The Time Is Right for an Urban Employment Guarantee Programme

Amit Basole, Rajendran Narayanan, Anand Shrivastava, Rakshita Swamy

Published in The India Forum, November 2020

The crisis in urban livelihoods precipitated by Covid-19 is of unprecedented proportions. Numerous reports and surveys have revealed that urban informal sector workers were the worst hit by loss of employment during the lockdown. At the time, the absence of any social protection measures for these workers was acutely felt. The continued economic slowdown and the lack of adequate creation of new jobs shows that the informal sector workers in the urban areas are yet to experience a recovery from their losses during the lockdown.

At the national level, the government’s response by way of employment support has focussed on increased allocations to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) programme and the PM Garib Kalyan Rozgar Yojana that is aimed at returning migrant workers. While these are, of course, important steps, a large urban public job creation programme with an employment guarantee is urgently needed.

There were several news reports in September suggesting that the central government was looking at introducing an urban employment guarantee (UEG) programme as a means of providing basic income security to the millions of urban workers who had lost their jobs during the pandemic (see this, this and this). Subsequently, a few op-eds have appeared in favour of and against this course of action.

While these debates continue, several states have already launched urban employment programmes. In addition to Odisha’s Urban Wage Employment Initiative and Himachal Pradesh’s Mukhyamantri Shahri Aajeevika Guarantee Yojana (Chief Minister’s Urban Livelihood Guarantee Programme), the latest is Jharkhand’s Mukhyamantri Shramik Yojana (Chief Minister’s Workers Programme). It is still early to say much about the impact of these schemes, but Kerala’s Ayyankali Urban Employment Guarantee Scheme has been running for a few years already and can provide some lessons for the way forward. These are important steps, but they remain severely limited in scope and intent with budgets of just about Rs 100 crores or so.

Designing a UEG

The core idea of a UEG is that the government guarantees work at or just below the minimum wage in order to create public assets and provide income support to the urban poor. But a national UEG programme need not simply be an extension of MGNREGA to urban areas. In fact, it needs to be imagined differently given the differences between the rural and urban labour markets. For example, seasonal unemployment is much less prevalent in urban areas. Instead, we have a more-or-less constant degree of underemployment among casual wage workers and own-account workers. Urban local governance institutions are also much less participatory compared with the Panchayati Raj Institutions (PRIs). Private contractors play a much larger role in urban public works. And, lastly, the scope for public works is much more varied in towns as compared with the villages.

Notwithstanding these differences, there are also several lessons to be learned from MGNREGA’s operation and design. The core is the same in both MGNREGA and UEG: the government guarantees a certain number of days of work in a year per household or individual for anyone who demands it. Both are self-targeted programmes that provide income support to those in the bottom urban income groups. Payment systems, social accountability systems, and grievance redressal mechanisms for UEG can also be based on MGNREGA.

Taking these differences and similarities into account some of us had proposed such a programme last year, before the pandemic. More recently, the economist Jean Dreze has proposed a Decentralised Urban Employment and Training (DUET) scheme with a similar purpose.

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.1 This is on the assumption that each of the 20 million workers will offer themselves for work on all 100 days. In reality, as private firms restart operations and livelihoods return to pre-pandemic levels, the total funds required for such a programme would come down. If only half of all casual workers (10 million) are covered (say by introducing the programme only in poorer states or districts), then the cost drops to Rs 50,000 crores. Spending this money will assure a basic income of Rs 30,000 a year to the most vulnerable 10 million urban workers. Assuming a household size of four, this would reach an estimated 40 million or 4 crore urban poor while creating much-needed urban public assets.

Answering the critics

One common criticism of a national urban jobs programme is that we cannot afford it. Some critics have specifically referred to our 2019 policy proposal, arguing that it would be prohibitively expensive. Certainly, a full-fledged national programme, as that proposed by us, with a living wage of Rs 500 per day and covering nearly 30 million urban workers, may not be affordable in a year that is going to see the deficit and the debt-to-GDP ratio reach historically high levels. But this is not the time to let the perfect be the enemy of the good. The truth is that any large investment in an urban public works programme will significantly alleviate suffering and poverty today.

Apart from the expenses of the programme, three kinds of criticism have been made. First, that there is very limited scope for urban public works that can be undertaken. Second, that it will induce more migration to cities. Third, urban local bodies do not have the administrative or financial capacity to implement such a programme.

In fact, our 2019 proposals presented a very large list of urban works that could be carried out in the cities and towns. These include upgradation of public provisioning of basic services in urban slums, such as clean water supply, drainage and sanitation; building and maintenance of roads, footpaths, and bridges; beautification and upkeep of public structures; creation, rejuvenation, and monitoring of urban commons (like water bodies and parks) and other tasks for ecological regeneration of urban areas; monitoring, evaluation, and surveying of air, water, and soil quality; work in municipal offices, schools and health centres; provisioning of care for children, elderly, specially-abled, and those in correctional facilities; and craft related works for artisans and craftspersons. The Jharkhand scheme has drawn on our list. The experience of Odisha, Kerala, Himachal Pradesh, and Jharkhand can further enrich our understanding of the nature of feasible works.

On migration, there are various creative ways to ensure some filtering of job applicants, including, as Jharkhand does, by restricting the scheme to those whose names do not appear on an MGNREGA card. While we do not recommend the course adopted by Jharkhand in this regard, the point is that the absence of thinking about eligibility criteria is a feeble reason for not having a UEG. But this does bring up a very important point. A UEG cannot be seen in isolation, rather it must be thought of as acting in concert with MGNREGA. If MGNREGA wages are increased to at least Rs 250 per day (as they must be to come close to state agricultural minimum wages) and 100 days of guaranteed work are provided, the earnings differential between the two programmes would not be substantial after we take into account the hardships of migrating and urban living.

Finally, on the problems with urban local bodies, it is, of course, true that they are currently administratively and fiscally constrained. But it is precisely a programme like a UEG that could help build capacity in these local bodies as well as improve the quality of urban public goods.

