Writing

An Econometric Analysis of the Female Labour Force Participation Rate In India

As part of: Economics Dissertation, University of Edinburgh, 2015

Grade: Distinction

22 girls standing at the back, India, 2014.

Context

Extra thoughts

Inspired by my trip Study in India with UKIERI, for my undergraduate dissertation I carried out an econometric analysis on the female labour force participation rates in India between 2011-2012.

Why?

In 2011 India had a population of around 1.2 billion people, with 49% of the population under the age of 25. A young workforce could make it one of the world’s largest economies. Women compromised 48.5% of India’s population but their participation to the labour force was only ~25%. In fact, India was ranked 140 out of 156 countries for Female Labour Force Participation rates. This is in sharp contrast to the majority of comparable emerging economies. This left me wondering if this could hinder its future?

Background theory

The labour force participation rate is a measure of the proportion of a country’s working-age population that engages actively in the labour market, either by working or looking for work.

Goldin's U-Shaped Curve (1994).

One of the most important theories on female participation rates is that of Goldin’s U-shaped curve. This U-shape is caused by structural changes in the economy, income effects and social stigma towards female employment in certain industries. 

It shows how in developing countries experiencing low levels of economic growth the agricultural industry tends to dominate economic activity. This induces high levels of female participation with women working, often unpaid, in agricultural jobs that are usually part of a family business. As the economy grows a shift from agricultural- based work towards manufacturing work is common. The expansion of manufacturing generates rising incomes. This shift can also bring about new innovations and technology, with improvements in productivity, but which can also threaten the number of jobs available, arguably more so for women than men.

"Women are excluded from early industrial jobs due to physical limitations, gender discrimination, and the domestic demands of large families.” Pampel and Tanaka (1986). Furthermore, social stigma against women working in blue-collar jobs further hinders female participation. Goldin (1994) argues that in some societies husbands would be stigmatised for allowing their wives to enter the labour force.

The ability and rate at which a country hits the turning point depends on various economic and social factors but is crucial to inclusive growth and achieving the UN's Sustainable Development Goals.

Analysis

The analysis below was done using the National Sample Survey (NSS 68th round) carried out from July 2011 to June 2012 which collected data on 101,724 households and 456,999 individuals over the whole of India. NSS are the main source of labour market data and are used for planning and policymaking by the Indian Government.

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This was my first time working with a data set this large. It was a daunting task, it crashed my computer many times and required a lot of patience to work with.

What does this show us?

The age at which men and women enter and start to leave the Labour Force is the same for both sexes. However by the age of 25, the percentage of males in the Labour Force jumps to ~90%, whereas for females it's only at ~25%. At their peaks of 40 years old, ~95% of men are in the Labour Force compared to ~30% of females.

While fewer women are in the Labour Force between the age of 15-25, their unemployment rate is lower. For both sexes, unemployment is negligible past the age of 35.

In the labour force means that an individual is actively seeking employment and comprises of both employed and unemployed.

Perception of a female in India

Having grown up as a British Indian, I was aware of existing stigmas on females, however during a trip to India in 2014, I observed common perceptions and gender codes for women, and noticed more than before how these were reflected in the role of women in the workplace and households. Some of these included; upholding honour in the family, lack of freedom to speak up, assumed role as a housewife, shame of sexual relationships, pressure to bear a child and societal standards of beauty. 

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Some moments that stood out to me.

Influencing variables

Variables that influence whether a female in India joins the labour force.

Positively affected by:

- Number of employed household members

- Caste

- Age

- Achieving above secondary level education

- Being head of the household

Negatively affected by:

- Number of children below the age of 15

- Marital status

- Islamic religion

- Age²

- Level of education from secondary and below 

- Amount of land owned

Analysis of the industries females entered, the wage paid and their level of education

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What does this show us?

- Of the females who enter the labour force, the majority have lower education levels than men.

- The most highly educated females work in the Information and Communications industry and on average earn% more than males. If India were to continue to expand in this industry, it reflects positively on the outlook for female’s wages.

- The largest education gap exists for mining and quarrying at 4.57 extra years, where women only have 3 years worth of education (the equivalent to just above primary school), whereas men have 7.57 (just below middle school). 

Although this can’t determine causation, it further highlights a correlation between higher wages and higher levels of education. This analysis can be useful to determine whether females face similar economics incentives to achieve a high level of education

What isn't show is the number of women employed is significantly lower than men, although this trend is similar in other countries and may be the result of women’s preferences towards industry.  

Key findings

Low levels of female participation rates is correlated with:

- an education gap between males and females
- a gender pay gap
- social acceptance of traditional gender roles

If women were to join the labour force education, social norms (stigma) and location (urban/rural) impact the industry women tend to join. 

Based on the nature of India's growth, the industry that females join impacts the type and rate of development which India will encounter.

Possible design solutions for further research

- Readdressing what is considered as labour. There are currently ‘less visible’ forms of domestic labour which aren’t included as work in the labour force (housework and caregiving) as these types of aren't valued with a monetary wage.

- In order to expand women’s labour market opportunities, women’s education levels need to be brought up to par with men’s through government expenditure on women’s education.

- Increasing the incentive for parents to send their daughters to school (e.g. improving quality of schools or monetary benefits - if too effective would require an increase in quantity of schools).
- Improved safety in a young person’s (particularly a girl’s) journey to school. Previous schemes include subsided bicycles.

- Social awareness, promotion and acceptance of equal gender opportunities across industries. This should be done with consideration of existing culture and customs.

- Focus on platform cooperatives with the growth of the digital workforce, which offers opportunities for females to work at a fair wage and breakdown uniform production for the worker.