The last few decades have witnessed a progressive change in the labour force participation rate, with an impressive surge led by women. This shift, however, comes with its own set of complexities and challenges.
Labour Force Participation Rate On The Rise
- In recent years, we’ve seen a steady upward trend in the labour force participation rate. This is the portion of the population that is either currently working or available to work.
- According to periodic labour force surveys, the overall participation rate rose from 36.9% in 2017-18 to 42.4% in 2022-23.
Increase Driven By Women
- A significant factor in this increase is the entry of a large number of women into the labour force, especially in rural areas.
- In rural India, the female participation rate jumped from 18.2% in 2017-18 to 30.5% in 2022-23, translating to approximately 56 million women entering the rural labour force over five years.
State-Wise Data
- This rise in female participation was seen across both high-income states like Karnataka and Gujarat and low-income states such as Odisha and Rajasthan.
- The increase occurred regardless of education level.
Increase Across All Education Levels
- Among those with no formal education, the worker population ratio for those aged 15 and above rose from 29.1% in 2017-18 to 48.1% in 2022-23.
- Among graduates, this ratio saw almost a 10 percentage point increase, moving from 18.6% to 28.3% during the same period.
Complex Reality Of Increasing Female Labour Force Participation
- The participation of women in the labour force has always been low in this country.
- The recent rise in female participation could be interpreted as a positive sign, but the reality is complex.
Financial Stress And Female Labour Force
- There’s a pattern of female labour force participation increasing during times of financial stress.
- This was observed from 1999-00 to 2004-05, especially in rural areas.
- Women often join the workforce to supplement household income during these periods.
Concerning Trends In Employment
- Most of the new female members of the workforce were not engaged in regular salaried work or casual wage labour.
- Instead, they were self-employed, either owning their own businesses or assisting in family-run enterprises.
Self-Employment And Income
- The self-employment rate among women in rural areas increased from 58% in 2017-18 to 71% in 2022-23.
- A significant portion of these women worked as helpers in household enterprises, often without any regular wages.
- For the rest who were self-employed, the average monthly earnings rose from Rs 3,921 in April-June 2018 to Rs 5,056 in April-June 2023.
- However, considering the inflation rate during this period, the increase in income barely kept up, implying that real income remained flat or even decreased.
Future Scenario
Growth Rate In Agriculture And Overall GDP
- The agricultural sector showed healthy growth during this period.
- Growth was 6.2% in 2019-20.
- It was 4.1% in 2020-21.
- In 2022-23, growth remained steady at 4%.
- Meanwhile, overall GDP growth slowed down.
- It fell from 6.5% in 2018-19 to 3.9% in 2019-20.
- It then contracted by 5.8% in 2020-21.
Non-Agricultural Sector Slowdown
- The non-agricultural sector decelerated sharply due to a financial crisis.
- The crisis was triggered by the fall of NBFCs.
- This mainly affected MSMEs and resulted in employment and income distress.
- The distress worsened during the pandemic years.
- Other impacts of the pandemic included:
- Pressure on per capita farm incomes due to reverse migration.
- Depression of remittance flows to rural areas.
- Subdued wage growth.
Non-Farm Income and Female Labor Force Participation
- Non-farm income forms a large part of rural household incomes.
- Distress in this area likely increased female labor force participation rates.
Signs Of Changing Situation
- There are now signs of improvement in the financial conditions.
- The flow of funds through the NBFC channel has picked up.
- The quarterly results of several NBFCs show healthy credit growth in personal retail and business finance segments in rural areas.
Source: This editorial analysis is based on the article titled “Questions over employment”, published in The Indian Express, November 06, 2023.