There is widespread misunderstanding in India about the underlying causes of India’s low Female Labour Force Participation Rate (aka FLFPR). Our view – which we have backed up with investment dollars – is that FLFPR is rising steadily in India but is being masked by the fact that rising numbers of women are entering university [see our blog on this subject: https://marcellus.in/blogs/
Ms Iqbal begins by laying out the contours of the puzzle which foxes most Indian commentators: “More women than men were enrolled in higher education in India in 2020-21, as per a Ministry of Statistics and Programme Implementation report. Yet, the labour force participation rate (LFPR) among women with secondary education or higher was 29.2%, less than half that of their male peers (73.1%), as per the Periodic Labour Force Survey (PLFS) report for 2022-23.
The reasons for this apparent contradiction were explained by Claudia Goldin, the Nobel Prize-winning economist from Harvard University. In a 1994 working paper (https://www.nber.org/system/
As per her results, the female LFPR will rise as the country transitions from middle- to high-income, but only if well-paying formal sector jobs are available, explained labour economist Farzana Afridi, a professor of economics at the Indian Statistical Institute in Delhi and research fellow at the IZA Institute of Labour Economics…
Goldin’s most famous result–the U-shaped LFPR curve for women–holds for India: We are in the middle portion of the curve, which explains the declining LFPR, according to Afridi. “Even though gender gaps in education have closed dramatically in the last few decades in India, fewer women are participating in the labour market because the social cost (stigma) associated with working in the mostly low status jobs available is still high in India,” she explained.” [If you want to see Goldin’s U-shaped curve drawn out for India, please click on the link to the IndiaSpend article.]
Ms Iqbal then brings into her piece Ashwini Deshpande of Ashoka University, India’s leading expert on the gender wage gap: “Another area of Goldin’s research that applies to India is the gender wage gap, or the difference between the wages of men and women. Goldin showed that the wage gap can be attributed to the inability of women to move to higher paying establishments and positions within establishments, unlike their male colleagues.
Is there a wage gap between men and women in India? There is, according to Deshpande. “…[G]ender wage gaps are higher among low-wage earners and lower for high-wage earners,” she wrote in 2017. Afridi agrees, and concurs with the reason provided by Goldin. “Women earn about 50% of what men earn (on average). This can be attributed, in large part, to the occupational segregation of women–women tend to take up jobs or work in sectors that are lower paying than men,” she said.”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
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