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New Delhi: India has amongst the most progressive laws on maternity benefits. But a large majority of India’s workforce is engaged in informal work. Further, the law exempts small firms from having to provide these benefits. As a result, 93.5% of women workers in the country cannot access maternity benefits, our analysis of government data shows.

This year, the  has earmarked Rs 3 lakh crore to initiatives that enhance the participation of women in India’s workforce, including initiatives such as establishment of childcare facilities and hostels for working women.

Last month, the Delhi High Court  of the policy restricting maternity leave for government employees with more than two children. The bench emphasised that measures be aimed at offering incentives and disincentives to parents rather than children.

India has also included provisions for women government employees undergoing surrogacy to seek maternity leave. The  now ensure that women in such situations with fewer than two surviving children are entitled to 180 days of maternity leave. A ‘commissioned mother’, defined as a woman who uses a surrogate to carry her child, is now explicitly included in this entitlement. Further, it grants commissioning fathers with fewer than two surviving children up to 15 days of paternity leave.

A  to the  had increased paid maternity leave to 26 weeks for up to two children, addressed the needs of adoptive and surrogate mothers with a 12-week leave, and enforced employer compliance with non-termination and fair treatment policies. The amendment also encouraged companies to allow women to work from home and made it mandatory for companies with more than 50 employees to offer a crèche on the premises, with costs to be borne by the employers, as IndiaSpend  in March 2021.

In comparison with , India’s maternity leave duration surpasses the  of 18 weeks, and the Act’s provision for 100% average wage entitlement is better than many countries that offer only .

However, a detailed examination of the Act’s coverage across India, based on the most recent Periodic Labour Force Survey () data for 2022-23, shows that these benefits are not available to a vast majority of women workers in India, as we explain below.

‘Maternity Benefits’ encompass paid maternity leave, 100% wage entitlement, nursing breaks, work-from-home options, crèche facilities, and medical benefits covering prenatal and postnatal care. Eligibility does not guarantee access to benefits without the presence of stringent implementation and oversight mechanisms. For instance, only a handful of large multinational companies complied with the requirement to set up crèche, IndiaSpend  in March 2021.

Further, this calculation uses the traditional definition of employment, and does not include the substantial time women dedicate to social reproductive responsibilities, including caregiving and household chores.

Small firms are exempt

According to the Act, the employer’s liability for maternity benefit payment applies only to establishments with 10 or more workers. This criterion overlooks the demographic reality of the workforce, where over 85% of women are employed in establishments with fewer than 10 workers.

The Act also mandates that eligibility for maternity benefits is contingent upon the woman having worked for more than 80 days in the 12 months preceding the date of her expected delivery. This requirement poses a substantial barrier for women engaged in casual, self-employed or alternately irregular employment patterns. The transient and sporadic nature of such employment makes it challenging for women to prove their eligibility, which can potentially result in discrimination against women who are nearing the 80-day threshold.

The motherhood penalty

The PLFS data suggest that for women aged 15 and older in the labour force, there is a significant drop in participation among those with childcare responsibilities. This drop is especially high among those with at least one child under the age of one. Across urban and rural demographics, this participation rate drops to 34%, three percentage points lower than the national average of 37%. The difference is higher in urban areas.

There is a further decline in labour force participation rates among women with children between the ages of three and five years, indicating the compounded effect of having multiple children under the age of five.

Among previously employed women who are now out of the labour force in the 365 days before the survey, one in 10 women report child care as the reason for exiting the workforce. Among mothers with at least one child, two in five women report childcare as the main reason.

The percentage of women not participating in the labour market due to childcare responsibilities increases to 65.5% when their child is below the age of one and then gradually declines as the child ages. To put it simply, two in three mothers of infant children are out of the workforce either due to prioritising childcare over work during the formative years of child development, or due to a lack of access to maternity benefits.

A survey of women in Rajasthan’s Udaipur district found that mothers with children in the one- to six-year-old age-group spent 9.4 hours a day on household chores, as IndiaSpend  in August 2017.

Up to 48% of women currently  within four months after returning from maternity leave, while up to 50% more men are working between the ages of 15-24 and 25-34, the child-rearing period, found a  by Intellecap, an investor in social enterprises, as IndiaSpend  in March 2019.

