Understanding Labor Market Segmentation for Women in India

The Indian labour market is far from a level playing field. It is divided into distinct compartments, and where a worker lands often has little to do with skill or effort. For women, this division becomes especially stark. A large share of working women find themselves clustered in low-paying, insecure, and invisible jobs, while the better-paying organised sector remains dominated by men. This phenomenon, known as labour market segmentation, shapes everything from women’s wages to their access to maternity benefits and pensions.

What labour market segmentation really means
The current state of women’s participation
The informal sector dominates
Sector-wise distribution of female labour
Agriculture: the largest employer of women
Manufacturing and the secondary sector
The tertiary sector: a tale of two worlds
Implications of segmentation for women
Wage penalties and the gender pay gap
The social security gap
Vulnerability during shocks
Barriers to mobility
Why segmentation persists
Looking ahead

What labour market segmentation really means

Labour market segmentation theory argues that the labour market is not one unified space where workers compete freely. Instead, it is split into distinct segments with different rules, wages, and protections. As researchers note, these segments are characterised by varying levels of job security, wage disparities, and access to social protection, with the sharpest divide running between the formal and informal sectors.

In India, this segmentation has a strong gender dimension. Women are not evenly distributed across jobs. They are concentrated in specific industries, specific kinds of contracts (or no contracts at all), and specific tiers of the workforce. Understanding this concentration is essential to understanding why economic growth has not automatically translated into better outcomes for women workers.

The current state of women’s participation

The Periodic Labour Force Survey (PLFS), conducted by the National Statistical Office, gives the clearest picture. According to PLFS 2023-24, the Worker Population Ratio for women aged 15 and above rose from 22.0% in 2017-18 to 40.3%, while the Labour Force Participation Rate climbed from 23.3% to 41.7%. On paper, this looks like good news. More women are working than ever before.

But the headline numbers hide a deeper problem. Most of this growth has come from rural women entering self-employment or unpaid family labour, not from formal salaried jobs. Around 76.9% of rural women remain in agriculture, and much of the recent rise is considered distress-driven, with women joining the workforce out of economic necessity rather than expanding opportunity.

The informal sector dominates

The International Labour Organization estimates that approximately 81.8 percent of women’s employment in India is concentrated in the informal economy, while only about 5 percent work in formal jobs with contracts and worker protections. Compare this with the formal labour force, where India’s rate of female participation stands at only around 24 to 30 percent – among the lowest in developing nations.

The implication is sobering: when a woman in India works, she is overwhelmingly likely to do so without a written contract, without paid leave, and without a safety net. This is not a marginal feature of her work life; it is the dominant reality.

Sector-wise distribution of female labour

Where exactly are women working? The answer reveals the second layer of segmentation – concentration in specific sectors of the economy.

Agriculture: the largest employer of women

Agriculture remains the single biggest employer of women workers. NITI Aayog data shows that during 2019-20, the agriculture and allied sector provided employment to 60 per cent of female workers, compared to 40 per cent of male workers. The industry sector absorbed only 16.6 per cent of women in the workforce, while services employed 23.5 per cent.

The PLFS 2021-22 data tells a similar story: agriculture has the highest estimated percentage distribution of female workers, followed by manufacturing. More recently, the share of women in agriculture has actually increased between 2017-18 and 2023-24, suggesting that structural transformation – the shift of workers from farms to factories and offices – is not happening for women the way it should.

Manufacturing and the secondary sector

In manufacturing, women are not absent, but they are clustered in low-skill, low-wage segments. More than 60% of women’s work in the non-farm sector is informal employment, concentrated in industries such as construction, retail trade, tobacco products, textiles, apparel, food processing, and hotels and restaurants. These are precisely the industries where wages are lowest and unionisation is weakest.

Home-based work deserves a special mention. An estimated 17.19 million women in India are engaged in home-based work, with 12.48 million involved in non-agricultural activities. These workers stitch garments, roll bidis, assemble products, and pack goods from within their own homes – invisible to labour statistics and unreached by labour laws.

The tertiary sector: a tale of two worlds

The service sector is where the contrast is most striking. Women in urban areas have made some inroads – services constitute nearly 64% of total women workers in urban areas, as documented in an Asian Development Bank Institute statistical portrait of the Indian female labour force. But this masks deep internal divisions. A small group of women works in well-paying telecommunications, IT, business services, healthcare, and education. A much larger group works as domestic workers, sweepers, cleaners, and care providers.

