Identifying works and funding key to national urban job scheme

Various states, including Rajasthan, Odisha, West Bengal, Himachal Pradesh, Kerala, Jharkhand and Tamil Nadu, have introduced job schemes in urban areas or are in the process of doing so.

However, these are very small schemes, and to make any fruitful dent on urban poverty, a national-level programme is required to be launched. For instance, Rajasthan’s is the biggest scheme among these states with an annual budget expenditure of Rs 800 crore.  

In fact, a report, ‘The State of Inequality in India’, commissioned by the Economic Advisory Council to the Prime Minister (EAC-PM) and prepared by the Institute for Competitiveness, had recommended in May that such a scheme be launched. It should be on the basis of its assessment that a gap between the labour force participation rate (LFPF) in rural and urban areas is widening.

LFPR is the percentage of persons in the labour force (working or seeking jobs) in the population. The LFPR was slightly lower in urban areas at 36.8 per cent, compared with 37 per cent in rural areas in 2017-18, according to the annual Periodic Labour Force Survey (PLFS).

However, this gap widened over the next few years. The LFPR was 36.9 per cent in urban areas and 37.7 per cent in rural areas the following year. It rose to 38.6 per cent in urban areas in 2019-20, but the rise was faster in rural areas, at 40.8 per cent.

The following year, 2020-21, when the first Covid wave struck and nationwide lockdowns were announced for months, the LFPR rose to 42.7 per cent in rural areas and 38.9 per cent in urban areas.

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However, launching a job-guarantee scheme for urban areas at the national level or urban MGNREGA will face the crucial issue of financial burden. The Centre may have to bear it alone or with the help of states.

The financial burden depends on the design of the scheme. There would be around 471 million workers in India in 2021, according to World Bank data.

Extrapolating from an earlier NSS report that says 20 per cent of the labour force is in the unorganised sector in urban India, around 94.2 million persons were in this sector in 2021. However, urban MGNREGA may not target the unorganised sector entirely.

Earlier, Azim Premji University came out with a report on a job-guarantee programme for urban India, in 2019. That report had proposed Rs 500 a day as wages for casual workers and Rs 13,000 a month as stipend for persons with some education.

It proposed providing 100 days of guaranteed work to casual workers. It also proposed 150 contiguous days of training and apprenticeship for the educated youth in urban clusters. About 4,000 urban local bodies, accounting for about 50 per cent of the population (Census 2011 data), could be covered under the scheme through an Act, it suggested.

According to that report, the total budgetary requirement will have three components — labour, material, and administrative cost. It proposed a 60:40 ratio. That is, 60 per cent of the total budgetary allocation would be labour cost and 40 per cent would be a combination of material and administrative cost.

Labour costs should be split between the Centre and states in an 80:20 ratio, it said. Also, non-labour costs would be shared among the Centre, states and urban local bodies (ULBs), the report suggested.

The report proposed two options for the programme. Option-1 will give work of 100 days in a year to one person in a household and Option-2 gives it to every adult.

The first option would, under certain assumptions, cost a total of Rs 2.8 trillion or 1.7 per cent of GDP at that point of time. The second option would cost Rs 4.5 trillion or 2.7 per cent of GDP.
 

The issue is from where such funds would come, given that the Centre and states are grappling with rising expenditure and scarce resources. This is even as goods and services tax (GST) is providing them some buffer. Former chief statistician Pronab Sen said funds could be reallocated from the Budget. Moreover, Rs 500 a day to a casual worker is a big amount and it should rather be minimum wages for unskilled workers.

Besides, all casual workers will not turn up for these works as they also have to be available for contractors. Otherwise, they will lose those jobs, he said. Moreover, Rs 13,000 a month as stipend for persons with some education is not an urban job scheme but more of an employment dole and needs to be separated.

Sen said more than the funds, a bigger problematic area in the way of such a scheme is identifying the kinds of work that would be provided.   

The works such as road maintenance, bridge maintenance, park maintenance are done by any decent municipalities. "If you provide these works also under the urban job scheme, you will only be replacing  one set of workers with others," he said.

C P Chandrasekhar, former professor of economics at Jawaharlal Nehru University, said the point is whether you have willingness to introduce such a scheme.

“If you have the willingness, you will mobilise resources for such a programme. This is crucial not only from the point of view of providing employment to the people but also to stimulate the economy through demand multipliers,” he said.

Currently, the economy has a low tax-GDP ratio.

"It (an urban job scheme) is not only feasible, it is a very good idea. You need to have some kind of wealth tax and inheritance tax, besides higher taxes on upper income groups to have a decent tax-GDP ratio," Chandrasekhar said.

When asked if more taxes could be imposed on the upper income group when there is already as high as 37 per cent  for those earning over Rs 5 crore in a year, he said given the level of inequality this is not only feasible but necessary too. 

 

Gehlot launches 100-day job scheme in urban areas

Rajasthan Chief Minister Ashok Gehlot on Friday launched the “Indira Gandhi Urban Employment Scheme” along the lines of the MGNREGA to provide 100 days of employment in a year to families in urban areas.

Gehlot said any family that wanted to increase their income at a time of high inflation could seek jobs under the scheme.

He added that the employment guarantee programme was prepared after studying similar schemes in other states.

The state’s urban development and housing minister Shanti Dhariwal said more than 400,000 registered under the scheme, while job cards had been issued to 250,000. On the first day, around 40,000 people got jobs.

Under the scheme, projects on environment protection, water conservation, heritage conservation, maintenance of gardens and sanitation and cleanliness, among others, will be undertaken.