Greater attention paid to  could help restrict the effects of a ‘motherhood penalty’ which entails women dropping out of work, worrying about being absent from work for a long time and accepting less-satisfactory employment, as IndiaSpend  in August 2018.

Does the age of the child matter for the nature of work for women?

One in three women work as ‘unpaid family members’, followed by more than a quarter of all women workers classified as ‘own-account workers’, or the self-employed persons who do not employ others on a regular basis. Common to these categories of workers is the flexibility in work timings and the possibility to work from home.

Similarly, one in five women workers are engaged in casual employment, which provides flexibility in work hours relative to regular salaried jobs for mothers.

Among women with at least a child below one year, only 11% work in regular salaried jobs compared to the national average of 20.1%, while 43.7% work as unpaid family members compared to the national average of 32%.

How accessible are maternity benefits for working women in India?

In general, the eligibility for social security benefits–such as gratuity, provident fund, pensions and maternity benefits–in India is limited to a narrow segment of the workforce, specifically to those employed in either regular salaried positions or casual wage labour. This restricts access to social security to 39.9% of the working female population, according to data from PLFS, 2022-23.

Only 32.1% of women in regular salaried employment are eligible for maternity benefits. This figure is slightly higher at 42.7% among working women who are mothers of children under the age of one, suggesting that women who continue to work with a child below one year are able to do so possibly due to the availability of maternity benefits.

Among women engaged in casual labour, only 0.1% are eligible for maternity benefits.

Overall, only 6.5% of all working women are eligible for maternity benefits. This further declines to 4.7% for working mothers of infants under one year.

Among salaried women, 32.3% are eligible for maternity benefits–and this number is lower in rural India. Further, more than half the salaried women do not have access to social security benefits.

There are also variations based on occupational categories: Women in occupations such as legislators, senior officials and managers, professionals and technicians are more likely to be eligible for maternity benefits. On the other hand, small percentages of women employed as service workers, shop and market sales workers, in skilled agricultural and fishery sectors, in elementary occupations have such access.

Even among higher-skilled occupations, less than half of the working women qualify for the benefits.

Occupational categories that have higher eligibility for maternity benefits like professionals, technicians and associate technicians, and clerks have low absorption of women at 7.1%, 2.1%, and 1.6% respectively, and most women are either working as skilled agricultural and fishery workers (44.4%) or are engaged in elementary occupations (25.3%), data show.

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A vast majority of Indians earn the entirety of their incomes through labour as opposed to ownership of capital or land. Further, about 90% of the working Indian population earns its livelihood through informal employment that is characterised by little or no job security, no employment benefits, no social protection, and lower earnings. The informally employed are primarily concentrated among casual labourers and the self-employed, but exist even in some segments of those who are classified as regular wage or salaried workers.

Therefore, whatever is happening to the GDP growth rate — which tends to occupy the headlines concerning the economy — or how that translates into improvements in the standards of living of the masses, in the end, depends on what is happening to the labour market — are new jobs being created? Are better jobs being created? Are wages going up?

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For many young adults, their first job post-graduation marks a significant milestone, symbolising their entry into the workforce and representing personal and familial achievement following years of education and training investment. Studies suggest that the first job determines an individual’s lifetime career trajectory, influencing future earnings and job quality (Cavero and Ruiz 2016). This ‘path dependence’ has important implications, impacting individuals’ income and employment status well into their middle-age.

As young adults begin their careers, their employment prospects are influenced not only by their qualifications but also by various societal factors. In India, factors like caste, religion, and race often dictate job opportunities, with social connections playing a significant role in hiring decisions. Demographics can also impact job prospects, with some evidence suggesting that cohort size affects youth employment rates. Economic conditions play a pivotal role, as demonstrated by Kahn (2010), who found that recession-era graduates faced lower wages and job quality. Wachter (2020) estimated potential earning losses of $400 billion over a decade for the 2020 labour market entrants. Atherwood and Sparks (2019) note that recession-era entrants experienced lower wages; however, these effects were somewhat mitigated for those with higher education.

