Need an urban jobs scheme: It can be designed to keep costs to the govt & impact on wages low

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August 06, 2021 3:45 AM

The increased demand for MGNREGA jobs following the pandemic shows that the flagship jobs scheme was able to absorb some of the increased demand in rural areas as migrants returned home.

But, for a more sustainable urban employment scenario, the government has to think of an urban jobs scheme.But, for a more sustainable urban employment scenario, the government has to think of an urban jobs scheme.

The Parliamentary Standing Committee on Labour has called for an urban employment guarantee scheme. Indeed, while some jobs in the cities are back, a large chunk of those in the informal sector that were lost/suspended due to the Covid-19-related lockdowns and change in social behaviour haven’t returned. The consequent impact on the urban informal sector workers isn’t hard to imagine—nearly a quarter of India’s informal sector workforce (which is 80% of the overall workforce) is estimated to be employed in urban areas. The pandemic-induced ‘forced formalisation’—moving away of business from the informal sector players to formal sector players as the former’s operations got severely affected by Covid-restrictions—has hit the urban informal workforce the hardest, as pointed out recently by HSBC’s Pranjul Bhandari and Aayushi Chaudhary; while, historically, formal sector sales have tracked the nominal GDP, during the pandemic, these overshot GDP, indicating a large chunk of the informal business got transferred to the formal sector. A report by researchers at the Azim Premji University shows that this group saw the worst year-on-year earnings-loss in the first few months after the national lockdown last year.

During India’s second Covid wave—answered by localised restrictions—urban unemployment rose in a sharper manner than rural unemployment, though the second wave hit rural areas harder than the first wave had. As per CMIE data, urban unemployment rose from 7% in March to nearly 15% in May while rural unemployment rose from 6% to 10%; this underscores the vulnerability of the urban poor. The increased demand for MGNREGA jobs following the pandemic shows that the flagship jobs scheme was able to absorb some of the increased demand in rural areas as migrants returned home. But, for a more sustainable urban employment scenario, the government has to think of an urban jobs scheme.

Critics believe this will impact the wage market by cornering urban labour—though several states have already rolled out similar schemes—and leave the private sector hanging, ultimately affecting investment. However, if the programme is designed in a way to attract demand only in case of dire need, it wouldn’t be as much a problem. Indeed, if it is based on job-stamps, of the kind economist Jean Dreze has talked about, the concerns over leakage and large demand can both be taken care of. Dreze last year proposed a Decentralised Urban Employment and Training (DUET), under which the government can issue job-stamps to specific public institutions and bodies, like schools, hospitals, municipalities, etc, for specific kinds of jobs, including maintenance, care work, environmental improvement, etc. There wouldn’t be too much diversion in a scenario where trained work in MSMEs could be more remunerative even as the scheme provides the means to the job-seeker to sustain herself till she finds better opportunities. While Premji University researchers and others, writing in The India Forum, estimate a cost of Rs 1 lakh crore for running an urban employment guarantee of 100 days for 20 million urban informal sector workers, the fact is that the demand won’t be as high as private sector activity catches up as vaccination cover expands meaningfully. It is time that the states and the Centre looked closely at the need for such a scheme, in addition to affordable housing and ration-portability for migrants.

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