What a UEG promises

Some of us, who are part of the Peoples’ Action for Employment Guarantee, have been engaged in a series of consultations with civil society actors, trade unions, academics, and government officials on the minimum principles of a UEG programme. Some of the issues we have discussed are the capacity of urban local bodies, migration, and the role of contractors. Consequent to the consultations, we have shared these principles with various officials in the central government. We should note that, in our consultations, we find broad support for such a scheme among civil society actors, workers’ organisations, researchers, and bureaucrats.

Critics of UEG have also been against MGNREGA. But from providing protection to addressing deprivation, to seeing people organising themselves around rights and creating useful assets, MGNREGA has played and can continue to play a transformative role. Therefore, it is a settled fact, as much as anything can be settled in economics, that despite several shortcomings, MGNREGA is an important and effective social support programme. The latest addition to our state of knowledge is a study by Cook and Shah that uses night-lights data to show that the programme increased per capita GDP by 1-2%. There is also substantial literature on the positive impact on farmers and landless labourers due to the assets created, and on women because of gender parity in MGNREGA wages.

Recently, one commentator wrongly claimed that MGNREGA had reduced private employment, and that UEG would also do so. But the research cited to support this claim shows that MGNREGA implementation led to a decline in self-employment, domestic work, and idle time. This is good news, not bad. India’s problem historically has been of underemployment, or disguised unemployment, where people are involved in low-productivity work. Hence, the fact that some of these low-productivity workers moved to MGNREGA is not only not surprising but is also an indicator of the programme’s success. Further, these people were not working for others (as is generally conveyed by the phrase ‘private employment’) but were self-employed. In fact, in more recent work, researchers find an increase in private employment as a result of MGNREGA disrupting the local employer-controlled labour markets.

A related criticism that misses the point is that MGNREGA has increased private sector rural wages. The concern is that a UEG will raise urban wages, thereby making Indian firms uncompetitive. But this is a feature and not a bug. That higher wages earned by poor labourers can be construed as a cause for worry is a sad reflection of how removed some commentators are from the realities of people’s lives. Even in urban India, wages for casual work remain abysmally low. Given the lack of social protection and the increasingly private provision of public goods like healthcare and education, a rise in the wage rate from very low levels is not only desirable but urgently needed.

This is not to say that there are no other consequences of a rise in wage levels in cities. The direct effect of higher urban wages will be on marginal employers who sell in price-sensitive urban markets and function on extremely thin margins. Higher wage costs may make these businesses unviable. There are some parallels to be seen in the effect of higher farm wages on farmer incomes. This needs to be considered in setting the wage levels of the UEG in accordance with minimum wage legislations in the country. However, it should also be noted that the customers of many of the businesses run by marginal employers also come from the poorer sections of society. It can therefore be expected that some of the increased wage cost would be offset by an increase in demand from those who benefit from the programme. Further, despite lower wages, Indian firms do not seem to be competitive with their Asian rivals for a variety of other reasons. Alleviating those bottlenecks (be they infrastructural or regulatory), is critical to becoming globally competitive. Holding down wages that are already low is not the solution.

Finally, there is the fiscal impact of such a policy, in terms of increasing debt, stoking inflation and affecting macroeconomic stability. There is a fear that the costs of such programmes will keep growing. This is unfounded. An increase in spending on a social protection programme would be an indicator of a crisis in the economy at large, and not a problem with the programme itself. Second, there is no evidence that MGNREGA or other such welfare transfer programmes have historically caused inflation in India. Third, asset creation and improvements in urban quality of life would be vital investments towards our urban futures. An improved quality of life of the marginalised in urban India is in and of itself a desirable outcome for a highly segregated and unequal society.

The time is therefore right for India to launch an urban employment guarantee programme

The COVID-19 fiscal response and India’s standing

Amit Basole and Jonathan Coutinho, The Hindu, July 22, 2020

How does India compare in the quantity and quality of its COVID-19 response to other developing countries? Here we extend our earlier analysis of India’s fiscal response (The Hindu online, “India must enhance fiscal support for COVID-19 relief and rebuilding”, April 18, 2020) drawing on the International Monetary Fund Policy Tracker, the COVID-19 Economic Stimulus Index (CESI) of Ceyhun Elgin at Columbia University, and the World Bank.

Before the announcement of the Atmanirbhar Bharat package, India lagged significantly behind comparable developing countries that are similar in GDP per capita, state capacity, and structure of the labour force. As of early July, the gap seems to have narrowed.

However, given the blurring of the distinction between fiscal and monetary components, ensuring comparable and accurate figures for fiscal responses is a challenge. For example, the total Atmanirbhar package is billed at 10% of GDP. The headline number for India’s fiscal response in international databases is around 4% of GDP. But we and others have estimated that the new fiscal outlay, including the Pradhan Mantri Garib Kalyan Yojana, of March, the direct fiscal aspects of Atmanirbhar Bharat, and the latest extension of free rations under the Public Distribution System, is around 1.7% of GDP. The one significant demand-side intervention in the Atmanirbhar Bharat package was ₹40,000 crore of additional outlay for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Most other demand-side measures involve the frontloading, consolidation, or rerouting of existing funds — for example, the recently announced ₹50,000 crore Garib Kalyan Rojgar Abhiyan, which consolidates projects of 12 ministries/departments.

On the other hand, India has surpassed almost all others in the stringency of its containment measures. As a result, the extent of relief measures does not seem to be commensurate with the economic disruption and dislocation caused by the severity of the lockdown. Vietnam, Indonesia, Pakistan, and Egypt, all while averaging less stringent measures than those in India, have announced stimulus measures that are as large or more substantial, as a share of GDP.

