Were India to rebalance its workforce, the world’s biggest democracy would be 27% richer

LAKSHMI, the goddess of wealth and fortune, is the closest thing Hinduism has to an economic deity. How poorly her earthly sisters in present-day India are faring. There, women are less likely to work than they are in any country in the G20, except for Saudi Arabia. They contribute one-sixth of economic output, among the lowest shares in the world and half the global average. The unrealized contribution of women is one reason India remains so poor.

Yet far from joining the labor force, women have been falling away at an alarming pace. The female employment rate in India, counting both the formal and informal economy, has tumbled from an already-low 35% in 2005 to just 26% now. In that time the economy has more than doubled in size and the number of working-age women has grown by a quarter, to 470m. Yet nearly 10m fewer women are in jobs. A rise in female employment rates to the male level would provide India with an extra 235m workers, more than the EU has of either gender, and more than enough to fill all the factories in the rest of Asia.

Imagine the repercussions. Were India to rebalance its workforce in this way, the IMF estimates, the world’s biggest democracy would be 27% richer. Its people would be well on their way to middle-income status. Beyond the obvious economic benefits are the incalculable human ones. Women who work are likelier to invest more in their children’s upbringing, and to have more say over how they lead their lives. Given that more Indian women have been beaten up by their husbands than are in work, there is room for improvement.

The first step in reversing the dramatic drop in female employment is understanding it (see Briefing). Some of the fall is a sign of progress. Girls are staying in school, and thus out of the labor force, for longer. But mostly it is the result of two unwelcome trends. As households become richer, they prefer women to stop working outside the home. It is not unusual in developing economies for a family’s social standing to be enhanced by having its women remain at home. But India stands out, as its female labor-force participation rate is well below those of countries at comparable income levels.

Social mores are startlingly conservative. A girl’s first task is to persuade her own family that she should have a job. The in-laws she will typically move in with after marriage are even more likely to yank her out of the workforce and into social isolation. In a survey in 2012, 84% of Indians agreed that men have more right to work than women when jobs are scarce. Men have taken 90% of the 36m additional jobs in industry India has created since 2005. And those who say that women themselves prefer not to work must contend with plenty of counter-evidence. Census data suggest that a third of stay-at-home women would work if jobs were available; government make-work schemes attract more women than men.

That points to the other problem: the lack of employment opportunities. The workforce has shifted from jobs more often done by women—especially farming, where most Indian women work but are being displaced by mechanization. At the same time, inflexible and unreformed labor markets have hampered the rise of manufacturing and low-level services, the gateway for women in other poor countries. In neighboring Bangladesh, whose customs are not so different from India’s, a boom in garment manufacturing has increased the number of working women by 50% since 2005. In Vietnam three-quarters of women work. But the mega-factories that boosted female employment there are largely absent in India.

What can be done? Many of the standard answers fall short. Promoting education, a time-tested development strategy, may not succeed. Figures show that the more schooling an Indian woman receives, the less likely she is to work, at least if she has anything less than a university degree. Likewise urbanization, another familiar way to alleviate poverty: city-dwelling women are half as likely as rural ones to have a job.
Promoting female-friendly workplace policies, such as generous maternity leave, goes only so far in a country where most workers operate outside the formal economy. The most fruitful policy would be to reform India’s labour market so that women can be sucked into jobs en masse. When hiring and firing decisions have to be validated by bureaucrats, few entrepreneurs want to set up large factories.

A huge amount can be achieved in the intimacy of people’s homes without any help from the deskwallahs in Delhi. Indian women do 90% of the housework, the most of any large country. Gentlemen, spending just two hours a week doing the dishes or putting the kids to bed, would translate into a ten percentage point increase in female labor participation, according to a World Bank study. If that raised GDP by $550bn, as the McKinsey Global Institute, a think-tank, has suggested, it would surely be the easiest half-trillion-dollar boost available to the global economy—and to one of its poorest countries, too.
An optimist might argue that more women are not working because India is still paying for the sins of the past, when so many of them were illiterate and high fertility rates bound them to the home. Most measures of female welfare are improving. India has many more girls in classrooms and fewer child brides than it once did.

But simply waiting for that progress to trickle down into the labor market ignores India’s dismal recent record. The socially conservative bent of the Hindu-nationalist government of Narendra Modi makes it an unlikely champion of women’s rights. Other countries are trying harder to get women into gainful employment. Unless something changes, it will not be long before Saudi women are more common in the workplace than Indian ones.
In fact, many fear that all that extra schooling was a parental ploy to improve a daughter’s prospects not in the labor market but in the arranged-marriage market, part of the all-important quest to snag a suitable boy. A further push is needed to get Indian women what they really need: a suitable job.

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