(Co-authored with Radhika Pandey)
The proposal that the government should bring in a right to employment in urban areas for Covid-relief may be a quick band-aid to help workers who have lost their jobs in the lockdown.
But it is a short-sighted idea considering the state of urban governance and funds available with cities for building infrastructure, law and order, water, sanitation, solid waste management, electricity, roads, public transport, health and education.
Over time, an urban version of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) could encourage job-seekers in rural areas to seek jobs in cities without the necessary skills needed by cities, and without any idea of the demand for labour because of the added comfort of an urban employment guarantee.
Under MGNREGA, the government guarantees 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. If a job seeker does not get employed within fifteen days of applying for a job, the applicant is entitled for unemployment allowance.
The Covid induced lockdown led to a halt in economic activities in urban areas and resulted in a process of reverse migration of workers to villages. To address the mounting rural distress emerging from the large scale migration of workers, the Government increased the allocation in Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by Rs 40,000 crore under the Atma Nirbhar Bharat package.
The scope of work has also been expanded to provide benefit to more number of job seekers in rural areas. As an outcome, the scheme has aided in improving rural incomes.
A proposal has been floated for introducing an employment guarantee programe for urban workers. It is argued that workers employed in informal sectors in urban areas have seen a collapse in their incomes. With no social security net to fall back, there should be an urban replica of MGNREGA as an urban employment guarantee program.
While the proposal is noble in its intent, it is short-sighted.
In rural areas, MGNREGA typically involves manual earth work like digging of canals but the scope for manual unskilled work is limited in urban areas.
MGNREGA was envisaged to help farmers and agricultural labourers seek jobs between two cropping seasons, or in ups and downs in employment, to prevent them from slipping into poverty. The scheme is conceived as wage intensive and less money is allocated towards materials and administration. The argument that the scheme would provide employment as well as result in asset creation in urban areas may not hold true. The emphasis on labour intensive works prohibiting the use of contractors, and machinery makes it amenable to addressing the problem of rural unemployment and under-employment.
The capital content of urban infrastructure tends to be high. For employing the same number of workers, the total expenditure would need to be much higher in, say construction activities. The norms as well as the cost per worker would be much higher.
An urban MGNREGA could potentially propel migration of workers from rural to urban areas. This could create challenges for the already crumbling infrastructure and services in urban areas.
Less than 10% of the 4000 plus statutory cities have a sewerage system. More than 45% of urban households are known to depend on on-site sanitation systems. Public utilities such as roads lack design standards. The administration of small towns and cities is under the purview of Urban Local Bodies (ULBs). However most ULBs are understaffed and lack skilled staff to meet infrastructure and service delivery needs of citizens. They are also financially constrained. Their own revenues as percent to GDP is abysmally low: at 1% of the GDP.
The Fifteenth Finance Commssion (FFC) is understood to have made recommendations towards improving allocation to local governments and ULBs. While a number of schemes such as the Smart City Mission, Atal Mission for Rejuventaion and Urban Transformation (AMRUT) have been initiated to empower the ULBs, their experience in terms of governance and service delivery has been sub-optimal.
In the rural areas, the gram panchayats are responsible for issuing job cards, but this will be a challenge for ULBs with their governance problems.
The roll out of an urban MGNREGs that seeks to guarantee 100 days of employment to each adult resident in cities would be fiscally challenging. Research by researchers at the Azim Premji University suggest that it would cost Rs 4,50,000 crore.
Reports suggest that the idea of introducing an urban MGNREGA has been dropped for now, due to shortage of funds. In addition to its already enhanced borrowing program for this year, the government will need to borrow additionally to meet the shortfall of GST compensation.
Hopefully, good sense will continue to prevail. With cities bursting at the seams, and law and order and women’s safety a serious issue in cities like Delhi, hopefully, long-term thinking too will prevail.
Until the quality of life of residents is improved through safe residential structures, greater ecological resilience, access to basic services like water and sanitation, the introduction of an urban variant of MGNREGS could create more challenges than solutions. This will require far reaching reforms in the functioning of urban local bodies.
Ila Patnaik is Professor at the National Institute of Public Finance and Policy (NIPFP), New Delhi, and a former principal economic advisor to the Government of India, Radhika Pandey is a fellow at NIPFP.
This was originally published in The Print on 6th November, 2020.
The views expressed in the post are those of the authors only. No responsibility for them should be attributed to NIPFP.