On cash transfers

Demand-side interventions announced by other developing countries could provide lessons for additional measures in India. Unsurprisingly, cash transfers constitute the largest category of support. The World Bank reports that, on average, such transfers amount to 30% of monthly GDP per capita, reaching 46% for lower-middle-income countries, for an average of three months. Countries have also significantly expanded coverage of their cash transfer programmes from pre-COVID-19 levels; Bangladesh and Indonesia have increased the number of beneficiaries by 163% and 111%, respectively. Indonesia’s cash schemes now cover more than 158 million people (or 60% of the population). It has even created two new unconditional cash schemes to reach 20 million individuals in urban and rural settings excluded from the current social protection measures. India could take these actions into account in decisions about expanding existing transfer programmes or even creating new ones.

Enhance NREGA

Of the World Bank’s list of 621 measures across 173 countries, half were cash-based. Most of the rest related to food assistance (23%) or waiver/postponement of financial obligations (25%). Only 2% related to public works, a clear indication of the popularity of cash transfers over public works for income support, perhaps in part due to concerns over physical distancing. One example of the latter is Mexico, which announced an enlargement of its rural permanent employment scheme to 200,000 farmers and beneficiaries. Indonesia has allocated more than $1 billion (more than ₹7,000 crore) to fund public works schemes that will benefit at least 600,000 workers.

Additionally, the Indonesia central government has directed village authorities to focus their budgets on a cash-for-work programme for day labourers and the unemployed. India has been a leader in employment guarantee policies with its flagship MGNREGA programme. This is the right time to expand entitlements in this programme as well as introduce an urban version of the programme, as many have called for.

Steps in the developing world

Developing countries are resorting to drastic means to finance COVID-19 responses. Actions so far include the amendment of legal budget limits and the enhanced issuance of bonds — including a ‘pandemic bond’ by Indonesia. One set of measures has been particularly notable: central banks in many emerging economies are experimenting with purchases of public and private bonds in the secondary market (quantitative easing) or directly purchasing government bonds on the primary market (monetising the deficit). Although the Reserve Bank of India has been buying sovereign bonds on the secondary market in India, the debate continues over whether the Indian government should invoke the “escape cause” in the Fiscal Responsibility and Budget Management (FRBM) Act, to enable the central bank to directly finance the deficit. Indonesia and Brazil have both amended laws to allow their central banks to buy government bonds, which the Indonesian central bank is doing in the primary and secondary markets. At the same time, the Philippine central bank has also bought $6bn (₹42,250 crore) worth of government bonds under a three-month repurchase agreement that is extendable after three months.

In India, one reason for the subdued fiscal response and the resort to monetary measures is likely a concern with the debt-to-GDP ratio, which is higher than for most countries in our set. However, aggregate demand and confidence in the economy have slumped and may not recover for many months. Additional fiscal outlay — in the form of cash and in-kind transfers and expanded public works schemes — would save lives and jobs today and might prevent a protracted slowdown. Not spending more now, therefore, might only worsen the debt-to-GDP ratio if growth remains depressed.

Amit Basole is faculty member, School of Arts and Sciences, Azim Premji University, Bengaluru. Jonathan Coutinho is research assistant, School of Arts and Science, Azim Premji University, Bengaluru.

India must enhance fiscal support for COVID-19 relief and rebuilding

Jonathan Coutinho and Amit Basole

Published in The Hindu, April 18, 2020

India urgently needs to increase fiscal support for COVID-19 relief and rebuilding. Among comparable developing countries with similar Gross Domestic Product (GDP) per capita, India has spent the least as a share of its GDP.

While the Central government has announced measures amounting to 0.8% of GDP, the International Monetary Fund (IMF) estimates that State-level relief adds around 0.2%, making the total 1% of GDP. Indonesia, Bangladesh, Pakistan, and Vietnam have spent much more.

Things are moving fast. Only a week ago, India was in the same range as Bangladesh and Vietnam. While there are important differences across countries, including historical and political-economic factors, mode of fiscal policy, as well as the extent of COVID-19 spread, a comparison of fiscal responses helps illustrate lessons that can be shared across developing countries. Here, we compare support extended to informal workers, small enterprises and specifically affected sectors. We also look at modes of financing at the national and sub-national levels.

All the countries have large informal sectors that bear the brunt of a shock like the COVID-19 lockdown. Vietnam is considering paying $77 (₹5,870) per month to such workers who are temporarily laid-off or forced to go on unpaid leave, and $43 (₹3,280) per month to the self-employed and those without unemployment insurance.

Brazil has announced a cash transfer for 54 million informal workers of $115 (₹8,760) each month for a three-month period. Even if India cannot match the level of payments of richer countries such as Brazil, the announced cash transfers of ₹500 (around $7) per month to 200 million women and similar transfers at the State level to vulnerable workers fall far short of what is required.

Dual strategy

Many developing countries have a dual strategy of providing immediate aid to workers who have been laid off and feeding poor families, while also trying to keep firms afloat. Indonesia, Vietnam, Bangladesh and China have all announced tax relief — in the form of deferments or reductions — for small and medium-sized enterprises (SMEs) in hard-hit regions.

In an effort to preserve jobs, both China and Vietnam are allowing firms to defer contributions to social security funds to cut operating costs. India has announced a similar measure, with the government paying employer and employee provident fund contributions for three months for workers earning less than ₹15,000 per month.

Support for MSMEs

Brazil has also created a $10 billion (₹760 bn) programme to allow businesses affected by COVID-19 to reduce workers’ salaries and hours by up to 70%, with the government partially compensating workers for up to three months. One important omission from the Indian response is such direct wage support for micro, small, and medium enterprises, which account for the bulk of employment.

In addition to helping MSMEs and workers in general, a few developing countries are assisting firms and workers in sectors particularly affected by COVID-19. Bangladesh has spent $600 m (₹45.5bn), in the form of loans to export-oriented firms, especially in the garment industry, in order to pay their workers’ salaries for three months. Around 4 million affected workers will benefit from this scheme, with payments sent via financial services on mobile phones — a technique that could be replicated in India.

