Uptick in female labour force participation

There was a significant improvement in the labour force participation rates (LPR) for women in the 20-29 age bracket in the September-December 2022 period. Around 0.28 million women aged 20-29 entered the labour force in this period, according to CMIE’s Consumer Pyramids Household Survey data. Moreover, the LPR for females in this age group is significantly higher now than during the lockdowns. This is encouraging.
 

LPR is the share of the working age population (aged 15 and above) who are either employed or unemployed, willing and looking for work. The age-wise distribution of female labour force participation is similar to an inverted-U shape, although not very well formed. In the 15-19 age group, the LPR for women was 1.22 per cent in the September-December period. This is understandably low as most people in this age group are likely to be students and are not seeking employment.

The LPR for women in the 20-24 age group increased from 10.63 per cent in May-August 2022 to 11.58 per cent in the period. This translates to an expansion in the female labour force in this age group of 0.17 million. Of the women belonging to the 20-24 age group who entered the labour force, 0.13 million were employed. This is a positive sign for the labour market as more young women seem to be willing to work. In fact, a large share of these women was able to gain employment as well.
 

A similar rise in LPR was observed for women in the 25-29 age group. The female LPR in this age group was 10.17 per cent in the May-August 2022 period. It rose to 10.99 per cent in the September-December period. This corresponds to an increase in the size of the female labour force (25-29 years of age) of around 0.11 million.
 

Among women aged 25-29, there was a small decline in the number of those employed. It fell from 2.14 million in May-August 2022 to 2.06 million in September-December 2022. On the other hand, the number of unemployed women in the age group increased by around 0.2 million between the May-August 2022 and September-December periods.
 

Nevertheless, the incre­ased entry of young women into the labour force is a promising start. The historic trends in female LPR suggest that it is grossly impacted by shocks in the economy. Before demo­netisation in Nove­mber 2016, the LPR for females in the 20-24 age group was around 18.4 per cent in May-August 2016. Demon­etisation, however, had a negative impact on female LPR. It declined drastically to 9.5 per cent in May-August 2017, which was a shocking 8.9 percentage points decl­ine. While the female LPR reco­vered to some extent in 2019, ranging aro­und 12-14 per cent, the Covid-19 pandemic further exacerbated the situation.
 

Following the first nationwide lockdown, LPR for women aged 20-24 was a mere 8.7 per cent in May-August 2020. In May-August 2021, the LPR for women in this age group stood at 9.96 per cent. In comparison, the 11.58 per cent LPR in September-December 2022 was a significant improvement.
 

For females in the 25-29 age group, the LPR was around 17-18 per cent at the beginning of 2016. As a consequence of demonetisation, the LPR for women in this age group fell significantly to around 13 per cent.
 

During the pandemic, the LPR for women in the 25-29 age group dropped further to 10-11 per cent. In May-August 2021, the LPR was 10.08 per cent for women in this age group. It increased to 10.99 in September-December 2022. This upswing in LPR is a happy outcome.

The LPR for women in the 20-24 age group seems to be more sensitive to economic shocks, compared to women in the 25-29 age group. The impact of demonetisation as well as the pandemic-induced lockdowns was felt to a greater extent by women in the 20-24 years age group, in terms of a higher fall in LPR. Furthermore, women in this age group also experienced a larger increase in LPR in recent times.

The upward trend in LPR for young women is a positive sign. Young women are stepping into the labour force in much larger numbers than seen since the pandemic. Many of them are also finding jobs. This is expected to motivate other young women to enter the labour force. It is imperative that this nascent trend of a rising young female LPR is strengthened and it does not face any more economic shocks.

While there is a recovery in the female LPR, India has not been able to reach pre-pandemic levels yet. There is also a long way to go to achieve the levels of female LPR that existed before demonetisation. Female LPR suffered a much bigger setback following demonetisation than it did during the pandemic.

The writer is MD & CEO, CMIE P Ltd