The Covid-19 pandemic, aside from its health toll, inflicted significant economic damage. Some forecasters at the time predicted that the global economy would shrink by 5.2% in 2020.  It severely impacted labour markets worldwide, varying in degree and duration. The Indian government imposed one of the strictest lockdowns globally on 24 March 2020  (Mathieu et al. 2020). During this time, at least one cohort of young graduates entered the labour market, facing challenges in securing employment. They were more likely to secure low-paying and informal jobs. Economic downturns can have lasting and ‘scarring’ effects on career trajectories, as evidenced by studies in other contexts. To assess this impact, in a recent paper (Abraham and Jha 2023) we analyse high-frequency labour market data for India, tracking young workers entering at different times and comparing their job outcomes.

The data we use are collected by the Centre for Monitoring Indian Economy (CMIE). Every year, a sample of households are interviewed in four-month intervals, with data being collected on their employment, income, and other earnings. Using these data, we track a subgroup of individuals who are identified as young entrants who would have entered the labour market in 2020, i.e. the year of the pandemic.  These individuals are between the ages of 18 and 23, report themselves as students, and were out of the labour force in 2019, likely entering the labour market in the following year. We follow this sample of individuals until 2022  and document their employment trajectories, along with their corresponding incomes. These outcomes are compared with a baseline sample of young adults who entered the labour market in ‘normal’ times – specifically, the baseline is those individuals who were students, out of the labour force, and in the 18-23 age bracket in 2018 and who entered the labour market in 2019 (a ‘normal’ year).

We compare the employment outcomes of two cohorts: (1) the ‘pandemic’ cohort whose employment and earnings are tracked in 2020 and in 2022; and (2) and the pre-pandemic, or ‘baseline’, cohort who entered in 2019. Comparing the outcomes for these two cohorts provides insight into the differences resulting from entering the labour market during the pandemic year. In doing so, we examine whether there are any penalties or ‘scarring’ effects associated with entering the labour market during an economic crisis. Since we only have two years of data for the pandemic cohort, we cannot comment on the long-term impact. Instead, we use employment and income information for this cohort from two years, 2020 and 2022, to assess the impact and recovery compared to the baseline.

Young entrants before the Covid-19 pandemic

We begin by observing employment outcomes of our ‘baseline’ sample – young workers who entered in 2019. The employment outcome of interest falls into three categories: first, whether they found employment, remained unemployed, or chose to remain out of the labour force; second, conditional on having found employment, what kind of employment were they able to obtain upon entering the labour market; and finally, the earnings across different employment types for these entrants in 2019.

Our baseline sample comprises 33,230 youngsters who are tracked in 2019 to observe their outcomes. Of these, 9% were employed in 2019, 15% were not able to find employment, and 76% remained out of the labour force (Figure 1).

Figure 1 Distribution of the baseline/pre-pandemic cohort and the pandemic cohort

Among those who were able to find employment, around 10% were absorbed in permanent-salaried jobs. Close to 25% of these workers were in temporary-salaried positions, while another 25% were in casual or daily-wage roles. The remaining roughly 40% reported themself as self-employed in 2019 (Figure 2).

The average real monthly income of these workers in 2019 was Rs. 9,588. As expected, the highest average earnings were for those in permanent-salaried work, at Rs. 16,727. The lowest was for those in daily wage work, earning Rs. 7,421 on an average each month (Figure 3).

Figure 2 Type of employment secured by labour market entrants in 2019, and those entering in 2020 tracked in 2022

Figure 3 Average monthly earnings of pandemic and baseline cohort, by employment type

Young entrants during the pandemic

What did these employment outcomes look like for the pandemic cohort?  The only significant difference between the pre-pandemic and the pandemic cohorts will be the year in which they entered the market, i.e. 2020 instead of 2019. Further, we tracked this cohort in 2020 and 2022. The analysis is based on 27,636 individuals who form part of the balanced panel of the pandemic cohort (i.e. individuals who were interviewed in all three years – 2019, 2020, and 2022).

Of these labour market entrants, 6% were able to find employment in 2020, 13% remained unemployed, and 82% continued to remain out of the labour force. The labour force thus contracted by around six percentage points in the pandemic year due to the young entrants, compared to the normal pre-pandemic year reported above. While this suggests a drop in supply of workers, it could also reflect an implicit decrease in labour demand, which was reflected in workers choosing not to enter the labour market, unlike their pre-pandemic counterparts. Further, even two years after having entered the labour market (i.e. in 2022), only around 10% of the young entrants in the pandemic cohort were able to find employment.

