A distinctive feature of the ruling coalition?s Common Minimum Programme is the commitment to ?immediately enact a National Employment Guarantee Act. This will provide a legal guarantee for at least 100 days of employment to begin with on asset-creating public works programmes every year at minimum wages for at least one able-bodied person in every rural, urban poor and lower middle class household.? The proposition has pros and cons that need to be looked at closely.
First, though the financial implications of the proposal are huge, the resources can be mobilised. If one considers only the rural and urban population below the poverty line and omits the lower middle class, around 50 million persons (read households) would have to be supported to cover a population of around 250 million, assuming an average household size of five. This is approximately the size of India?s population below the poverty line.
At an average minimum wage of Rs 60 per day, the cost of guaranteeing 100 days employment in a year to 50 million unemployed amounts to Rs 30,000 crore. At present, each year, the central government spends around Rs 11,000 crore on rural employment schemes and the state governments also spend about Rs 6,000 crore on similar schemes. Therefore, around Rs 17,000 crore are already there in the system and can be mobilised for the new scheme by discontinuing the existing programmes. The remaining Rs 13,000 crore can be found by restructuring some of the existing subsidy schemes.
Conceptually, a job guarantee scheme scores over a number of other schemes that are dished out in the name of the poor but end up supporting either the middle class or those above the poverty line. For instance, the bulk of the subsidy on kerosene does not reach the poor. Much of it is sold in the black market or supports the urban lower middle class and rarely benefits those below the poverty line. The subsidy on LPG goes not only to all segments of the middle class, but also to the rich.
The food subsidy too does not benefit the poorest despite the fact that the public distribution system is now targeted at the poor. In fact, the offtake of PDS grain by the poor in many states has fallen. This is because the large differential between the PDS price and market price makes diversion of grain very attractive and leads to large leakages.
Most of the schemes today, including the PDS, aim at supporting the poor indirectly through subsidies. In that sense, an employment guarantee mechanism that implies direct income transfer to the poor by giving them jobs marks an improvement over subsidy-based schemes. Direct cash transfers provide a direct benefit to the poor and also give them the flexibility of choice in spending. This expenditure adds to the local economy by stimulating demand and productive activity to meet that demand ? thereby having a multiplier effect on the local economy.
However, implementing the job guarantee scheme as a legal right would pose an enormous challenge. A legal right means that the district administration would have to be made responsible for enforcing the right. This is an onerous task and one wonders whether more bureaucracy would have to be created. Secondly, it is doubtful that already overloaded courts at the district and tehsil levels would have the capacity to speedily discharge complaints against laxity by enforcers of the right. In sum, implementation of the right, unless thought through, could end up creating a nightmare for the government, courts and beneficiaries alike.
Another issue would be eligibility. Since, only minimum wages are to be offered, the assumption is that only the really poor and destitute would apply. In the absence of a legal right, anyone queuing up could become eligible for the scheme. However, legally, only those below a certain income level would become eligible. This identification may be time-consuming but not all that difficult. But what would pose a problem is eliminating those who cross the poverty line while they avail the benefit of the scheme and including those who may lose their existing livelihoods and fall below the poverty line. This constant updating of the list would be a cumbersome exercise. But since the scheme confers a legal right, this would have to be done.
Finally, the detailing of an implementation mechanism to ensure that benefits are not misappropriated would be critical. One way this could be done is by separating the implementing and the monitoring authority. For example, panchayats or municipal corporations could be the implementing agencies and district administrations could monitor whether all identified beneficiaries are not only being paid but also made to work. Otherwise, the easiest way to enforce a right is to ensure payments even when there is no work. There are many dimensions to defining an employment guarantee scheme and ensuring its success would require rigorous effort.
The author is an advisor to Ficci. Views expressed herein are personal