Both Indonesia and Egypt have also targeted the travel and tourism sector for financial assistance, with Indonesia offering subsidies for travel costs and Egypt committing half of its $6.4 bn (₹486 bn) stimulus to supporting its tourism sector, which accounts for 10% of total employment. While specific sectors will differ for India, such an approach should be considered.

An important question for all developing countries is how these measures will be financed, especially since credit ratings have been slashed and capital outflows have further squeezed available funds.

Indonesia, Bangladesh and Brazil, realising the inevitability of high budget deficits, are preparing and announcing revised budgets. Indonesia has temporarily suspended a rule preventing the government from running a deficit of more than 3% of GDP.

India will likely revisit the Fiscal Responsibility and Budget Management (FRBM) guidelines this year. The Indian government has asked the Reserve Bank of India to indirectly purchase government bonds on the open market but has left open the prospect of the RBI directly monetising the deficit. This practice (that ended in 1997) might have, under normal circumstances, led to inflationary concerns, but these are extraordinary circumstances.

The move has parallels in Indonesia, where the government announced a new “pandemic bond” to raise funds for its deficit and the central bank, Bank Indonesia, has been allowed to purchase government bonds directly, after the revocation of a 1999 law. Indonesia has successfully raised $4.3 bn (₹326 bn) in its bond drive, including by issuing a 50-year bond — its largest ever.

While India’s debt-to-GDP ratio is higher than those of developing South-East Asian countries, what matters is the ability to finance the debt, which India possesses. Moreover, the failure to act in adequate measure now may lead to much lower growth in the future, increasing the debt-to-GDP ratio.

Finally, States and provinces will remain at the forefront of all efforts in most countries and need to augment their fiscal and administrative capacities to respond. In India, the RBI has raised the short-term borrowing limit of States by 30%. This could go up further.

Similarly, the Brazilian government has transferred funds to States and municipalities to fight the medical battle against COVID-19, while also offering them debt relief and enhanced credit lines. Chinese local governments have issued bonds to fund efforts to stimulate aggregate demand through infrastructure investment.

The trend across major developing countries seems clear: give State and local governments as much support and discretion as possible, with the coordination of the Central government and the central bank in the background. It is time to enhance our efforts in India and plan for the medium- to long-term recovery.

(Amit Basole is faculty member, School of Arts and Sciences, Azim Premji University, Bengaluru, and Jonathan Coutinho is research assistant, School of Arts and Science, Azim Premji University, Bengaluru.)

COVID-19 Crisis Relief Response And Appeal

Appeal for Emergency Measures to Deal with COVID 19 Crisis (March 24th)

Response to COVID 19 Relief Package Announced on March 26th

A Compilation of State-Level COVID 19 Relief Orders

Press coverage of appeal for emergency measures:

http://counterview.org/2020/03/24/covid-19-strides-in-public-welfare-plans-over-the-years-can-help-provide-necessary-relief-to-needy/

https://www.thehindubusinessline.com/economy/covid-19-workers-body-seeks-375-lakh-crore-emergency-relief-package-for-poor-households/article31152618.ece

https://www.outlookindia.com/website/story/india-news-economists-activists-urge-govt-for-rs-375-lakh-crore-coronavirus-relief-package-for-poor/349361

https://countercurrents.org/2020/03/covid-19-emergency-package-of-3-75-lakh-crores-urgently-needed

https://frontline.thehindu.com/dispatches/article31154962.ece

https://www.thehindu.com/business/no-economic-task-force-for-covid-19-yet/article31145254.ece

https://www.newsclick.in/COVID-19-Impact-Poor-Vulnerable-Section-India

https://thewire.in/labour/migrant-contract-workers-coronavirus-lockdown

https://www.deccanherald.com/national/give-rs-7000-each-for-two-months-to-poor-households-activists-817164.html

https://www.newindianexpress.com/nation/2020/mar/25/activists-urge-modi-government-to-help-needy-during-india-lockdown-supply-free-ration-2121144.html

https://www.thehindu.com/news/national/coronavirus-lockdown-hits-nrega-workers-hard/article31145538.ece?homepage=true

https://theprint.in/india/this-is-how-modi-govt-plans-to-help-mgnrega-workers-during-covid-19-lockdown/387687/

https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2020-03-25%2014:50:34&msec=383

Bold steps needed to meet crisis in jobs

From The Free Press Journal

India is dealing with a serious crisis of employment despite achieving higher than global average rates of GDP growth consistently for many years. The crisis has many dimensions, some of which are low real wage growth, a proliferation of insecure jobs, high rates of unemployment among the educated youth, and low and falling labour force participation rates, particularly among women. Some of these problems are not unique to India. For example, jobless growth, stagnant real wages, and rising insecurity are global phenomena.

In India, in addition to rising unemployment among the higher educated, less educated workers have also seen job losses and reduced work opportunities since 2016. Five million men left the workforce between 2016 and 2018. Although no direct causal relationship can be established based only on these trends, the beginning of the decline in jobs coincided with demonetisation in November 2016.

These are findings by the recently released ‘State of Working India 2019’ which examines employment trends since 2016. Together with ‘State of Working India, 2018’, which analysed the long-run trends in the Indian labour market, the reports reveal a crisis-hit, precarious employment situation.

Over the past two decades, rising aspirations and education levels among the youth have coincided with declining public employment and weak creation of decent jobs in the formal private sector. In the last two years, the shocks of demonetisation and the introduction of the Goods and Services Tax have also affected employment in the informal sector.

What is the way forward? First, we need to understand the nature of the crisis clearly, and second, we need to address it simultaneously on many fronts. Both these are doable given our current resources and institutional capacities. We need to move beyond the recent controversy over the release of official employment data. It merely indicates that there is now a fully established politics of unemployment in India.

The ‘State of Working India, 2019’ report analysed trends in the Indian labour market, but most of it, is concerned with policy ideas for employment generation. A running theme in the report is the importance of public goods and public action. For example, addressing the crisis of the quality of public goods in our towns through an urban employment guarantee scheme.