The E-Shram portal, which registers unorganised workers, found that women held a 96 percent share of domestic and household work, compared to around 4 percent of men. This single statistic captures the gendered hierarchy of services more vividly than any theoretical framework.

Implications of segmentation for women

Why does this segmented structure matter so much? Because the segment a worker occupies determines almost everything about her economic life.

Wage penalties and the gender pay gap

Segmentation directly produces wage gaps. According to UN Women, Indian women earned, on average, 48% less than their male counterparts in 1993-94, with the gap declining to 28% in 2018-19 based on National Sample Survey Office data. The gap is far from closed. In home-based work, women earn around Rs. 24 per hour while men earn Rs. 48 per hour – half of the recommended minimum wage.

The gap is not only about lower hourly pay. It is also about hours, types of contracts, and bargaining power – all of which are determined by which segment a woman occupies.

The starkest cost of segmentation is the loss of social protection. The National Commission for Enterprises in the Unorganised Sector (NCEUS) defines informal jobs as those without employment security, work security, or social security – meaning no protection against arbitrary dismissal, no protection against workplace accidents, and no maternity or health benefits.

Women in agriculture, who make up the largest chunk of the female workforce, have almost no social security protection at all. By contrast, women in service-based industries such as media, public administration, healthcare, and education are far more likely to access at least one social security benefit. The result is a two-tier system where a minority of women enjoy something close to decent work, and the majority labour without any safety net.

Vulnerability during shocks

Segmentation also determines who survives an economic shock. The Covid-19 pandemic exposed this brutally. A Centre for Sustainable Employment report cited by gender researchers found that during India’s first lockdown in 2020, 47 percent of women lost their jobs and did not return to work by year’s end, compared to just 7 percent of men. Women in the informal sector had no work-from-home options, no employer-paid leave, and no insurance. The shock fell hardest on those least protected.

Barriers to mobility

Perhaps the most damaging consequence of segmentation is its persistence. Once a woman is in the informal sector, moving to the formal sector is extraordinarily difficult. Lack of formal education, family responsibilities, restricted mobility, and discriminatory hiring practices keep her trapped. Even within corporate India, the picture is uneven – only 17% of C-suite jobs and 30% of entry-level positions are held by women, according to a 2025 NASSCOM-Deloitte report. The pipeline narrows sharply as one moves up.

Why segmentation persists

Several forces sustain this segmented structure. Social norms continue to define which work is “appropriate” for women, pushing them towards care-related and home-based occupations. The double burden of paid work and unpaid domestic responsibilities limits how many hours women can devote to formal employment. Skill gaps restrict entry into high-paying sectors like technology and manufacturing. And weak enforcement of labour laws in the unorganised sector means that the cost of keeping women in informal arrangements is low for employers.

Policy responses such as the Code on Wages (2019) attempt to universalise minimum wage coverage across both organised and unorganised sectors, and the Mahatma Gandhi National Rural Employment Guarantee Act has helped raise rural wages for women. But policy alone cannot dissolve segmentation. The deeper issue is that the structure of the economy itself – what jobs it produces, where it produces them, and on what terms – continues to allocate women to its weaker tiers.

Looking ahead

Segmentation is not destiny. Women’s growing educational attainment, the expansion of service-sector jobs, and gender-responsive labour codes have started to crack the older patterns. But the cracks are uneven. A small group of urban, educated women is moving up the ladder, while a vastly larger group remains caught in informal, low-wage, low-security work. Unless the secondary segment itself improves – through wage floors, social security, recognition of home-based work, and serious enforcement – formal-sector progress will remain a privilege of the few.

What do you think? If the labour market is structurally segmented, can targeted government schemes alone close the gap, or does the change have to begin within households and social norms? And how should we measure progress for women workers – by their numbers in the workforce, or by the quality of the work they actually do?

References

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Understanding Labor Market Segmentation for Women in India

Table of Contents

What labour market segmentation really means 🔗

The current state of women’s participation 🔗

The informal sector dominates 🔗

Sector-wise distribution of female labour 🔗

Agriculture: the largest employer of women 🔗

Manufacturing and the secondary sector 🔗

The tertiary sector: a tale of two worlds 🔗

Implications of segmentation for women 🔗

Wage penalties and the gender pay gap 🔗

The social security gap 🔗

Vulnerability during shocks 🔗

Barriers to mobility 🔗

Why segmentation persists 🔗

Looking ahead 🔗