By: Surjit S. Bhalla, Karan Bhasin, and Tirthatanmoy Das
This paper originally appeared in SSRN and Researchgate.
ABSTRACT
This paper analyzes the evolution of India’s labor market, with a focus on female labor force participation (FLFPR) from 1983-84 to 2022-23. Utilizing both Indian and international databases that include unit-level surveys and time use data, the authors address issues of data quality, labor market definitions, and measurement challenges and make necessary adjustments for accuracy. Additionally, by applying a structural microeconometric model, the authors evaluate the roles of both the labor market and the household sector in female labor participation. Their findings indicate that India's labor market is undergoing a structural transformation driven by rising educational attainments and declining fertility rates. After appropriate adjustments to data and definitions, the authors obtained six key results: (a) no significant decline in FLFPR between 1999-00 and 2022-23; (b) FLFPR in 2022-23 is comparable to international standards; (c) India requires 7-9 million jobs annually over the next five years, contrary to the widely believed 10 million per year; (d) education shows a U-shaped relationship with FLFPR due to its non-linear relationship with earnings; (e) India’s gender wage gap is comparable to that of its peers; and (f) Indian women spend more time on child care, a crucial investment for childhood skill development, than women in OECD countries. These findings challenge assumptions of a sharp decline in FLFPR, significantly lower FLFPR compared to other countries, and slow job creation during 1999-00 to 2022-23.
Karan Bhasin is a Non-Resident Fellow at ORF America.