India has been a leader in this respect thanks to the Mahatma Gandhi National Rural Employment Guarantee Act, the MGNREGA. An urban employment guarantee scheme will provide employment within city or town limits to all those who ask for it and thereby provide services to all residents, build our civic infrastructure, and restore the urban commons.

The programme can provide 100 days of guaranteed work at Rs 500 a day for a variety of works and 150 contiguous days of training-and-apprenticeship at a stipend of Rs 13,000 per month for educated youth. Such a programme will cost between 1.7 per cent to 2.7 per cent of GDP and will create work for 30-50 million people.

This is a huge spend by any standard but it can result in spin off benefits like raising productivity, stimulating the economy via increased demand, arresting or reversing the effects of climate change, and empowering urban local bodies. Continuing the theme of public action, it is time for India to stop underinvesting in basic social services. Indians spend much more out-of-pocket on healthcare and education than citizens of other comparable countries.

A bold public commitment to a universal basic services programme will have the dual effect of supplying quality services while creating good jobs. A key condition for this is an investment in improved and increased public provision of healthcare, education, housing, security, transport, and utilities.

This includes filling existing vacancies in the system, expansion of capacity, as well as regularising various forms of contract and ‘volunteer’ workers (such as ASHA and anganwadi workers). A well-executed UBS would go a long way in restoring public goods to their rightful place in society, creating millions of good jobs in the process.

Employment-oriented public policy is vital at the macroeconomic level as well. India’s experience with industrial and trade policy (licensing, reservations, permits, subsidies, tariffs, and so on) during the planning years was mixed at best. Recent decades have seen hostility to such policy measures across the globe, barring a few such as tax breaks or the creation of special economic zones.

On the other hand, we know that strategic trade and industrial policy have played a key role in all the successful examples of industrialisation across the world. Even researchers at the International Monetary Fund, an organisation that has been a leading advocate of dismantling the pre-liberalisation era policy structures, have recently written about the importance of industrial policy. The new challenges of the fourth industrial revolution can only be met by a new industrial policy for the 21st century.

Finally, no public action on the ground or at the policy level will succeed if Central, State or local governments are starved of resources. We need to believe in the governments’ ability to deliver public goods and services, and we need to hold them accountable. Indeed, there are many successful examples of public action in healthcare, education, nutrition, industrial promotion and other areas.

These deserve greater recognition. But calls for greater government spending are often met with concerns over the fiscal deficits and public debt. While some of the concerns are legitimate, history and empirical analysis show that many of the fears are either unfounded or overblown. Focusing on the fiscal deficit to the detriment of employment generation and public goods creation is dangerous.

There are major misconceptions about India’s fiscal policy, government debt and fiscal sustainability that are belied by India’s own experience since the 1980s, and there is ample space for fiscal expansion. Such expansion can pay for itself if it invests in building capacities, raising productivity, and improving the quality of life.

India is at a crucial juncture in its economic development where timely public investment and public policy can reap huge rewards. At the same time, being in denial about the current realities and missing this window of opportunity can have large negative consequences in social and economic terms.

Amit-Basole is a faculty member at Azim Premji University, Bangalore and lead author of the State of Working India report.

शहरी रोजगार योजना की जरूरत

अमित बसोले, राजेंद्रन नारायणन
From Prabhat Khabar

साल 2019 के आम चुनाव में रोजगार का अभाव सबसे मुख्य मुद्दा बनता नजर आ रहा है. पिछले कुछ महीनों से बेरोजगारी की समस्या और इससे संबंधित आंकड़े लगातार आ रहे हैं. केंद्र सरकार ने 2015 के बाद बेरोजगारी दर के आंकड़े जारी नहीं किये हैं.

साल 2017 में स्थापित आवधिक श्रम बल सर्वेक्षण की रिपोर्ट तैयार होने के बावजूद इसे प्रकाशित नहीं किया गया. बिजनेस स्टैंडर्ड में इस रिपोर्ट के कुछ आंकड़ों के आने पर पता चला कि 2017-18 में बेरोजगारी दर बढ़कर 45 साल में सबसे अधिक 6.1 प्रतिशत हो गयी है. शहरों में यह और अधिक 7.8 हो चुकी है. उच्च शिक्षितों में यह दर बढ़कर 20 प्रतिशत हो गयी है. हर पांच शिक्षित युवा में एक बेरोजगार है. भारत के लिए यह बहुत चिंताजनक विषय है. कम आय वाले असंगठित और अनियमित रोजगार की समस्या तो है ही.

एक तरफ जहां बेरोजगारी और असुरक्षित, असंगठित रोजगार की समस्या तीव्र रूप ले रही है, वहीं दूसरी तरफ शहरों में सार्वजनिक सेवाओं का सख्त अभाव दिखता है और पर्यावरण की स्थिति भी बिगड़ती जा रही है. क्या इन समस्याओं का एक साथ कोई हल निकल सकता है? शहरी रोजगार गारंटी योजना के जरिये यह मुमकिन है.

करीब एक दशक पहले पूरे देश में मनरेगा लागू करने के बाद भारत ने, सीमित रूप में ही सही, रोजगार की गारंटी का सिद्धांत स्वीकार कर लिया.

पिछले कुछ सालों में मनरेगा में बजट की कमी और तीव्र केंद्रीकरण के चलते मजदूरों को लगातार लंबित भुगतान और कम मजदूरी जैसी परेशानियों को झेलना पड़ा है. फिर भी, मनरेगा ने गरीबों की आय बढ़ाने, गावों में लोकतांत्रिक ढांचे को मजबूत करने, लैंगिक व जाति-आधारित गैरबराबरी घटाने, पर्यावरण सुधारने तथा कुआं-तालाब जैसे सामूहिक संसाधनों को सुदृढ़ करने में सफलता पायी है. साथ ही, ग्रामसभा को सक्षम करके अति गरीब नागरिकों की लोकतांत्रिक ढांचे में उम्मीद जगाने में मनरेगा का बड़ा योगदान हो सकता है.

