India went through one of the world’s stringent lockdowns with heavy restrictions on economic activities and human mobility. The byproduct was India’s GDP taking a nosedive to –7.4% in July-August 2020 and unemployment rates increasing to historical highs of 23.5%.
A worrisome fact is that the unemployment scenario was more severe in the urban areas than both national and rural levels. To handle this situation, governments have been discussing launching an employment program exclusively for urban set up. Even though there had been talks of such a scheme since 2019, the pandemic gave it an extra push.
NEED OF AN URBAN EMPLOYMENT SCHEME
The sudden and unplanned national lockdown resulted in a reverse migration crisis which destroyed the livelihoods of millions of informal workers and urban poor. During the second wave of the pandemic, the partial lockdowns announced in various states led more migrant workers to move back from industrial centers and cities to their native villages. Owing to this massive reverse migration, the demand for MGNREGA works shot up while percentage employment in the agricultural sector saw a jump after a decline of many years (Fig 1).
Even though short-term relief measures were announced to handle the rising urban unemployment rates and strained rural labour market, concrete measures are yet to be taken. More than a year after the need for such a scheme was felt, the Standing Committee on Labour stated in its report dated August 3, 2021, that “there is an imperative need for putting in place an Employment Guarantee Programme for the urban workforce in line with MGNREGA.”
Kerala has an urban employment scheme introduced way back in 2011, which was unsuccessful owing to poor design and implementation. High incidents of “educated unemployed” are an issue unique to the State which was not addressed by the scheme. The Odisha government launched an urban employment initiative more successfully during the first lockdown with the completion of more than 6000 projects and generation of 13 lakh person-days of work.
DESIGNING A UEGP
While we plan to launch a national level urban employment guarantee scheme, lessons from the states’ programs and an understanding of the basic difference between urban and rural job markets is crucial. First, the rural labor market experiences seasonal unemployment issues while the urban areas have a constant degree of underemployment among casual wage workers and own-account workers. Second, contractors have an upper hand in the urban informal employment set up. Additionally, scope for public works is much more varied in towns as compared with the villages.
Third, for urban areas, a bigger concern is the joblessness amongst the educated youth or labour. UEGP, if unable to give high skilled jobs, will only encourage underemployment or disguised unemployment. Moreover, such a scheme will induce more migration to cities, resulting in urban slums, congestion, and pollution.
Renowned economist Jean Drèze offered a way out with his proposed DUET (Decentralized Urban Employment & Training) Scheme which involves giving job stamps to entities like schools, parks, residential associations where renovations or maintenance are needed. The stamp holders can then directly employ workers & pay them using stamps.
These stamps can be used in lieu of currency within a fixed period while the workers can be hired from “Placement Agencies” which will monitor the work & also provide training to employees. The proposed DUET scheme can later be subsumed into another oft discussed UBI (Universal Basic Income) Scheme.
Additionally, checks can be put in place like 5+ years of domicile in the city as a criteria to give job cards, keeping MGNREGA & UEGP wages equivalent or restricting the scheme to those whose names do not appear on an MGNREGA card (followed by Jharkhand) to avoid excessive migration to cities.
THE NEED OF THE HOUR
A mention of UEGP brings forth the argument that such a scheme may not be affordable in a year that is going to see the deficit and the debt-to-GDP ratio reach historically high levels. A UEGP is expected to cost the exchequer anywhere from Rs. 1 lakh crore to 21.6 lakh crore a year which is certainly more than the Rs. 9 lakh crores the Indian government spends every year on beneficiary schemes like MGNREGA, subsidies, PDS etc.
However, what we forget is that the MGNREGA & PDS are currently riddled with loopholes & leakages & an effective percentage of the 9 lakh crores is believed to be nothing but bureaucratic costs. Thus, a UEGP or UBI can help the government close many such inefficient schemes which have already overstayed their welcome.
All of these factors present to us both benefits & challenges. DUET or UBI or any other form of urban employment scheme will have to certainly be carried out on a trial basis in a few states to recognize & weed out any gaps which can be exploited. Many even argue that extending the MGNREGA programme to urban areas rather than creating UEGP might be more cost effective. UEGP is certainly the need of the hour. Moreover, asset creation and improvements in urban quality of life would be vital investments towards our urban futures.
This article was written by Anushka Dwivedi and Rakshikha P under guidance of Dr. R P Pradhan, CPPR Distinguished Fellow. Views expressed by the authors are personal and need not reflect or represent the views of Centre for Public Policy Research.