Is allowing more women to enter the formal sector as employees a good thing or a bad thing? The answer, as with many other things, depends on how you look at it.
Thus, while it is a good idea to educate women and get them into formal sector employment, what does it do to wages and salaries if the supply of labour expands when demand is not growing fast enough or, if as is happening now, technology is displacing labour?
This is the overall context in which Finance Minister Arun Jaitley’s remark on the subject should be seen. He spoke on 3 November about how future gross domestic product (GDP) growth would be driven by areas that have been untapped till now. One of these areas, he said, was the contribution of women, which is set to increase with growing literacy.
Female labour force participation in India has been abysmal, with the latest data showing that it is the third lowest in South Asia, at 27 per cent. This is less than a third of the male labour force participation. Women also receive lower wages, and are over-represented in informal sectors and in unpaid domestic work.
In other words, with not enough jobs going around, and a historical tendency to force mothers to stay at home, India is in a situation where about half of the population is simply not being exploited to its full potential.
There have been increasingly strident calls to rectify this, demanding greater education aimed at women, day-care facilities in offices for working mothers, and an increase in safety and mobility for women travelling to work.
A recent IMF working paper titled Macroeconomic Impacts of Gender Inequality and Informality in India, by Purva Khera, however, shows that while literacy and education among females do help short run and long term GDP growth, it makes no difference to providing day care facilities and enabling mobility.
Khera notes that labour market rigidities in India actually mean that these facilities actually increase informal employment of women.
“On the one hand, gender-targeted policies increase female labour force participation and GDP in both the short run and long run,” the paper says. “On the other hand, however, due to labour market rigidities, gender-specific policies do not generate sufficient formal job creation. This results in a larger share of these increased female participants either being employed informally at low wages, or staying unemployed, which increases aggregate unemployment and informality and further widens gender gaps in wages and informal employment.”
The paper finds that the only exception to this is a policy that promotes female education which in turn increases women’s work efficiency, leading to a higher employment in the formal sector.
“In addition, this increase in female efficiency leads to an expansion of the formal sector engendering an increase in both female and male formal employment,” the paper notes.
Simply put, it is not enough to only make it easier for women to get to work, or make it easier for working mothers to cope with the duties of motherhood and a job. Without an increase in their education levels, this greater access will only result in a larger number of women working informally, while the higher-paying formal jobs will increasingly be reserved for males.
“Finally, we show that simultaneously implementing gender-based policies that lower constraints on female participation combined with policies that boost formal job creation, as opposed to a piecemeal approach, generates substantial gains in gender equality in participation, formal employment, and wages along with larger gains in GDP and formality,” the paper says. The author does not quite explain how real wages would rise when supply increases.
This is where the government can take some advice. It is all well and good for Jaitley to speak of increasing female literacy in a passive sense, as if it is happening on its own, but it is an issue that requires targeted policy interventions — more than mere taglines of ‘beti bachao, beti padhao’.
At the same time, the overall number of formal jobs needs to be increased, if female participation in the formal workforce is to increase. As things stand now, there aren’t enough jobs for even the men.
The better way of looking at is perhaps not to link it to the labour market but to treat women’s education as desirable and good in itself. It surely needs no justification.
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