शहरी रोजगार गारंटी योजना कुछ हद तक मनरेगा से प्रेरित हो सकती है, लेकिन इसे शहर के अनुकूल एक अलग रूप लेना होगा. एक ऐसी ही योजना के बारे में अजीम प्रेमजी विश्वविद्यालय स्थित सेंटर फॉर सस्टेनेबल एम्प्लॉयमेंट ने प्रकाशित की है. सुझाव यह है कि शुरुआत में यह योजना दस लाख से कम आबादी वाले छोटे शहरों में लागू की जा सकती है.

भारत में तकरीबन 4,000 ऐसे छोटे शहर हैं. कई प्रकार के कार्य इस योजना के अंतर्गत किये जा सकते हैं. जैसे, साधारण लोक-निर्माण कार्य यानी सड़क, फूटपाथ, पुल अदि का निर्माण और मरम्मत, शहरी पर्यावरण सुधार यानी नदी, तालाब, जंगल, बंजर जमीन और अन्य सार्वजनिक जगहों का कायाकल्प, देखभाल, सफाई, वृक्षारोपण, पार्क और अन्य हरित जगहों का निर्माण, शहरी कृषि और ऐसे कई अन्य काम इस योजना में सुझाये गये हैं.

गावों के मुकाबले शहरों में भिन्न-भिन्न हुनर वाले और उच्च शिक्षा प्राप्त लोग अधिक होते हैं, इसलिए योजना में इसका ख्याल रखा गया है. इसके अंतर्गत दिहाड़ी मजदूरों से लेकर मिस्त्री, इलेक्ट्रिशियन, प्लंबर, पेंटर, कारपेंटर और अन्य कई कुशल कारीगरों के लिए काम का प्रावधान है. शहर का कोई भी नागरिक साल में सौ दिन का काम पा सकता है, जिसके लिए 500 रुपये रोज की दर सुझायी गयी है. इसे हर साल महंगाई के हिसाब से बढ़ाया जायेगा.

उच्च शिक्षित बेरोजगार युवा सार्वजनिक अस्पताल, विद्यालय, दफ्तर आदि में अप्रेंटिस (हेल्पर या इंटर्नशिप) का काम पा सकते हैं. साथ ही पर्यावरण और सार्वजनिक सेवाओं की स्थिति का सर्वेक्षण करना, इससे संबंधित लिखा-पढ़ी का काम और अन्य निगरानी तथा प्रशासनिक कामों में भी उनकी भागीदारी हो सकती है. हर बेरोजगार उच्च शिक्षित युवा को साल में करीब पांच महीने यह काम मिल सकता है.

इन कामों के लिए प्रति माह 13,000 वेतन मिलेगा. इस तरह शहरी बेरोजगार युवाओं को काम का अनुभव मिलेगा, कौशल बढ़ाने का मौका मिलेगा, योजना में भागीदारी का सर्टिफिकेट भी मिलेगा, जिसके आधार पर निजी क्षेत्र में नौकरी मिलने में भी आसानी हो सकती है.

छोटे शहरों में नगर पंचायतें और नगर पालिका आदि आर्थिक व अन्य संसाधनों के अभाव का सामना करती रहती हैं. इस योजना के जरिये इन संस्थाओं में भी जान फूंकी जा सकती है. शहरी रोजगार गारंटी के तहत जो लोग काम करेंगे, वे नगर पालिका के नियमित स्टाफ की जगह नहीं ले सकते और न ही रिक्त स्थान भर सकते हैं, लेकिन उनके काम में मदद जरूर कर सकते हैं. प्रस्तावित योजना लगभग तीन से पांच करोड़ लोगों को लाभ पहुंचा सकती है. इस योजना में कुल खर्च सकल घरेलू उत्पाद का 1.7 से 2.7 प्रतिशत तक होगा, ऐसा अनुमान है.

पारदर्शिता और जवाबदेही को ध्यान में रखते हुए सूचना अधिकार कानून की धारा-4 का पालन होगा. हर वार्ड में, साल में कम-से-कम चार बार सामाजिक अंकेक्षण और जन-सुनवाई के जरिये लोगों द्वारा प्रशासन और विधायकों पर निगरानी रखने का प्रस्ताव है. इसमें शिकायत निवारण के कानून को लागू करने का प्रस्ताव भी है, जिससे आम आदमी का मनोबल बढ़ेगा और उसकी लोकतांत्रिक भागीदारी में उन्नति होगी.

राजनीति में आज जब ‘न्यूनतम आय’ का सवाल गरमाया हुआ है, यही मौका है कि रोजगार गारंटी के जरिये आय की गारंटी की बात हो और रोजगार गारंटी का सिद्धांत शहरों में भी लागू किया जाये.

The shape of an urban employment guarantee

Mathew Idiculla, Rajendran Narayanan, Amit Basole
From The Hindu

India is in the midst of a massive jobs crisis. The unemployment rate has reached a 45-year high (6.1%) in 2017-18 as per leaked data from the Periodic Labour Force Survey (PLFS) report of the National Sample Survey Office (NSSO). According to the PLFS report, the unemployment problem is especially aggravated in India’s cities and towns. Aside from unemployment, low wages and precarity continue to be widespread. In urban India the majority of the population continues to work in the informal sector. Hence, India cannot ignore the crisis of urban employment.
Reviving India’s towns

Both State and Central governments tend to treat towns as “engines of growth” for the economy rather than spaces where thousands toil to make a living. Programmes such as the Swarna Jayanti Shahari Rozgar Yojana (1997) that included an urban wage employment component have made way for those focussed on skilling and entrepreneurship.

