Why Claudia Goldin’s Nobel Prize-winning work is relevant for India

The Nobel Prize for Economics this year went to a single individual, Professor Claudia Goldin of Harvard University. She is the third woman in history to have won this award and the first to be honoured independently.

The Nobel citation, describing her work over five decades, says that the prize is ‘for having advanced our understanding of women’s labour market outcomes’. Some of her insightful and original contributions have become common knowledge, and it is important that they stay in circulation, to be understood and applied.

Her most intensive and definitive study is of women’s labour force participation and outcomes over 200 years of American history. Many of her findings and conclusions, drawn from American data, are applicable to other countries, including India, despite cultural and geographic differences. Let us examine some of the prominent ones.

First, there is the U-shaped curve representing the participation of women as economies develop from agrarian to industrial to service-dominated. In the agrarian phase, women work on farms along with their menfolk. With industrialisation, work in factories and on assembly lines becomes more rigid, less flexible, and hence the participation of women drops.

With the advancement towards a service-economy, women are able to participate in greater numbers. Thus the U-shape — high, low and high again. Observed not only in America but also across countries that are presently at different stages of development, clearly this is a pattern that unfolds across time, as well as across the world.

Not surprisingly, most prosperous countries, which tend to have a very large services sector, also tend to have a high female labour force participation rate (FLFPR). In countries like Sweden, the FLFPR is as high as 85 or even 90 per cent.

That means 90 per cent of working-age women are either employed in paid work, or are looking for a job. By contrast, the FLFPR in India is low. By some accounts, it is below 20 per cent, and is the lowest among all G20 countries. This has been disputed. The Economic Survey of India 2023, puts the FLFPR at 27.7 per cent.

Over and above the development trajectory of the economy as a whole, the U-shaped curve of female participation can also be seen through the lens of family income and social custom. In very poor households, women cannot afford not to work.

Hence, the workforce participation rate is high. As family income rises, the women pull back and tend to focus on household work and childcare. With rising incomes, the workforce participation rate also goes up. This pattern is further muddied by social custom.

If a woman is working for pay outside the home, there is a social stigma attached. It implies that the ‘man’ of the household is either lazy or unable to earn enough for his family. This stigma has been observed across different cultures. Thus, social stigma might also prevent women’s participation, especially in middle-income families.

Another factor that influences the U-shaped curve is education. Women who are illiterate or have only elementary education, participate more. With secondary education (middle school), their participation rate drops. And with higher education (graduation and postgraduation) their participation picks up again.

This too presents a U-shaped curve and is seen through Indian data. Here, the explanation for the U-shape is neither from the supply side of labour, nor the assumption that women with secondary education do not want to work. What prompts this is the demand side of labour.

There simply aren’t adequate and appropriate jobs for women with high-school or middle-school education. In the absence of jobs, they drop out of the labour force.

It is quite common to hear comments like: “My daughter has a job, but as soon as she gets married, she will quit.” It is as if a job is no more than a temporary arrangement before marriage and motherhood.

Indeed, Goldin (and others) have documented that, in olden times, nearly 60 per cent of an adult woman’s prime working life was spent either being pregnant or nursing a child. Just look at our grandparents’ generation where having a dozen siblings was par for the course. Imagine the plight of the mothers.

All this changed thanks to family planning, deferring marriages and spacing out pregnancies. This also led to a sharp drop in the total fertility rate, i.e., the average number of children born to a woman in her prime. The distinct role of contraception in increasing FLFPR is highlighted in Goldin’s work, which also covers the struggle against discrimination in the workplace, as well as women’s fight for equal pay.

Goldin’s Nobel Prize-winning work could not have been timelier and more relevant for India. The FLFPR in India has been falling steadily for over two decades, although there is some uptick recently. The Economic Survey of 2023 also documents the silent revolution of the 12 million self-help groups across the country, run almost wholly by women.

The recent legislation for women’s quota in Parliament and state assemblies has come none too soon. Across most states, 50 per cent of all elected persons in village, town and city councils and corporations are women, thanks to reservations in the third tier of government. Many companies are actively trying to re-recruit women after their first or second pregnancy, i.e., mid-career.

There are two gaps that India must urgently fill. One is the gap between the male and female labour force participation rate (56 and 28 per cent according to the Economic Survey).

The second is the gender pay gap, whereby male and female employees do not have wage parity for the same work. If both these gaps are eliminated, or at least narrowed, India’s GDP could show a significant jump. Thanks to Goldin’s prize, these issues have come into sharp focus.

(Ajit Ranade is a noted economist. Courtesy: The Billion Press)