Women’s Participation in the Indian Labor Market: Explaining the Decline

August 13, 2015

by Sirisha C. Naidu

[Source : Triple Crisis]

Between 2005 and 2012, nearly 25 million women—roughly the total population of Australia—withdrew from the Indian wage-labor market. Imagine the frenzied reaction of news media, researchers, and policymakers if the entire population of Australia pulled out of the labor market in less than a decade! This decline in Indian women’s labor force participation rate—which counts women who are employed in regular or casual wage work, self-employed or working in family-owned businesses, plus those who are seeking work, as a percentage of all working-age women—is part of a longer-term trend. The labor force participation rate for rural women declined from 42.5% in 1988 to 18% in 2012, and for urban women from 24.5% to 13.4% over the same span.

Development scholars and policymakers often assume that economic growth is a panacea that will unshackle women from the confines of the domestic sphere, increase their social status, and allow them to participate in economic and political decision-making as equals. It is puzzling, then, that the decline in the women’s participation in the labor market has continued into the current period during which India has experienced robust economic growth—the World Bank expects India to overtake China as the world’s fastest-growing economy by 2017.

The most common understanding of women’s labor force participation rate is that it is a “U-shaped” curve—high for countries with very low or very high levels of development, and low for countries at middling levels of development. At low levels of economic development, countries are more likely to be labor-intensive agrarian economies using low levels of technology and high inputs of female labor. Poverty compels women to contribute to household income. These factors lead to a high participation rate. As countries begin to develop and achieve moderate levels of development, they make the transition from agricultural to industrial production. Agriculture begins to employ more “advanced” technology, which reduces the demand for labor, particularly women’s labor. Meanwhile, the increase in non-agricultural jobs increases household incomes and reduces the need for women to participate in the labor market. (Economists call this the “income effect.”) The overall impact of the demand and supply factors is a lower proportion of women in the labor force. Finally, as these countries continue to develop, there is increased demand for highly skilled labor which, as women secure higher levels of education, they are able to fulfill. The net result is an increase in women’s participation in the labor force once again.

Applying this hypothesis to India, some researchers argue that the declining proportion of women in the Indian labor force is no cause for alarm. Rather, it is just a reflection of the downward portion of the U-shaped relationship. Women, according to this argument, can afford the luxury of not working for pay due to higher household income. Indeed, India has some of the trappings of a middle-development country. Per capita income has increased from about $1,100 in 1990 to over $5,000 in 2012. Meanwhile, the contribution of the agricultural sector to GDP has declined from 29% to 18%, as the economy transitions toward higher-value sectors. To test the plausibility of the assertion that “there is no cause for alarm,” let’s explore some features associated with the demand and supply of women’s labor in India.

We start with the demand-side. Even though agriculture’s contribution to GDP has declined, it still accounted for 47% of total employment in India by 2012. The rural female labor force, which almost four times the size of the urban female labor force, derived 75% of its total employment from agriculture. Therefore, the sectors that create jobs for women are suffering from low growth in a period of overall high economic growth. Between 2005 and 2010, women workers suffered a net loss of 21.5 million agricultural and 3.1 million manufacturing jobs; meanwhile, more than 80% of the 22.3 million non-agricultural jobs created in this period went to male workers. The decline in agricultural employment, while perhaps desirable in the process of economic development, has not been sufficiently compensated by an increase in jobs in other sectors. The biggest losers of this phase of “jobless economic growth” in India have been women workers.

A second undesirable trend in the process of Indian economic development is that there is a far greater demand for contingent or informal workers than regular workers. Informal employment is contractual or insecure in nature and, according to a recent report from the Indian government, is characterized by lower wages, little or no benefits, lower job security, and higher instances of sexual harassment, compared to regular employment. Thus, along with jobless growth, women workers have to contend with poor quality, insecure jobs with a higher risk of harassment. These, along with some other factors, suggest that conditions on the demand side of the labor market are very undesirable for women workers.

Now let’s look at the supply side. As stated earlier, according the “U-shaped” explanation, women reduce their labor market participation because of the income effect. While Indian per capita income has indeed increased, it has been accompanied by lower overall calorie consumption and poorer nutrition. It is thus possible, as research by economists Amit Basole and Deepankar Basu suggests, that despite higher incomes, many Indian households are suffering from increased expenditures on other essentials such as education and health, thus leading to a food-budget squeeze. Further, there is evidence of increased income inequality, which indicates that the benefits of economic development have not been widely shared. The latest data released by the Indian government’s Socio Economic and Caste Census reveals that 75% of Indian households live on less than 5,000 rupees ($78.74) per month. Thus, it seems overly optimistic to claim that women, especially in the poorest households, are withdrawing from the labor market due to higher household incomes.

