Guaranteeing urban jobs

Last year, more than 20 million people had applied for just 100,000 jobs in Indian Railways. This desperation for employment was further revealed through the leaked Periodic Labour Force Survey data, according to which India is witnessing its worst unemployment crisis in the last 45 years, with open unemployment of around 20 per cent among the higher educated. In addition to massive agrarian distress, we are also confronted with a shortage of dignified employment opportunities in Indian towns and cities. A large section of the urban workforce is informal and is hence exposed to a variety of risks and vulnerabilities.

This, in conjunction with rampant ecological degradation, loss of green spaces and crumbling urban infrastructure and services, presents us with a set of unique challenges. How do we create good-quality urban jobs and skills for educated youth? How do we improve urban infrastructure and public services, and reduce the ecological stress on our towns and cities?

Unlike big cities, small towns have largely been neglected in policy debates. Administration of towns and cities falls under the purview of Urban Local Bodies (ULB). However, most ULBs are severely understaffed and financially constrained. There is an urgent need to strengthen ULBs and re-imagine their functions as drivers of good-quality employment, skill-building and ecologically sustainable development. It is in these contexts that some members of the Centre for Sustainable Employment, Azim Premji University, have proposed an urban employment guarantee programme in a policy brief titled Strengthening Towns Through Sustainable Employment.

The proposed programme covers towns with a population of less than one million. There are about 4,000 such towns consisting of about 126 million people of working age. Five broad categories of works can be undertaken through this programme: (a) building and maintenance of public works; (b) creation and restoration of green spaces, rejuvenation of water-bodies and waste lands; (c) environmental monitoring, surveying, and community-auditing; (d) administrative assistance and (e) care work such as in creches and assisting differently-abled people.  

Two categories of workers have been identified. Workers with varying levels of formal education up to class 12 would be eligible for 100 days of guaranteed employment a year. This may include construction workers, masons, plumbers, etc. And, workers who have acquired formal education beyond class 12 would be provided guaranteed apprenticeship and skill-building works in monitoring, surveying, and other similar tasks in public hospitals and offices for a contiguous period of five months. While the first category of work is used to address the question of low-wage informal work and underemployment, the second category is designed to address skill-building and internship for educated youth.    

According to the Centre for Monitoring Indian Economy’s (CMIE) Consumer Pyramids Survey 2018, the median wages of urban casual labourers is Rs 361 per day. Self-employed tradespeople reported median earnings of Rs 462 per day, while clerical workers reported median earnings of Rs 1053 per day. The overall median daily wage in urban India is Rs 500 per day. More recently, the ministry of labour and employment (MoLE) has proposed a national floor minimum wage of Rs 375 per day. Keeping the CMIE and MoLE regimes as reference, we propose a daily wage rate of Rs 500 for the first category of workers and Rs 13,000 per month as stipend for the second category of workers, i.e., educated youth. Based on the internship experience, this category of workers could later seek employment in the public or private sector. Wages would be indexed to CPI-Urban and would be adjusted upward in some towns based on cost of living considerations. 

Setting the wage scheme at the median of the wage distribution would raise the earnings of the poorest. While this may adversely impact the cost of labour for small entrepreneurs, we however posit that a rise in wages for the poorest workforce would increase the demand for goods and services. The debate over the effects of a rise in minimum wages in the context of the developed economies points to a strong positive role for demand, while the negative effects in terms of loss of jobs are either small or non-existent. Moreover, a multiplier effect resulting from reduced unemployment will create conditions for entrepreneurship in a distributed fashion. 

The following essential features of MGNREGA can be retained. First, 60 per cent of the total budgetary requirement would be labour cost and the rest would be material and administrative cost. Second, this programme is demand-driven, so work would be available on demand and an unemployment allowance would be paid if work is not provided within 15 days of demand. Third, compensation would be paid to workers in case wages are not paid within 15 days of completion of work. Fourth, proactive disclosure of information under Section 4 of the RTI Act would be mandatory and periodic social audits and public hearings involving workers would be conducted.

Inadequate funds, massive delayed payments and a highly centralised wage payment mechanism have wreaked havoc in MGNREGA. For example, the Central government is yet to pay Rs 950 crore worth of arrears to the government of Karnataka for over three years, and an unacceptably high proportion (about 70 per cent) of wage payments to workers have been delayed by the Centre. Keeping these in mind, we propose three significant departures from MGNREGA in funds management and the mechanism of payment of wages.

First, the whole pool of Central funds would be transferred to the states at the beginning of each financial year. State governments in turn would transfer the Central and the state share of the budget to the ULB in four tranches of one per quarter so that funds are locally available. Thus the state government and the ULB would be the nodal agencies for ensuring decentralised payment of wages and implementation. Second, the Centre would bear 80 per cent of the labour cost and the states the remaining 20 per cent. Third, the Centre would bear 50 per cent of the non-labour costs and the rest would be split between the state governments and the ULB, depending on the size of the town. The sharing of monetary responsibilities is intended to increase decentralisation, ownership of all government levels and build local accountability. For participatory implementation, a “Right to Timely Grievance Redressal” has been proposed. 

We propose two possible variations of the employment scheme. Considering employment of one person per household, we estimate about 30 million jobs created at a cost of 1.7 per cent of GDP. Considering employment of every adult, 50 million jobs would potentially be created at a cost of 2.7 per cent of GDP.  Programme costs are potentially high but we emphasise the positive spillovers that will result from higher wage rates, increased productivity, skill-building, improved public services and reduced ecological degradation. As a comparison, World Bank researchers had estimated 1.7 per cent of GDP allocations for MGNREGA for it to run robustly, but sadly, at present, only about 0.33 per cent of the GDP is being spent on MGNREGA. Moving away from reductive debates of “less state” versus “more state”, we propose a newly imagined state intervention.  The crisis is real and so it’s time to actually get people employed.    

Rajendran Narayanan and Amit Basole work at Azim Premji University, Bengaluru. Mathew Idiculla is a consultant with the Centre for Sustainable Employment, Azim Premji University    



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