A Case for Urban Employment Guarantee Programme: Necessity, precedents and proposals

The Covid-19 pandemic has had a devastating impact on not just public health, but also on economies and livelihoods of people around the world. Socio-economic inequalities worsened globally, pushing about 230 million people into poverty in India alone, as per a report by Azim Premji University [1]. If there is one thing that the last two years of pandemic have shown us, it is the dire necessity of social security nets for the welfare of marginalised and vulnerable sections of society in terms of crisis, like the current pandemic.

Welfare schemes like PDS (Public Distribution System) and ‘Pradhan Mantri Garib Kalyan Yojana’ (PMGKAY) played a key role in ensuring food security among the poorest Indians.[6] The demand-driven employment generated in 2020-21 through ‘Mahatma Gandhi National Rural Employment Guarantee Act’ or MNREGA (an employment guarantee scheme benefitting the rural poor), was 44% more than the previous year [2]. This indicates the critical role played by MNREGA in handling the livelihood crisis in rural areas, which resulted from the pandemic and the lockdowns enforced consequently.

Not surprisingly, the urban poor were hit harder during the pandemic than their rural counterparts. The unemployment crisis among young urban workers was much worse, even at a time when the economy was supposedly recovering after the first covid-19 lockdown [5]. As per a report by ‘Hunger Watch’, the living conditions of the surveyed urban poor were reported to be 15 percentage points worse than that of their rural counterparts across most of the important parameters [3]. The more severe impact on urban poor (especially on those working in the informal sector), was primarily due to stricter lockdowns in urban areas and non-existence of social security nets like an employment guarantee scheme for the urban poor in most of the states.

In the wake of such a dire scenario, a Parliamentary committee recommended the roll-out of an urban employment scheme at the national level, though more than a year after the necessity of such a scheme became evident. The Standing committee on Labour in its report released on August 3rd 2021 mentioned that “there is an imperative need for putting in place an Employment Guarantee Programme for the urban workforce in line with MNREGA”. Eminent development economists like Jayati Ghosh and Jean Dreze have also stressed on the necessity of such schemes directed at urban poor [4][5]. Jean Dreze, who was instrumental in drafting MNREGA, had proposed a scheme called DUET (Decentralised Urban Employment and Training) to tackle the issue of urban unemployment and livelihood crisis. Dr. Dreze also suggests that atleast one third of such jobs under DUET be offered to women, so that we can address the twin problems of poverty and gender inequality. After implementing the DUET proposal through a pilot project, it would also be relatively easier to turn DUET into a ‘demand-driven employment guarantee’ scheme.

Additionally, Centre for Sustainable Employment (CSE) at Azim Premji University had also proposed some viable templates for urban employment schemes in a policy paper released in 2019, even before the advent of the pandemic. In this policy paper, CSE proposes a pan-India scheme specifically covering towns with less than one-million population. These proposals by Dr. Dreze and CSE are definitely worth considering in the rollout of an Urban Employment Scheme by the government. Irrespective of the design of the scheme, it is desirable to make it ‘demand-driven’ along the lines of MNREGA. The efficacy of any demand-driven employment guarantee scheme lies in the fact that in a strong booming economy with considerable number of jobs, the demand for employment through these schemes would be significantly lower as the workers would not choose to be employed at lower wages through these schemes (MNREGA wages in many states are lower than even the state minimum wage for agriculture [7]), while they have the option of other higher paying employment opportunities and thereby reducing unnecessary spending from the state. But during the times of economic distress when unemployment is high, the vulnerable sections of society would always have the safety net of a decent livelihood through these employment guarantee schemes and are protected from falling into extreme poverty. Thus, the employment generated through such a ‘demand-driven’ scheme could be thought of as a proxy indicator for the state of unemployment.

Precedents : Though the rollout of such a scheme at a national level could be a very elaborate task, we need not have to start from the scratch as we already have precedents of MNREGA and few Urban Employment schemes launched by individual state governments, like–

Madhya Pradesh (Mukhyamantri Yuva Swabhiman Yojana)
Kerala (Ayyankali Urban Employment Guarantee Scheme)
Odisha (Unnati or Urban Wage Employment Initiative)
Jharkhand (Mukhyamantri Shramik Yojana).
Rajasthan (Indira Gandhi Shahari Rozgar Yojana)
Himachal Pradesh (Mukhya Mantri Shahri Ajeevika Guarantee Yojna)

But the issue with state-funded schemes is that many of the states are usually cash-strapped (especially after the pandemic) and do not have as much fiscal space as the central government in funding these schemes to create sufficient impact on the ground. Thus arises the necessity of a centrally-funded scheme implemented at a national level.

When the UPA-I government launched MNREGA in 2006, Indian economy was seeing one of its best years. Yet the then central government realised the need for an employment guarantee scheme to alleviate rural poverty. When the informal sector is still struggling with a K-shaped recovery after two years of pandemic and an ensuing high inflation, it is only fair that the present central government gives ‘Urban Employment Guarantee Scheme’ a serious consideration, so that the urban poor too have access to reliable social security nets. The best time to implement such a scheme was probably at the peak of the pandemic when the economy was in a very bad shape. But the next best time is definitely now, so that the urban poor are protected till the informal sector gets back to at least pre-pandemic levels and so that we are also well equipped to handle any crisis (like Covid-19) which we might encounter in the future.