Letting the demographic dividend slip

India's total fertility rate declined in 2017 to 2.2 after remaining unchanged at 2.3 for four years. This means that Indian women, who on an average bore 2.3 children during their reproductive years, now have 2.2 children. This is one of the findings of the Sample Registration System, a large demographic survey conducted by the Registrar General of India.

One of the major reasons why women are unable to join the labour force in sufficient numbers is that they fulfil a very time-consuming responsibility of bearing and bringing up children. If women bear many children then they are inhibited more from joining the labour force. Conversely, if they start bearing lesser children mostly in response to falling infant and child mortality, they get freer to join the labour force.

News of the fall in total fertility rate is therefore very welcome. All other things being the same, it should help improve the female labour participation rate. Total fertility rate was constant for four consecutive years from 2013 through 2016. The change has come after a long gap.

CMIE's Consumer Pyramids Household Survey showed an increase in female labour force participation rate between January-April 2016 when it was 15.7 per cent and May-August 2016 when it rose to 16.4 per cent. Then came the shock of demonetisation and the labour force participation rate fell sharply. 'All other things' were not the same anymore.

More recently, we noticed an increase in the female labour participation rate at the younger age groups. We documented this change in this column on June 18, 2019. Early signs of a turnaround in female labour force participation were seen in 2018. In the January-April 2019 survey, an increase in the female labour force participation rate was clearly evident.

While there is a steady improvement in the female labour force participation rate between early 2017 and early 2019, the ratio has still not repaired to its early 2016 level. Female labour force participation rate among young women, between 15 and 29 years of age during January-April 2016 was 14.3 per cent. It fell sharply to 8.6 per cent by January-April 2017. Then, it fell further to 8.1 per cent in 2018. By January-April 2019 it recovered to 8.8 per cent.

While this is heartening, it is dismaying to see how little this really means. It is pointless to rejoice the small increase in labour force participation of women, if this does not mean an increase in their employment. It is more important to see the  employment rate (which is the proportion of working age women actually working, also called the worker participation rate) of women improve. This ratio is not improving. On the contrary it is deteriorating.

In January-April 2016, 7 per cent of the young women of 15-29 years of age were employed. This ratio dropped to 5.6 per cent in January-April 2017. Then it dropped to 4.6 per cent in January-April 2018. And in January-April 2019 it was down to just 4.3 per cent.

It is somewhat disheartening to see only 4-7 per cent of young women working. In comparison, 40-48 per cent of men of this age group are working. It is true that this is also the most child-bearing age group. Yet, the sharp disparity between men and women is as disconcerting. 

If female labour force participation rises, but the employment rate does not, the few additional women who join the labour force will face increasing disappointment in not finding jobs. If this continues for some time, it may discourage women from joining the labour force any further. India will then lose an opportunity to increase labour participation to drive growth based on the prosperity of households.

Partly, this poor condition of the women workforce is a reflection of the depressed labour markets.

The overall employment rate during January-April 2019 was 39.9 per cent. This compares poorly with the 41 per cent rate a year ago; 42.3 per cent rate two years ago and 42.9 per cent rate three years ago. Evidently, the employment rate has been falling steadily since 2016. The fall is seen across men and women. And, it is seen across young men and young women. Between 2016 and 2017, while the employment rate for women dropped from 7 per cent to 5.6 per cent that for men dropped from 48 per cent to 45 per cent. 

Steadily, we see a decline in the proportion of men and women, young and old populations actually employed.

While demographic transitions are providing favourable conditions by producing a larger working age population and a falling total fertility rate is delivering women in greater numbers into the labour force, the economy seems to fail them by not being able to provide them jobs in proportion.

The mere supply of labour does not guarantee growth. The supply of labour needs to be harnessed for productive purposes to ensure that India can benefit from its demographic dividend.

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