It is the season of rights in Indian public policy. The Right to Education?a piece of legislation that essentially nationalises 25% of private school capacity?will soon be joined by the Right to Food. A somewhat flippant but not unthinkable solution to India?s horrible sanitation problems could require every house to make 25% of their bathroom capacity available to people who don?t have their own. But this column is not a mother nature rant against the role of the state?market fundamentalists are as wrong as communists?but a case that there can be very different costs and outcomes depending on how state interventions are structured.

NREG will spend more than Rs 1,50,000 crore over five years. The modular employable skills (MES) programme of the ministry of labour has been allocated Rs 500 crore over five years. This budget differential of 300 times is wrong. MES is rooted in capabilities while NREG is rooted in rights. MES teaches people how to grow food while NREG gives people food.

NREG is a massive ?make work? scheme whose numbers will improve if we take away the beneficiaries shovels and give them spoons. Even if we don?t consider the obvious transmission losses of corruption in the massive delivery system?more money would have reached if it had been dropped from helicopters?the biggest problems arise from the inability of NREG?s 100-day job to deliver productivity enhancing assets or an employability corridor that builds skills. But nobody can dispute that a clear consequence of NREG has been to increase the wage bargaining power of farm labour. This is bittersweet; an obvious downside has been the scarcity of farm labour and some contribution to food price inflation. But a long-term upside of NREG is acceleration in higher farm productivity because the traditional armies of farm workers at subsistence wage and marginal productivity will no longer be available. So many more unskilled farm workers now seek non-farm rural or urban jobs.

MES is a programme of the ministry of labour that belies the notion that public policy does not listen or is incapable of innovating. It is an open architecture programme that replaces archaic long programmes with short ones, involves employers in course design to ensure relevance, links money to student performance rather than institutional need, and makes public money available for outcome measured private delivery. MES enables private trainers to deliver more than 1,200 approved courses of various durations to students who are subsequently independently assessed. Thus, MES enables repair?quick re-skilling or last mile skilling?of labour market participants seeking to make one of India?s ongoing labour market transitions (farm to non-farm, rural to urban, unorganised to organised, subsistence self-employment to wage employment or school to work). Unfortunately, MES?s five-year budget of Rs 500 crore?a rounding error by NREG?s calibration?is completely inadequate to meet the market requirements.

No democracy on this planet has ever dealt with the fire hose of people that India faces; we will add one million people to our labour force every month for the next 20 years. While we can learn from the experience of other countries, nobody else has confronted the impossible trinity of cost, quality and scale. We need massive innovation in how we match jobs to candidates, how we para-skill our trainers, how we blend the four classroom factors of instructor, satellite, e-learning and apprenticeships, and how we finance skill development. The state has a huge role in skills because of a market failure; employers are not willing to pay for candidates or training but for trained candidates. Candidates are not willing to pay for training but willing to pay for jobs. Third party financiers are not willing to lend to candidates unless a job is guaranteed. And many training companies are unable to fill up classrooms even though many of them are spending more on marketing as a share of revenues than pharmaceutical companies. MES is an important part of attacking this market failure in skills because it provides viability gap funding while enabling scale and competition.

A 100-day job under NREG violates more than 37 labour laws: minimum wages, contract labour, ESI, EPFO, etc. So the government?unlike Left parties and trade unions?seems to recognise that the good is not the enemy of the great and a job is better than no job. But any state intervention programme in labour markets that ignores the issue of labour law reform ignores the very real costs of our current regime; unorganised employment, capital substitution and corruption. The labour law issue is important to the poverty and skill issue because it is very difficult?if not impossible?to sustain third party financing of skill development unless it leads to organised employment. So any innovative, sustainable and scalable state intervention in labour markets lies at the intersection of employment and unemployment. NREG fails this test. MES passes. I never imagined I?d be writing this, but isn?t it time to give the ministry of labour more money?

?The author is chairman, Teamlease Services