We analyse the types of employment they secured and how it compares with their predecessors. There was a drop in the percentage of individuals who were able to get into the most secure form of employment, namely, permanent-salaried. The proportion dropped to 7% among the pandemic cohort. A greater proportion of the pandemic cohort got absorbed in daily wage work and self-employment, the more precarious kinds of employment, in comparison to the baseline pre-pandemic cohort. The pandemic cohort, however, did show signs of recovery in about two-years’ time. By 2022, the proportion of workers in permanent salaried jobs had increased up to 12% and the self-employed had fallen to 33%. However, the proportion of daily wage workers and those in temporary salaried jobs continued to remain higher than the respective proportions in the pre-pandemic cohort.

The average real monthly income (in 2019 prices) of the pandemic cohort of entrants who found employment in 2020 was Rs. 3,946. This implies that, compared to the baseline pre-pandemic cohort, the pandemic cohort had an average monthly income around 60% lower. The income difference also varied depending on the type of employment. The difference in incomes for the daily wage workers and the self-employed of the pandemic cohort compared to their pre-pandemic counterparts was the highest, at 62%. The difference was the least for the permanent salaried workers of the pandemic cohort, whose income was 38% lower than the pre-pandemic cohort.

In the paper we also provide a detailed breakdown of how the pandemic cohort was rewarded in the market after gaining two years of experience. While their experiences varied depending on the type of employment, there was a general penalty in terms of the increment in their earnings two years after entering the market.

The pandemic cohort of employed workers was able to make only around 9% higher income compared to the starting income of the pre-pandemic cohort. By 2022, the permanent salaried workers of the pandemic cohort were making 22% higher income than the starting income of the permanent salaried workers of the pre-pandemic cohort, while the temporary salaried workers of the pandemic cohort continued to make 4% lower income even after two years as compared to the starting income of their pre-pandemic counterpart. The increment in earnings of the daily wage workers and the self-employed after two years of working was only around 5-7% higher than the starting salary of the respective workers in the baseline pre-pandemic year cohort.

Conclusion

Comparing the young entrants of the labour market in the pandemic year with those in the pre-pandemic year, we find that the penalty in terms of finding a job is marginal when only considering the metric of finding employment versus remaining unemployed or out of the labour force. However, there exists a significant difference for the pandemic cohort in both the types of jobs they are able to get and their earnings from these jobs. Our findings suggest a ‘scarred’ cohort of workers, making it imperative for policy interventions to ameliorate this damage. Policy interventions that help better match workers with jobs can help reallocate these young workers to more secure and well-paying jobs and allow for a course correction in their labour market trajectories. Further, subsequent entrants, although not entering during an economic downturn, may pay the price of compromised schooling during the lockdown. Remedial classes, vocational training and apprenticeships can potentially address this challenge.

With India well into the golden period of demographic dividend, employing the youth in meaningful, quality jobs is critical not only from a socioeconomic concern but also to reap the maximum benefits from this demographic phase.

Editors’ note: This column is published in collaboration with the International Economic Associations’  initiative, which aims to enhance the role of women in economics through research, building partnerships, and amplifying voices.

References

Abraham, R and M Jha (2023), “The Penalty of Being Young: India’s Workers During the Pandemic,” in Contextualizing the COVID Pandemic in India: A Development Perspective, pp. 109-125, Springer Nature Singapore.

Atherwood S and C S Sparks (2019), “”&�Բ�����;PLoS ONE 14(3):e0214234.

Cavero, D and C Ruiz (2016), “Do Working Conditions in Young People’s First Jobs Affect Their Employment Trajectories? The case of Peru,” ILO Work 4 Youth Publication Series No. 33, International Labour Office.

Mathieu, E, H Ritchie, L Rodés-Guirao, C Appel, C Giattino, J Hasell, B Macdonald, S Dattani, D Beltekian, E Ortiz-Ospina and M Roser (2020), “,” Our World in Data.

Kahn, L B (2010), “,”&�Բ�����;Labour Economics 17(2): 303–16.

von Wachter, T (2020), “,”&�Բ�����;The Journal of Economic Perspectives 34(4): 168–194.

Footnotes

1. https://www.worldbank.org/en/news/press-release/2020/06/08/covid-19-to-plunge-global-economy-into-worst-recession-since-world-war-ii
2. Close to 90% of our sample consists of individuals who are high-school graduates and above.
3. The last period for which we have their data at the time of writing.

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