Long read: Inside the Recent Rise in Female Workforce Participation Rate in Rural India

Over the past year or so we have published a series of blogs on the rise of Indian women. More specifically, we have viewed the rise in the Female Labour Force Participation Rate (FLFPR) over the past few years as a positive development (see https://marcellus.in/blogs/the-rapid-rise-of-female-entrepreneurs-in-india/). Sapna Goel, Assistant Professor at Hindu College in Delhi takes a different view of the recent surge in FLFPR. She writes in The Wire: “The recent increase in female labour force participation is distress-driven and is nothing unusual compared to the previous periods when it also rose, but this time it has been more broad-based.”

So why does Ms. Goel view the recent rise in FLFPR as a manifestation of distress? If you run a business in India or invest in the Indian economy, we urge you to read Ms. Goel’s piece (complete with charts) in its entirety as more hangs on this question than the banal metrics spewed out by stockbrokers on a daily basis. If Ms. Goel is right – and by implication, we are wrong – Marcellus’ women-centric investments might not work out.

Ms. Goel writes: “…the NSS categorises workers into three broad categories based on their employment status. These categories are self-employed, regular wage/salaried employee and casual labour.

Within the self-employed category, there are two sub-categories: i) own account worker and employer and ii) unpaid helper in household enterprises. Own account workers are those who operate their enterprises on their own or with one or few partners without hiring any labour, while employers are those who work on their own account or with one or more partners and run their enterprise by hiring labour.

Between 2017/18 and 2022/23, the proportion of casual labour among all women workers decreased without any corresponding increase in the proportion of regular wage/salaried women. The share of self-employed women constituting own account workers/employers and unpaid helpers has increased by around 13% during the same period.

The increase in the proportion of self-employed women is observed across all sectors, including agriculture, manufacturing and services.

Between 2017/18 and 2019/20, the rise in the participation of women was driven by an increase in the share of helpers in household enterprises, while the share of own account workers remained largely stable.

However, from 2019/20 to 2022/23, which included the period during and after the pandemic, the increase in women’s participation rate was primarily due to an increase in the share of own account workers.

This increase in the proportion of own account women workers may partly be an outcome of the large exodus of male migrants returning to their villages during the pandemic, with women in the household joining ‘own-farm activities’ or other non-farm activities to support household income.” [Underlining is ours]

Whilst we agree with Ms. Goel that male workers did return to their villages during the pandemic, we do not understand why she’s correlating that with the rise in the proportion of self-employed women ACROSS agriculture, manufacturing and services especially since this rise is accompanied by a REDUCTION in the proportion of casual labour amongst all women. Given that India is the 140^th poorest nation in the world basis per capita income, if there was such destitution amongst women in India, we find it hard to believe that that will manifest itself as rising self-employment rather than rising casual labour.

In line with theory posited by recent Nobel laureate, Claudia Goldin, Ms. Goel goes to write: “Second, there is a U-shaped relationship between education and FLFP rate in any given year. The FLFP rate is generally higher among women with little or no education. As the level of education increases, the FLFP rate declines, before eventually rising for highly educated women.

The U-shape hypothesis states that among the poorest with no or very little education, women are forced to work to survive and can combine farm work with domestic duties, while among the highly educated, high wages induce women to work and stigmas associated with female employment in white-collar jobs are low.

For instance, between 2017/18 and 2022/23, the FLFP rate for illiterate women increased from 29.1% to 48.1%, while it increased from 49.2% to 52.2% for women with post-graduate or higher education.

During the same period, the FLFP rate increased from 10.3% to 30.7% for women with secondary education.

The increase in the FLFP rate in rural India is observed among all education categories. However, the extent of the increase in rural India is higher among women with lower education levels than with relatively high education levels…” [Underlining is ours]

Ms. Goel correctly points out that barring graduates and post-graduates, women at ALL OTHER EDUCATIONAL levels have seen a sharp rise in their participation rate in recent years. Ms. Goel views this as a sign of hardship. We see this as a manifestation of the fact that jobs for Indian graduates – male & female – have been scarce in the last couple of years. At a time when the leading IT Services companies are shedding tens of thousands of jobs, at a time when India’s most prestigious universities are finding it difficult to place their students, it is strange that Ms. Goel interprets the smaller rise in FLFPR for female graduates & postgraduates as a sign of growing hardship for women.

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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.