- Recently, while presenting the Budget for the next financial year, the Rajasthan government announced the start of the Indira Gandhi Shahri Rozgar Guarantee Yojana. This is essentially an employment guarantee scheme on the lines of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) albeit for the urban areas.
- MGNREGA was started in 2006 and guarantees to provide 100 days of wage employment for unskilled manual work to each rural household every financial year.
- With each passing year, more and more Indian state governments are looking favourably towards an urban version of MGNREGA. These include Kerala (Ayyankali Urban Employment Guarantee Scheme), Odisha (Unnati or Urban Wage Employment Initiative), Himachal Pradesh (Mukhya Mantri Shahri Ajeevika Guarantee Yojna or MMSAGY), Madhya Pradesh (Mukhyamantri Yuva Swabhiman Yojana) and Jharkhand (Mukhyamantri Shramik Yojana).
Why are urban employment guarantee (UEG) schemes being demanded now?
- India has had a history of urban employment schemes such as the Swarna Jayanti Shahari Rozgar Yojana (SJSRY), which was launched in 1997. It provided employment to the unemployed and underemployed urban poor through self-employment and wage employment. In 2013, the SJSRY was replaced by the National Urban Livelihoods Mission (NULM). But none of them were employment “guarantee” schemes.
- The need for a scheme providing a guarantee is due to the growing distress among the urban poor, which has remained largely unaddressed for a long time — Covid just made it worse.
- Most unemployment data shows that the unemployment rates are typically higher in urban areas. Add to that the fact that the urban poor are worst affected by India’s persistently high inflation.
- In addition to this, Indian towns and cities continue to be plagued by the prevalence of low-wage, poor quality, informal work. Government’s Periodic Labour Force Survey (PLFS) data show that despite a rise in the prevalence of regular-salaried work, over 50 per cent of the urban workforce remains either self-employed or in casual wage work.
- Making matters worse is the fact that most of the government schemes providing relief — be it from the Union government or state — prioritise rural unemployment and poverty. A good example is the existence of MGNREGA. Yet another example is the Prime Minister Garib Kalyan Rojgar Abhiyaan. This was launched in 2020, with an allocation of Rs 50,000 crore, to boost employment and livelihood opportunities for migrant workers returning to villages in the wake of the Covid outbreak.
What should be the design of a UEG?
- On the face of it, most UEGs appear to be a mere extension of MGNREGA to the urban areas.
- For instance, Himachal’s MMSAGY aims to provide at least 100 days of guaranteed employment to every household in the urban areas. But in reality, a UEG cannot be a mere extension of MGNREGA.
- For one, rural unemployment is mostly seasonal. During peak farming season, very few rural people may be unemployed. However, during other months, unemployment in rural areas goes up. But there is no such seasonality in urban unemployment.
- Similarly, the public works in which the labour is involved are quite different from each other. Another key difference is the capacity of the Panchayati Raj Institutions in rural and urban areas. Urban local bodies are poorly funded and have little capacity to provide help.
- Economist Jean Dreze, who was involved in drafting the MGNREGA, has proposed Decentralised Urban Employment and Training or DUET.
- The basic idea behind DUET is that the state government issues ‘job stamps’ and distributes them to approved institutions – schools, colleges, government departments, health centres, municipalities, neighbourhood associations, urban local bodies, etc. Initially, the approved institutions will be public institutions (private non-profit institutions could be considered later).
- Each job stamp can be converted into one person-day of work within a specified period, with the approved institution arranging the work and the government paying the wages (statutory minimum) directly to the worker’s account on presentation of job stamps with a due-form work certificate from the employer.
- Further, unlike MGNREGA, DUET proposes to be for both unskilled and skilled workers and, in fact, has a crucial element is to provide training or skilling.
How will a national-level UEG be funded?
- Most of the state-level UEGs are backed by very modest Budget allocations. But a national-level UEG would demand a substantial Budget allocation.
- According to one calculation by researchers at APU published in The Indian Forum, “a UEG programme that covers an estimated 20 million urban casual workers for 100 days, with a wage rate of Rs 300 per day, would cost the union government around Rs 1 lakh crore”.
- The actual Budget outgo would depend on how many people are covered and what is the guaranteed wage.
Should there be a national UEG?
- While programmes and schemes like MGNREGA or UEG start as relief measures, they tend to be quite sticky. It is unlikely that once instituted such a programme will be withdrawn by any future government.
- Another concern is about funding. It often helps provide a different perspective when one adds up all the money spent on MGNREGA over the past 10 or 15 years. Could that amount of money be spent better? Spent towards finding a solution that obviates the need for such relief measures?
- Similarly, it is reasonable to ask that if India had an additional Rs 1 lakh crore to spend, why should the policymakers spend it on a new UEG scheme and not simply boost the Budget allocation for MGNREGA.
- As things stand, each passing year creates another heap of poor and pushes India towards more inequality. The resulting effect — through lower aggregate demand and social unrest — on India’s medium and long-term economic prospects is unlikely to be salutary.
- Many point to the “New Deal” offered by President Franklin D. Roosevelt in the 1930s to pull the US out of The Great Depression. FDR’s “New Deal” was essentially a series of large-scale relief programs financed by direct government spending and aimed at boosting aggregate demand while also creating public infrastructure.
- It is to be seen whether India will see a national UEG as a new deal to recharge the economy or would it be a wasteful expenditure that will threaten to ruin government finances.