Jobs scheme will not offer a long-term solution to urban unemployment. Safety nets need to better conceived

Context: A few days ago, the Economic Advisory Council to the Prime Minister released a report on the state of inequality in India. The report, prepared by the Institute of Competitiveness, provides a detailed examination of the existing disparities in society.

Some of the suggestions to tackle rising inequality in India included putting in place an urban equivalent of MGNREGA and introducing a universal basic income.

These require careful consideration.

• For more on the report – Click here

Why the proposal for an urban employment guarantee scheme has been made?

The proposal to introduce an urban employment guarantee scheme comes in the backdrop of the pandemic, exposing the critical position of workers, especially those employed in the informal sector in urban areas.

It’s also argued that not only would this provide employment during times of distress, but this would also serve as a channel to push funds through quickly in periods of stress.

Several states have in fact been experimenting with this concept. Recently, the Rajasthan government announced a scheme for urban areas — the Indira Gandhi Shahri Rozgar Guarantee Yojana — on the lines of MGNREGA.

What are the problems associated with the idea of an urban employment guarantee scheme?

First, such a scheme may simply encourage migration, which without the creation of the attending infrastructure, will only exert further pressure on the crumbling facilities of these cities.

Second, demand for work under MGNREGA tends to move in line with the agricultural cycle. As such, it is seasonal in nature. However, in urban areas, there is no such seasonality in either work demanded or unemployment, complicating the design of such a scheme. And moreover, many of the migrant workers are unlikely to have the requisite skills needed for regular jobs in cities.

Third, it is also debatable whether the educated but unemployed workers will take up these jobs.

Fourth, there are capacity constraints with the urban local bodies, which are likely to be the implementing agencies.

Lastly, there is also the question of financing such a scheme at the national level.

Way forward

The proposal seeks to address the continuing employment and inequality crisis that plagues India. However, India’s job challenge is structural in nature, owing in part to the absence of a labour-intensive manufacturing sector.

A more prudent approach would be for economic policy to focus on boosting growth, lowering inequalities in opportunities, improving access to education and health, and providing pathways for upward mobility.

Source: This post is based on the article “Jobs scheme will not offer a long-term solution to urban unemployment. Safety nets need to better conceived” published in The Indian Express on 21st May 22.