Why should women who are enthusiastic to join workforce exit labour mkts?

Young women are returning to the labour force. There is action in the 20-24 year age bracket of women.

Labour force participation rate among young women in the age bracket 20-24 years was 14.3 per cent in the September-December 2019 period. This is the highest participation rate in this age bracket since demonetisation.

What is so special about this finding is that this is the only age-bracket which has seen a clear increase in the labour participation rate since demonetisation. Every other age-bracket has seen a decline. This implies that women who left the labour force post demonetisation have not returned. They seem to have gone for good. But, females entering into their early twenties are coming into the labour force in greater numbers than earlier. These could be new young women who are likely to have completed their graduation and now are entering the labour markets in search for jobs.

This is a welcome change in the newer cohorts of women entering the working-age.

The female labour force participation rate among women of 20-24 years was 17.3 per cent in January-April 2016. This scaled up to 18.4 per cent during May-August 2016. This was the situation before demonetisation. But, the participation rate fell sharply after demonetisation to 13.5 per cent in the September-December 2016 period. Then, the participation rate in this age-bracket fell as low as just 9.5 per cent by May-August 2017. It remained under 11 per cent through most of 2017 and 2018. 2019 has seen a significant improvement.

Female labour force participation rate was 13.4 per cent during January-April 2019. This rose to 13.7 per cent in May-August 2019. With this, it breached the 13.5 per cent level seen around demonetisation (September-December 2016). The latest Wave of CMIE's Consumer Pyramids Household Survey (CPHS) of September-December 2019 shows a further improvement to 14.3 per cent.

This improvement is across rural and urban regions.

But, the picture of women in the labour force is dramatically different in rural and urban India. Young women join the labour force far more enthusiastically in urban India than similar women in rural India. In the September-December 2019 Wave of the CPHS, the female labour participation rate among 20-24 year age groups in rural India was 12.2 per cent. In urban India it was much higher at 18.7 per cent. Let's keep aside the fact that is rather too low in both rural and urban regions and focus,
for now, on the difference in the two.

In rural India, the female LFPR in the 20-24 age-bracket had fallen from 16.4 per cent before demonetisation to 9.3 per cent within a year. It has since improved to 12.2 per cent. This is an improvement of nearly 300 basis points. The improvement among urban women in the same age bracket is more than twice as much, of over 670 basis points in the LPR -- from a low of 11.9 per cent in May-August 2017 to 18.7 per cent in September-December 2019.

But, this enthusiasm of young urban women in their twenties does not last long. Female labour force participation rate among women in their early twenties, at 18.7 per cent is 6.5 percentage points higher than in the same age women in rural India at 12.2 per cent. This lead of urban women narrows a bit in the late twenties but is still significant at 4.7 percentage points.

Then, in the thirties, urban women labour force participation falls off a cliff -- from 16-18 per cent down to 11-12 per cent. In the case of rural women it climbs up to over 16 per cent.

The phenomenon of urban women joining the labour force more enthusiastically than rural women and then exiting the labour force in their thirties while rural women continue to remain and even increase participation in the labour force in their thirties and forties is not new. What seems to be new is the apparent increased recoil of young women from the labour force. The labour force participation of women in their twenties is increasing. But, their participation in the thirties is falling more sharply than before. And, the fall is sustained through senior years.

Why should women who are initially enthusiastic to join the workforce exit the labour markets? Something seems to be discouraging them. Some old arguments may require a re-examination. If it was higher education then what would explain their enthusiastic entry into the labour markets in their twenties? The decline is in the thirties and later years. Even rising household incomes may require a re-examination. If it is child-bearing and child-care, then apparently, new laws to give extended maternity leave, etc have not worked.

There is a need for us to understand what discourages women from continuing to work after their twenties and find ways to remove those hurdles to ensure that the new cohorts that are entering the labour markets do not exit like their seniors did. 


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