-win situation that can be achieved if it is done properly. And that should be the goal of all these processes.

One last question. Can you also elaborate the policy measures that you have mentioned to increase the participation of women in the Indian workforce?

Right, so in terms of increasing the participation there is no single solution. One has to look at a comprehensive and integrated approach. Now, there are six key pillars that the book highlights. One is the issue of job creation and access to jobs. Jobs needs to be promoted through investments in specific sectors. This will need to be looked at through this lens to ensure that women are able to access them. So, this is going to be about jobs being created in poorer states in India – more in the rural areas where women will be able to access them. But clearly, just job creation wouldn’t be enough. You need to look at the education and skill development to ensure that women are able to access good jobs and decent work that has been created. Now, when we look at the supply side constraints in terms of their own burdens – a number of areas need to be looked at. The time burden is the biggest constraint for women. They are traditionally looking after the family – children, the elderly – and other domestic duties which make it very difficult for them to leave their households. So it is very important that we look at access to decent child care. We should look at technology as being the key way to reduce the burden in terms of reducing domestic duties. Access to fresh and clean water globally has been a very important step for women to be able to work because it reduces that burden by hours per day. And these things are already happening in a very big way but that has to be a part of it. The third thing linked to the issue of infrastructure is the overall access for women to transport. If you are going to be able to commute, is it done in a safe way? The service sector has done that in India. The call-centers are famous for it and they have their mini-vans and this is starting in some of the manufacturing sectors. But this has to be done at a greater scale. Housing becomes an important part as well – residential housing should be done in a way that provides women a safe living environment. Another key pillar is rights and protection – access to social security, social protection, minimum wages, prevention of sexual harassment, etc., because you know that they are not protected. It’s very difficult for women to join and they will be very reluctant to leave their household to work. And finally, it’s very important to measure and monitor these issues as well. So, across these dimensions, there is a coherent integrated process that is needed but I would stress that in a country like India, many things are happening at the national level – many important and positive steps are being taken. Increasingly, what needs to happen is at the state level. States will need very clear and focused strategies that look at promoting women in the workplace, addressing these dimensions linked to the broader schemes of the country around skill development, Make in India etc.