South Asia needs more women in the workforce

This year’s Nobel Prize for Economics was awarded to Claudia Goldin for drawing attention to gender gaps in economic activity. In few developing country regions are these gaps more pronounced than in South Asia.

In the past two decades, South Asian women have continued to catch up with men in educational attainment. They are having fewer children, which has freed them up to work outside the home. South Asian countries have also passed laws aimed at improving employment opportunities for women.  

And yet their participation in labor markets has remained low. Just 25 percent of South Asia’s working-age women were in the labor force in 2021—about half the average among emerging market and developing economies (EMDEs). About 40 percent of young women in South Asia are not employed , in school, or receiving professional training—about three times the corresponding share among young men.

The arguments for why women need to participate in the labor market are well-established.  Families where women are more economically empowered tend to invest more in their children and women’s participation can raise productivity. When men are over-represented among breadwinners, entrepreneurs and high-earners and women comprise the majority of homemakers talent is misallocated and growth suffers.

Women’s low labor market participation risks wasting the demographic dividend from South Asia’s still growing working-age population. By one estimate, South Asia’s long-term sustainable growth in the rest of this decade could be boosted by as much as one percentage point a year if female labor force participation were raised to the EMDE average. Another estimate suggests that South Asia’s GDP per capita could rise 19-58 percent in the long-term if women’s employment was equal to that of men .

So, why have women not joined the labor market in greater numbers?

Dr. Poonam Gupta, Director General of the National Council of Applied Economic Research, recently points to many pieces that are currently missing in most South Asian countries: a care economy that caters to children and the elderly, safe transport and workplaces, women in leadership positions and the police force, economic and tax incentives, jobs that would allow women to return to the labor market after children are older, and an education system that promotes gender equality. Education gaps and limited access to finance and other inputs are also missing pieces. Indeed, many of these measures rank high in a recent World Bank assessment of interventions aimed at boosting female labor force participation. Comprehensive, multi-pronged approaches dealing with supply side barriers to women’s employment have shown to be effective.

But on their own, these measures are unlikely to be sufficient. Two complementary factors are needed to catalyze women’s economic empowerment. First, boosting job creation is vital to ensure women can thrive in current and future labor markets. Second, changing mindsets, behaviors, and attitudes around women’s work is key to improving women’s employment outcomes in a sustained manner.  

Faster output growth would boost job creation, including for women. In the 2010s, South Asian employment growth has averaged around 1 percent per year—about one-third less than the rate of working age population growth. India is no exception. Faced with a challenging labor market, both male and female labor force participation rates have declined in India since 2010. Accelerating economic growth in the next decade could be key to turn this around.

That said, the type of growth matters for job creation, too. The export-oriented sectors—sectors in which firms face stiff competition in their product markets—tend to be more gender-equal. More open trade and competition policies would not only boost output and productivity growth, but also favor greater gender equity . Indeed, Bangladesh’s garment sector is a clear example of a light manufacturing-driven growth process that has attracted millions of women into the labor force. Similarly, the rise of the business, processing, and outsourcing industry in India attracted millions of women into the workforce and encouraged them to remain engaged in the labor market throughout their lifetime. Similar examples can be found in Morocco, Tunisia, and Turkey.  

Social norms are tougher to change, but some interventions have been shown to be effective. These include mandated hiring policies (such as quotas), political reservations including in village councils, public works and employment guarantees, classroom discussions, community discussions, and efforts to lower search and match costs. But, for financially constrained governments, the fiscal cost of scaling up some of these measures needs to be carefully weighed against their likely benefits.

Poor job prospects and negative attitudes towards women’s work outside the home can interact in ways that deter women’s participation in labor markets. For example, when jobs are scarce, social norms, rather than productivity, may determine labor market outcomes. According to the World Value Survey, a large majority of people in South Asia agree that “when jobs are scarce, men have more right to a job than women.” This majority has increased over the past decade in Bangladesh, India, and Pakistan.

A comprehensive package of measures is therefore needed to draw more women into South Asia’s labor markets. This package will need to include greater economic dynamism that creates jobs as well as shifts in mindsets and the removal of obstacles to women’s participation. This is challenging work, and progress will not necessarily be steady and gradual. But increasing female labor force participation in South Asia is a challenge that all economies must rise to meet—their future success depends on it.

This article first appeared in The Financial Express (India) on November 25.