Reform in Practice: Sowmya Dhanaraj (Good Business Lab) on Gender and India’s Manufacturing Workforce

What is one area of regulation in India that should be deregulated?

I'm working a lot on the worker well-being and especially in the manufacturing sector. I feel I closely work with low-income laborers and therefore I think that this sector really needs a lot of reforms, specifically when it comes to improving gender representation in the workforce. For instance, you know, there is a big difference between what are the social norms or gender norms followed in our society and where the law is.

The laws can be very progressive, they are a lot to a lot extend gender equalizing or gender neutral and in some cases more gender progressive and so on, but where the society is far from it. This leads to a lot of friction in terms of what firms can do to improve their gender diversity. So for instance, I can give you an example.

If you think about maternity benefits, the law in India is that the firms have to pay the six months of maternity leave from their own pocket. Now imagine if you're a small-sized firm with only 50 workers or 40 workers and then you have women working in the firm. Now it is not only that you have to find replacement for this woman when she goes on the maternity leave, but you also have to pay the wage of the person whom you're replacing as well as the wage for another person whom you're hiring in your place.

Now for small firms this is very costly and of course we have seen in a lot of cases that firms work around this by breaking the laws, by asking women to leave the workforce and join later so that they don't end up paying both the wages. So what is happening in this context is that the government is shifting this entire cost on the firms and the firms will always find a workaround to not implement these things as much as possible. But in my experience what I've seen is that when firms really want to be gender diverse and then they are progressive, they go out of their ways and do more things than what law suggests to make sure that women join the workforce.

But when firms do it just for the compliance sake, they find all sorts of workarounds to not implement those rules. So this I feel is where this non-compliance gap comes in and it creates a lot of tension between what actually can work for the firms and what actually doesn't work. So what we have to do is that when there is a huge non-compliance gap, I feel that shifting this cost or making the firms entirely liable for bringing out those changes in the society is unfair and sometimes it will just only backfire or it will not have any effect in essence to change gender representation in the workforce.

What would a more effective alternative look like?

A better alternative can be looking like instead of putting the burden on the firms, countries can think of some kind of shared structure. Instead of saying it's completely private cost and the government has nothing to do with it, but just to see to that the laws are implemented, instead of going to that model, in a society like India where we still have to evolve in terms of gender norms, I think the government can come forward and say that, let us do it together as a shared responsibility rather than you taking up the entire responsibility. So, for instance, in the case of maternity benefits, you can think of shared cost between the government and the firms so that the firms don't work around to not pay the women, but instead make it a point to make sure that the women are paid and they are also not suffering too much because of the cost that they incur in the short run.

So, these kind of shared responsibilities will motivate firms also to hire women as well as government also achieve bringing more women into the formal labour force where more women get covered by these benefits.