Women’s reduced participation in the labor force coincides with an increase in working-age women’s participation in “domestic and other allied activities.” These consist of production for household consumption—such as processing one’s own food or caring for animals that produce milk and meat for the household. It also includes cooking, cleaning, and caring for one’s own family. These activities increase the consumption of total goods and services by the household, but do not show up in official GDP or labor-force statistics because they do not pass through the market. Under the current system, if the very same work performed for the family is offered in the market, it increases GDP without actually increasing the value of goods and services in the economy. At the household level, if a family member earns just enough to purchase goods and services that she was previously producing for household consumption, she would add to household income but not household consumption. As feminist economists have argued, the exclusion of domestic and other allied work from the calculation of labor force participation rate underestimates the economically active population.

Indian women’s increased participation in household production—at a time of high poverty and inequality, and low demand for women’s labor—fails to square with the argument that women’s labor force has declined due to the income effect. Rather, it suggests that women and their households are scrambling to ensure a minimum level of consumption for survival. Withdrawal from the labor market does not allow women to engage in leisure activities; it has instead pushed them back into the undervalued and invisible domestic sphere. This condition is exacerbated by the Indian government’s dismal role in providing essentials such as education, healthcare, and well-paying decent jobs.

Thus, it is imperative that the Indian government take the following steps that dovetail with higher economic development.

  • Include domestic and other allied activities in the calculation of women’s labor force participation rate so that adequate policies can be formulated.
  • Direct economic growth toward employment-generating sectors so that women workers can secure jobs.
  • Regulate the labor market to ensure a living wage and better working conditions
  • Provide basic services essential for survival and a healthy workforce, and free women from the drudgery of housework.
  • Pass and enforce laws against gender discrimination in the workplace and enforce existing laws against sexual harassment.


Such intervention is necessary for two reasons. First, countries in North America and Western Europe that experienced an upturn in women’s labor force participation, after an initial decline, often put in place deliberate policy measures—such as implementing anti-discrimination laws and investing in public education. Second, these countries faced different global economic conditions at the same stage of development as India presently. In today’s economic environment, in which public sector jobs have declined, workers increasingly depend on employment in the private sector, which can relocate to almost any part of the world. This threatens workers’ ability to negotiate higher wages, better working conditions, and a higher standard of living. It also reduces the promise of higher investment and jobs in the domestic economy by high-performing businesses. All of this negatively affects women’s participation in the labor market. Rather than accepting the decline in women’s participation rate as a necessary but temporary fallout of the development process, it is essential that the Indian government take corrective measures, so the Indian economy can fully employ its vast working age population, both male and female.


1) Abraham, V. (2013) ‘Missing labour or consistent “de-feminisation”?’ Economic and Political Weekly 48(31): 99-108.

2) Basu, D., & Basole, A. (2013) ‘The calorie consumption puzzle in India: an empirical investigation’,
PERI Working Paper Series No. 285. Amherst: University of Massachusetts Amherst.

3) Mazumdar, I. & I. Agnihotri (2011) ‘Gender dimensions: employment trends in India, 1993-94 to 2009-10’. Occasional Paper No. 56. New Delhi: Centre for Women’s Development Studies.

4) MRD (2015) Socioeconomic and Caste Census 2011. Ministry of Rural Development. New Delhi: Government of India.

5) NCEUS (2009) The Challenge of Employment in India: An Informal Economy Perspective Volume I. New Delhi: National Commission for Enterprises in the Unorganised Sector.

6) NSSO (2014a) Employment and Unemployment Situation in India. 68th Round July 2011-June 2012. Ministry of Statistics and Programme Implementation. New Delhi: Government of India.

7) NSSO (2014b) Participation of Women in Specified Activities along with Domestic Duties. 68th Round July 2011-June 2012. Ministry of Statistics and Programme Implementation. New Delhi: Government of India.

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Thomas, J.J. (2014) ‘The Demographic challenge and employment growth in India’ Economic and Political Weekly 49(6): 15-7.

The World Bank (2014) World Development Indicators. Retrieved from http://data.worldbank.org