Significance of female labor force participation to reap the benefits of demographic dividend in India

Abstract

India is going through the phase of demographic dividend in which the proportion of working age population is increasing and it is more than the nonworking age population. As a result,there are more number of people to produce than to consume. This gives an opportunity by enabling to produce surplus and overcome poverty. This is a rare opportunity in the sense that this phase of demographic dividend is not an everlasting phenomenon. After few decades the population structure will change and it will enter into a stage where the proportion of nonworking people will be more than the working age people. The macroeconomic consequences of that stage of demographic transition would be such that there will be lesser number of people contributing towards production and more number of people consuming. When the proportion of older people increases, on the aggregate the dis-savings will be more than income. It will be more burdensome on the economy due to the large number of old age people who will be dependent upon the social security systems like pension and old age health care schemes etc. India is passing through this stage of demographic dividend when almost all the developed economies and also the other emerging economies have moved past this demographic transition. This gives India an advantage over the developed economies and also the emerging economies.This growing share of working age population will lead to increase in the GDP per capita,provided that the aggregate labor productivity and labor force participation rate at least do not fall below the present level*. It means that the demographic dividend has the inherent potential to give significant rise to the GDP per capita. At the same time it also suggests that the benefits will not come automatically. There is a very big challenge to maintain the aggregate labor productivity and labor force participation rate. If these two factors are not maintained, India will be pushed to lower GDP per capita despite having a unique opportunity of demographic dividend. Aggregate labor productivity is a function of human capital, which largely depends upon the education, skills and the labor conditions. In India there is a potential scope for improvement in the areas of literacy, education, skills and training. We are way behind the developed nations and our figures in these parameters are worse than many developing nations. There is a huge scope for improvement in labor force participation rate as well. Labor force participation rate is defined as the ratio of the people of working age who are part of the labor force (i.e. either employed or actively looking for work) to the total working age population. In general, a higher labor force participation rate will lead to an increase in the potential growth rate of GDP per capita. A significant aspect of labor force participation rate in the context of Indian economy is the female labor force participation (FLFP).FLFPR, defined as the ratio of the female population either directly involved in the economic activity or looking for the job to the total female population in the working age. It basically represents the proportion of the working age females involved in the economic activity. The FLFPR in India is already among the lowest in the world and it is further on the decline over a period of time. This declining trend of FLFPR is largely a result of gender inequality. The female participation rates in India fell from 34.1% in 1999-2000 to 27.2% in 2011-2012 (NSSO Data). This lower level of FLFPR is wastage of the potential human resource, which can make significant contribution to the growth of the economy. All across the globe, increasing FLFPR has contributed significantly in the economic growth during the demographic dividend phase. India is committed to increase the FLFPR. There have been a plenty of provisions and initiatives to overcome the gender inequality. The principle of gender inequality is enshrined in the Constitution of India in the preamble, fundamental rights, fundamental duties and directive principles of state policy. In addition, various legislations and reforms have been enacted subsequently for bringing in the gender equality.Despite all the commitment and policy environment, there is a huge gap between the goals enunciated and situations in the ground. This is being reflected in the continuously declining FLFPR despite the fact there is a burgeoning female labor force equipped with matching education, skills and capabilities with their male counterparts. Given the significance of FLFPR in determining the size of potential demographic dividend in India this paper studies factors affecting the FLFPR in India and recommends policies to encourage an increase in the same. If we examine the FLFPR in India, we find that there is a U shaped relationship between the household income and the FLFPR. At the lower levels of household income, the females are almost equally participating in the economic activities. At higher household income levels, the FLFPR is again high. There is almost no difference between male and female employment in terms of the career prospects and the wages also to a great extent. However, there is a huge decline in the FLFPR when the household income levels rise from low level to medium level. At these income levels there is no distress call for the females to support the household income. The withdrawal and absence of females from labor force participation at medium household income levels is further aggravated due to the increasing wages and the wage gender gap. The increasing safety and security fears outside their homes together with the wage gender gap is leading to severe social and economic marginalization of women and causing their withdrawal from their participation in the economic activities.Rwanda is the one country from which India can draw lessons to improve the FLFPR. Around twenty years back the situation of women in the Rwandan society was much worse than what we are facing today. However, today Rwanda is ranked first in the world for women s representation in the elected lower house of the Parliament. In 2012, the FLFPR in Rwanda was 87%, which is way higher than 64 % in China, 57 % in the U.S. and 48 % in Japan. Through suitable policy initiatives and their implementation there has been a total turn around in the situation of women in Rwanda. Laws and policies have been critical steps in the process of rapid transformation of Rwanda. A mandatory 30 % of the seats are reserved for women in both the houses of the Parliament. Out of 14, 7 judges of the Supreme Court are women. There is a quota of 30 % posts for women in the offices. The women empowerment centric laws and policies have been proved critical in the rapid transformation of Rwanda.However, in the Loksabha the representation of women is around 10 percent only. It is recommended to increase the women s representation in Loksabha through reservation of minimum number of seats for them. Once the reservation is implemented the representation is likely to go even beyond minimum prescribed limit of say 33 %. Enhanced representation of women at political helm of affairs will bring large-scale gender responsiveness in the legislations and policies. It will lead to overall women empowerment, as there will be more focus on gender equity in all areas. This will certainly help overcome the social and economic marginalization of women, what we have been witnessing until now. Once we are able to turn around the declining trend of FLFPR, there will be significant contribution of the women in the economy. We will be able to achieve the growth close to potential and benefits of demographic dividend shall be much better reaped towards the prosperity of the country through the increase in the GDP per capita