Balancing the costs of gender equity

The Budget proposes to reduce the provident fund (PF) contribution of women employees to 8 per cent from the standard 12 per cent, with no change in the employer’s contribution. Will this four percentage point differential see more women flocking to companies for jobs? Unlikely; and here is why.

First, the incentive is too negligible to galvanise women to start circulating their CVs. It is worth remembering that there was a time when tax-paying women employees enjoyed a higher standard deduction than their male counterparts (one of the nineties’ Budgets ended that sop). This certainly gratified many of us at the time but did not have an appreciable impact on altering the gender balance in the workplace.

Second, the government has approached the issue from the wrong end of the argument. PF relief is targeted at improving women’s participation in the workforce, or so the finance minister said in his Budget speech. But research into the reasons for the steady fall in female workforce participation rates suggest that, contrary to perception, all these women aren’t dropping out to pursue education opportunities or for social reasons. Caren Grown, senior director, gender, of the World Bank group, points out that the higher enrolment for secondary and tertiary education accounts for but a fraction of the decline. 

Third, embedding this incentive in the organised sector makes little sense, because it accounts for a minuscule proportion of employment in India. 

When it comes to gender balance in the workplace, the issue at stake today is the same as it has always been: Incentivising women to join the workforce is less the problem than incentivising companies to hire them.  

We know that a big part of the reason for the collective aversion to hiring to women lies in the entrenched chauvinism in Indian society. But it is also true that a range of other factors play into this attitude too. The principal one is the superior requirements for a conducive workplace environment for women, not just protection from sexual harassment but also in terms of providing decent toilets and ensuring safe transport for women working nights. Many factory owners — including even those run by marque names — cut cost corners by not providing toilet facilities at all and have night-shift employees doss down on the factory floor in lieu of providing transport. All of this may work for men, but never for women. 

And then, there’s the age-old complaint that women go off and have babies, with all the attendant costs and problems this entails in terms of paying for maternity leave and the inconvenience of finding a replacement for the duration. The government just raised those costs, though with the most honourable of intentions. In a bid to improve maternal and infant health, the government expanded the provision for paid maternity leave from 12 weeks to 26 weeks and mandated the provision of crèche facilities for employing 50 or more employees with effect from July 1, 2017. These appear to be a sensible provision since in Indian society, the burden of childcare continues to fall disproportionately on women.

Many of the larger corporations — the multinational IT subsidiaries in particular — have been offering such facilities for years and they are conspicuous for the visibly large complement of women in their workplaces. Public sector companies and banks are other generous providers. But deep-pocketed giants are exceptions precisely because they have the wherewithal to sustain such costs, and state-owned entities do so because they are bound to follow the law. For many Indian companies — particularly in the medium and small scale (MSME) sectors — such costs can be way too burdensome and, therefore, act as strong disincentives for hiring more women. 

Given that MSMEs remain the critical employment generators in India and many remain outside the formal employment arena (where a lower PF provision won’t make any difference), it may make better sense for the government to explore a more realistic set of incentives. That is assuming that the government is serious about expanding women’s participation in the workforce beyond easy vote-winning ruses.

The starting premise would be a sensible recognition that the payment of maternity and childcare benefits does impose monetary and non-monetary costs on companies.  One suggestion to minimise the burden has been for the government to offer a subsidy. That comes with all the attendant problems of (in)efficient delivery (the backlog on fertiliser payments alone holds a lesson). But what if companies earned tax breaks on maternity benefits and expenditure on crèche facilities? These proposals are easy to implement and the scope for misuse is minimal, since maternity leave is activated on the production of a doctor’s certificate. This offset may still not motivate small enterprises to redress their gender balance since many of them are outside the tax net. Medium-sized companies, on the other hand, could well feel spurred to start bucking the trend. 

What about disparate pay, you may ask, or the propensity for organisations to promote male employees faster than women. These are issues too, but they can be addressed once there is a critical mass, so to speak, of women in the workforce to start with.