Labor Markets, Fertility Decisions and Human Capital Investments

In developing nations, women traditionally play a limited role in the formal labor market. Female participation in the labor force is changing, however, as foreign companies increasingly outsource employment opportunities, such as call centers, to India, the Philippines, and other developing markets. In India, declining technology costs have encouraged the growth of the Business Process Outsourcing (BPO) sector, with call centers generating over 70 percent of BPO revenue. In 2011, female employees constituted nearly half of the 350,000 call center workers in India.

In his recent paper, “Do Labor Market Opportunities Affect Young Women’s Work and Family Decisions? Experimental Evidence from India,” Robert Jensen evaluates how new labor market opportunities in the BPO sector impact women in India. Using randomized control trials, Jensen finds that when professional opportunities are available, women make different decisions about marriage and fertility, and parents make greater investments in their daughters’ education and well-being.

To evaluate whether and how labor market opportunities affect women’s employment and familial decisions, Jensen targets rural areas where baseline surveys indicate minimal participation in the BPO sector. Over a three-year period, Jensen randomly assigns villages to a treatment cohort, contracting with professional BPO recruiters to provide information about employment opportunities as well as support services, such as interview skills, to women between 15 and 24 years old. Women in unassigned villages do not receive services and constitute a control group. After the three-year period, he conducts additional household surveys in both the treatment and control cohorts.

Jensen finds that women in the treatment group are significantly more likely to have a job, whether in the BPO sector or another formal labor market, upon completion of the program. They delay marriage and childbearing over the three-year period compared to the control group. They also express a greater desire to continue working after marriage and childbirth, and aspire to have fewer children than women in the control group. In addition, women in the treatment cohort are more likely to have pursued professional training or education in fields such as English or computer literacy.

The recruiters’ services also have a significant impact on girls between 6 and 15 years old. Girls in the treatment villages show greater school enrollment and higher Body Mass Index than girls in the control villages. Jensen reports,

Results show that clear and salient evidence of greater economic opportunities for women is met with increases in human capital investments for girls.

While his findings are noteworthy, Jensen observes that, as white-collar jobs, call centers carry less social stigma for women than manual labor. Thus, while outsourcing call centers can affect labor outcomes for women, outsourcing blue-collar jobs, such as garment factories, to developing countries may not have the same impact on human capital and fertility decisions.

Yet, the results of Jensen’s trial are particularly relevant for policymakers concerned with women’s empowerment. He notes that international organizations and governments “have emphasized social or cultural determinants of poor outcomes for women” and often focus on “awareness-raising […] to promote the status of women.” In contrast, Jensen’s findings suggest that economic and labor market solutions might better serve the aim of empowering women.

Feature photo: cc/Iecercle