India’s small and medium towns are particularly ignored in the State’s urban imagination. As per Census 2011, India has 4,041 cities and towns with an urban local body (ULB) in the form of a Municipal Corporation, Municipal Council or Nagar Panchayat. However, national-level urban programmes such as the Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) only benefit a fraction of them. Most ULBs are struggling to carry out basic functions because of a lack of financial and human capacity. Further, with untrammelled urbanisation, they are facing more challenges due to the degradation of urban ecological commons.

Hence, we need new ways to promote the sustainable development of India’s small and medium towns. In the context of the present employment crises, it is worthwhile considering to introduce an employment guarantee programme in urban areas. Along with addressing the concerns of underemployment and unemployment, such a programme can bring in much-needed public investment in towns to improve the quality of urban infrastructure and services, restoring urban commons, skilling urban youth and increasing the capacity of ULBs.

The idea of an urban employment programme is gaining traction in political and policy debates. According to multiple reports, it could be a key agenda of a possible Common Minimum Programme of the Opposition parties for the 2019 general election. In Madhya Pradesh, the new State government has launched the “Yuva Swabhiman Yojana” which provides employment for both skilled and unskilled workers among urban youth.

What shape an urban employment guarantee programme should take can be widely debated. We have offered one proposition in the policy brief “Strengthening Towns through Sustainable Employment” (https://bit.ly/2utJlL0), which was published recently by the Centre for Sustainable Employment, Azim Premji University. Such a programme would give urban residents a statutory right to work and thereby ensure the right to life guaranteed under Article 21 of the Constitution. To make it truly demand-driven, we have proposed that the ULB receives funds from the Centre and the State at the beginning of each financial year so that funds are available locally. Wages would be disbursed in a decentralised manner at the local ULB.

Given the State’s relative neglect of small and medium towns and to avoid migration to big cities, such a programme can cover all ULBs with a population less than 1 million. Since it is an urban programme, it should have a wider scope than the the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA); this would provide employment for a variety of works for people with a range of skills and education levels. We emphasise that it would not come at the expense of MGNREGA but rather the two would go hand-in-hand.

Urban informal workers with limited formal education would benefit from this programme. They can undertake standard public works such as building and maintenance of roads, footpaths and bridges for a guaranteed 100 days in a year, at ₹500 a day. We have also proposed a new set of “green jobs” which include the creation, restoration/rejuvenation, and maintenance of urban commons such as green spaces and parks, forested or woody areas, degraded or waste land, and water bodies. Further, a set of jobs that will cater to the “care deficit” in towns by providing child-care as well as care for the elderly and the disabled to the urban working class have been included.

Skilling and apprenticeship

Another novel aspect is the creation of a skilling and apprenticeship programme for unemployed youth with higher education who can sign up for a contiguous period of 150 days (five months), at ₹13,000 a month for five months to assist with administrative functions in municipal offices, government schools, or public health centres, and for the monitoring, measurement, or evaluation of environmental parameters.

While the first category of work is aimed at providing additional employment opportunities and raising incomes for those in low-wage informal work, the second category is to provide educated youth experience and skills that they can build-on further. We estimate that such a programme will cost between 1.7-2.7% of GDP per year depending on design, and can provide work opportunities to around 30-50 million workers. In light of the 74th Amendment, this programme should be administered by the ULB in a participatory manner by involving ward committees.

Our proposal provides strong transparency and accountability structures — proactive disclosure of information based on Section 4 of the RTI Act, proactive measures through mandatory periodic social audits, public hearing and reactive measures through a “Right to Timely Grievance Redressal” for workers.

An urban employment guarantee programme not only improves incomes of workers but also has multiplier effects on the economy. It will boost local demand in small towns, improve public infrastructure and services, spur entrepreneurship, build skills of workers and create a shared sense of public goods. Hence, the time is ripe for an employment guarantee programme in urban India.

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

Interim Budget 2019: Basic Income Won’t Fix Underlying Problems, Bold Policy Vision Needed

From HuffPost.

The past few weeks, building up to the interim budget, have been exciting for observers as well as participants of economic policy making. First, some version of a “universal basic income” (UBI) seems imminent in the budget. Second, there has been much drama around employment statistics, with reports being withheld by the government and leaked to the press.

Let us take UBI first. Even a few years ago, this type of a policy would have seemed unlikely to be implemented in India. It is on the front-burner today because of a combination of factors. First, what is being proposed is not a truly “universal” income transfer, but rather a targeted one, on the basis of occupation or income level. This makes the idea politically as well as fiscally more feasible. Some have proposed a national version of the popular Telangana scheme, Rythu Bandhu, that transfers Rs 4,000 per acre per season to all landed agricultural households.

Others have proposed an income transfer to the bottom 75% of the rural population, whether possessing land or not. The second factor that is responsible for the popularity of such a policy is rising rural distress arising from droughts and a collapse in farm incomes. The third factor is worry over joblessness or rising unemployment. And finally, of course it is crucial that farm distress and unemployment are rising in an election year, forcing the government to do something bold and big on the welfare front.

On unemployment, the government has had a difficult time not only because jobs have been scarce, but also because data on jobs has been scarce. The last published government statistics on the national employment-unemployment situation are from 2015 (the 5th round of the Labour Bureau survey). For the three subsequent years, which saw two large policy interventions —demonetisation and the introduction of Goods and Services Tax (GST) —nationally representative survey data is not available.

Two surveys have been conducted during this period, the 6th round of the Labour Bureau in 2016-2017 and the new Periodic Labour Force Survey (PLFS) in 2017-2018. However, results, despite being ready, have not been made public for either survey. Instead, estimates of job creation in the public domain have been based on the Employee Provident Fund Organisation (EPFO) and other similar databases, which only cover a small portion of the Indian workforce. These showed job creation, but the numbers were not indicative of the economy as a whole.

After much uncertainty as to what was going on, the headline unemployment numbers from both household surveys were leaked to the press. And they spell bad news for the government. As per the PLFS, in 2017-2018 the unemployment rate stood at a 45-year high of 6.1 percent.

