Tuesday, March 17, 2015

IMF study backs Modi, seeks labour market flexibility citing poor female participation rate

By Our Representative
The world's powerful bankers, International Monetary Fund (IMF), have now backed the Government of India's "effort" to bring about a major change in the country's labour laws by removing the labour protection provisions, saying it would help reduce "gender gap in Indian labour force participation". In a recent policy paper, it says, increased "labour market flexibility" would lead to "more formal sector jobs, allowing more women, many of whom are working in the informal sector, to be employed in the formal sector."
Released this month, the paper, titled, "Women Workers in India: Why So Few Among So Many?", is authored by Sonali Das, Sonali Jain-Chandra, Kalpana Kochhar, and Naresh Kumar. It was released ahead of IMF managing-director Christine Lagarde's meeting on Prime Minister Narendra Modi on March 16. She called "India a bright spot in the cloudy global economy", and sought a major push in "reforms in subsidy, labour market and monetary policy."
The paper, based on calculations of data from the Government of India's National Sample Survey Organization up to 2011-12, stresses on the need in India for a better Employment Protection Legislation (EPL) index, which is based on a survey of labour market regulations, and is constructed by counting amendments to regulations that are expected to increase labour market flexibility.
It says, "The coefficient of 0.360 on the EPL variable implies that the probability of being in the labor force for women increases by about 3 percentage points when the EPL index increases from 0.5 to 1." It adds, however, "The coefficient on the EPL index is not statistically significant in the male labour force participation regressions, indicating that flexibility does not affect male participation as strongly as it does female participation."
The paper says, its study suggests "how labour market rigidities relate to labour force participation", and why India should implement policies that would lead to "implement to increase female participation." It blames India's "rigid" labour laws for having "one of the lowest female labor force participation (FLFP) rates "among emerging markets and developing countries."
The paper calculates, "At around 33 percent at the national level in 2012, India’s FLFP rate is well below the global average of around 50 percent and East Asia average of around 63 percent. India is the second-most populous country in the world with an estimated 1.26 billion persons at end-2014. Accordingly, a FLFP rate of 33 percent implies that only 125 million of the roughly 380 million working-age Indian females are seeking work or are currently employed."
Lack of labour law flexibility, the paper says, has let to a situation where "India’s gender gap in participation (between males and females) is the one of the widest among G-20 economies at 50 percent."
In fact, it says, "Female labour force participation has been on a declining trend in India, in contrast to most other regions, particularly since 2004/05", insisting, "Drawing more women into the labour force, along with other important structural reforms that could create more jobs, would be a source of future growth for India as it aims to reap the 'demographic dividend' from its large and youthful labor force."

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