Female labor force participation has been declining in India over the last decade, and only 27 percent of working-age women in the country are employed or looking for a job. Some explanations for this decline include wage discrimination, retrenchments from capital substitution, rising household incomes that motivate women to leave agriculture, and gender barriers in urban labor markets. Estimates from IMF suggest that gender parity in workforce can boost India’s GDP by 27%.
The Government of India recently amended the Maternity Benefit Act to increase maternity leave from the current 12 weeks to 26 weeks for women working in the private sector. Will this new measure help to arrest the declining rates of women in the workforce?
Studies have documented that maternity leave, particularly when there is job protection required by law, can positively impact mothers’ wages and employment in the long run. Women are able to count on job security when making decisions to enter the workforce, boosting their labor force participation.
However, some experts believe that an increase in maternity leave in India may lead to greater discrimination against women workers. Smaller companies might find it hard to afford the increased financial burden of providing longer paid leave. Or firms might worry that new mothers will lose touch with work-related developments and lag behind when resuming their jobs.
In other words, the law could have the effect of boosting the supply of women workers – as a barrier to women’s labor force participation becomes lower – and decreasing the demand for women workers – as employers exhibit greater male bias in hiring. One solution to the latter could be introducing paternity leave, which could eliminate any new male bias introduced by the more progressive maternity leave law.
But whatever the effect, it will be extremely limited in the context of India’s workforce. Only six percent of all employed women work in the formal sector. The new law will not address the employment situation of women in the informal economy.
It may be difficult to intervene in the informal labor market – especially in a way meaningful to women, who often take up jobs beyond the reach of the state (e.g. home-based work, agricultural labor). But a broader set of policies – enhancing women’s enrollment in secondary schools, promoting their participation in skills training for higher-productivity jobs, and improving access to credit for female entrepreneurs – can at least help to ensure that women are given equal opportunity to transition into formal employment.
About the Author
Dhruv Jain is Research Associate at JustJobs Network.