The numbers were particularly high among the youth and the educated. These numbers, at least in trend if not level, are consistent with the findings of the private surveys conducted by the Centre for Monitoring the Indian Economy. The CMIE numbers indicate a steady fall in net employment in the economy as a whole from 2016 to 2018. This means that, on balance, more jobs or employment opportunities were destroyed over this period than were created.

Clearly, both rural distress and unemployment (particularly among educated youth) are urgent problems. If it is implemented well and last-mile delivery problems are sorted out (a big if), directed income transfer or a basic income programme would have the effect of alleviating immediate distress and bolstering aggregate demand. Of course, it is possible that the policy will be accompanied by a cut in other subsidies, so the net effect may be smaller.

However, the larger point is that, as with farm loan waivers, such a policy does not fix the underlying problems. We need a bold policy vision that can create non-farm jobs and raise incomes. This is a far more difficult proposition than instituting an income transfer programme.

There are several ideas out there on what should be done, and many more should come. I will outline one here. It draws on the fact that just as there is an unprecedented crisis of joblessness, there are also unprecedented opportunities for job creation. The last two decades have seen a dramatic divergence between the quality of private and public goods in our economy. As malls, mobiles, and motorcycles have flourished, our streets, schools and sanitation have suffered. This is a result of underinvestment over the decades. Restoring as well as creating much-needed public goods for India’s future must be made our priority.

Cleaning lakes, greening commons, paving footpaths, running trains, teaching children, caring for the sick, building houses, are jobs that need to be done. These jobs require a range of skills and education levels. Fortunately for us, many of them are harder to mechanise and need humans to do them. They are also hard to substitute with imports and must be performed locally. But they do need a big commitment of fiscal resources. We cannot pay anganwadi workers a regular government wage or hire the teachers and doctors we need, or build the parks we want and clean the streets without spending public money. But if we do spend, then we will be repaid many times over, not only due to increased demand and multiplier effects, but also because such investments will increase productivity, and more importantly the quality of life in India’s cities and villages. Is it too much to expect this year’s budget to kickstart this process?

Unprecedented drop in job creation cause for worry

From Deccan Chronicle

The question of jobs and employment has been one of the most dominant economic issues of 2018. It is likely to be a central issue in the 2019 elections as well. In our recently released report, State of Working India (SWI) 2018, we have highlighted a concerning rise in the rate of unemployment in the country. In developing countries like India, unemployment is generally low because the majority of the labour force cannot afford to be unemployed, instead they take up any casual work that they can find or they employ themselves (self-employed) in some small business or other. But over the past few years, India’s unemployment rate has been steadily rising from around 3 per cent in 2011 to 5 per cent in 2015 to 7 percent in late 2018. This is unprecedented.

The nature of India’s labour force is changing rapidly. Young people are acquiring more education and entering the labour force with graduate degrees. Graduates and post-graduates now constitute 15 per cent of India’s labour force. In 2004 this number was only 6 per cent. It will continue to rise. These youngsters are not satisfied with just any type of work of a casual or self-employed nature. They want regular salaried work that pays at least the minimum central government salary. But the Indian economy is not generating such jobs in adequate amounts. As of the latest available government data from 2015, regular salaried workers account for only 17 per cent of the workforce. 82 per cent of male and 92 per cent of female workers earn Rs. 10,000 a month or less. Since graduates aspire to better jobs, they are three times more likely to be unemployed compared to the overall average. The widespread protests all over the country demanding more reservations in the public sector are a symptom of this problem.

The economic factors behind this lack of job creation are well known. The sectors that have shown rapid GDP growth, such as IT-BPO, real estate, or financial services, are not those that create a lot of jobs. Sectors that can create a lot of good jobs, such as manufacturing, have experienced extensive mechanisation and a rapid rise in insecure employment (contract work, trainees, etc). With agriculture in crisis, this is also not an attractive option for youth in rural areas. Low-wage service work and construction jobs are the only ones to be easily found.

To deal with this problem we need good, up-to-date information. But instead, 2018 saw a lot of confusion on job creation numbers due to lack of official data on employment. Three years have now passed without clarity on how many jobs have been created on net, i.e. accounting for job creation as well as job destruction in all the sectors of the economy. This is because the government has not released data for 2016-2017 and 2017-2018. Instead many claims of job creation have been made on the basis of enrollments in provident fund and pension schemes, as well as MUDRA loans, and other government schemes. But since these schemes cover only a small fraction of the total labour force, they do not paint a complete picture. Household surveys are essential for such a picture.

Currently, the Mumbai-based Centre for Monitoring the Indian Economy is the only available survey data source since 2016. RTIs filed by us reveal that official survey data for 2017-2018 is available and will be released soon. One hopes that this will be in time for a debate over the government’s performance before the elections.

To sum up, unemployment among the educated youth, low wages among those who do have work, and lack of timely data are major problems we need to address urgently.

In SWI 2018, we have suggested that a “National Employment Policy” is needed. I end with a few ideas for such a policy.
1. A Universal Basic Services (UBS) programme that expands public investment in education, health, housing, public transport and safety. This will create good jobs in addition to addressing the shortfall in the provisioning of public goods.
2. A National Urban Employment Guarantee Programme that offers work opportunities particularly in the small towns and peri-urban areas. Such a programme will necessarily differ in details from NREGA, but will be in the same spirit. Workers employed in this programme can contribute to the creation of public infrastructure such as roads, sanitation, urban greening and rejuvenation of the rapidly degrading urban environment.
3. Fiscal policy (at central, state, local levels) is central to employment generation and welfare. We need to reorient fiscal policy towards employment rather than international credit-ratings, and stop making the fiscal deficit a policy target.
4. A new data architecture based on household and business surveys, time-use surveys, and administrative sources (such as EPFO and GST databases).

(Amit Basole is Associate Professor of Economics and Head, Centre for Sustainable Employment at Azim Premji University)