2023 Economics Nobel And How It Relates To India’s Qualified, Underpaid Women

The reasons for this apparent contradiction were explained by Claudia Goldin, the Nobel Prize-winning economist from Harvard University. In a 1994 working paper, she pointed out that married women’s labour moves from the farms into offices with an increase in education of women, causing the LFPR to trace a U-shaped curve as education (or GDP) increases.

As per her results, the female LFPR will rise as the country transitions from middle- to high-income, but only if well-paying formal sector jobs are available, explained labour economist Farzana Afridi, a professor of economics at the Indian Statistical Institute in Delhi and research fellow at the the IZA Institute of Labour Economics.

Given that more than 90% of India’s workers are in the informal sector, getting more women in the labour force means getting them paid work, said Ashwini Deshpande, professor and Head of the Department of Economics at Ashoka University.

There are other lessons that Indian policymakers seeking to draw more women into the labour force can learn from Goldin’s work, added Deshpande. “Male-female gaps in choice of jobs, earnings, etc. do not disappear as countries become rich,” Deshpande told IndiaSpend.

How relevant is the work of a USA-based economist who draws her inferences from data on the US and developed countries to the Indian labour market? IndiaSpend spoke to experts to bring you this #TIL explainer.

Different norms, same outcomes for women in developed countries and India

Focusing on careers instead of jobs, Goldin showed how women’s domestic roles negatively affect their career choices, according to Deshpande. She emphasises the role of social norms around marriage and childbirth in women’s professional choices.

In the USA, women dropped out of the workforce after marriage. The use of the oral contraceptive pill allowed women to delay marriage and childbirth, resulting in their increased participation in the workforce. In India too, the marriage penalty is salient, says Afridi. “We see that the probability that a woman works declines after marriage in India,” she explained.

Goldin’s most famous result--the U-shaped LFPR curve for women--holds for India: We are in the middle portion of the curve, which explains the declining LFPR, according to Afridi. “Even though gender gaps in education have closed dramatically in the last few decades in India, fewer women are participating in the labour market because the social cost (stigma) associated with working in the mostly low status jobs available is still high in India,” she explained.

This result also explains the difference between the LFPR of rural (27.2%) and urban women (18.8%) in India, according to Afridi. “Higher poverty in the rural areas compared to that in urban areas is the reason for the difference in the LFPR, just as the U-shaped curve would predict,” she said.

Another area of Goldin’s research that applies to India is the gender wage gap, or the difference between the wages of men and women. Goldin showed that the wage gap can be attributed to the inability of women to move to higher paying establishments and positions within establishments, unlike their male colleagues.

Is there a wage gap between men and women in India? There is, according to Deshpande. “...[G]ender wage gaps are higher among low-wage earners and lower for high-wage earners,” she wrote in 2017. Afridi agrees, and concurs with the reason provided by Goldin. “Women earn about 50% of what men earn (on average). This can be attributed, in large part, to the occupational segregation of women--women tend to take up jobs or work in sectors that are lower paying than men,” she said.

The way out, according to Goldin, is to make jobs more flexible in terms of the number of hours required. “The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours,” she wrote.

IndiaSpend has reached out to the Ministry of Labour and Employment on the reasons for the low labour force participation rate among women, how it has increased over the last five years, and what measures were taken to improve it. This story will be updated when they respond.

Extend Goldin’s results to India, but with caution: experts

About three in every four Indian workers India are in the informal sector, as per the 2022-23 PLFS report. This is different from the labour market that Goldin has studied, where women are educated and in formal sector jobs, according to Deshpande. In addition, the labour of women may be underreported because of the way the data are collected: if women have not worked in the last day or the last seven days, she will not be counted as a worker by the PLFS surveyor, as Deshpande wrote in 2019.

Moreover, much of the work done by women is not counted as work in the survey. This misclassification and undercounting of women’s work is similar to what Goldin remedied with her analysis of census data spanning more than 100 years (starting from 1890). However, this record cannot be set straight using data in India: The oldest data we have on women’s work are from 1980s’ National Sample Survey reports, says Afridi.

How can we get more women to become a part of the labour force in India? The answer may not be as simple as letting social norms weaken with economic development, as they did in the USA. It requires changing the definition of work as well as paying women a fair wage for it, according to Afridi and Deshpande.

“Increasing labour force participation of women in India would mean focusing on getting women into paid work, recognising women who are already working in family enterprises as workers and finally, getting women (and men) into good jobs in the formal sector from precarious, poorly paid jobs in the informal sector,” said Deshpande.

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