Wasted labour

If any more proof is needed that hastily-made election promises are the policy maker's nightmare, the United Progressive Alliance's (UPA) pledge to immediately enact a National Employment Guarantee Act (EGA) is one.

The Common Minimum Programme (CMP) says 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" (emphasis added).

This went much further than the Congress Party manifesto and economic vision document that talked about providing this guarantee only for rural households.

The Planning Commission has been given the responsibility of designing a suitable programme and it has got down to work, studying various models of employment generation schemes.

And as policy makers sit at their drawing boards, they are realising that the task of giving concrete shape to this glib and heart-warming assurance is more difficult than they had thought.

The Food for Work programme in 150 districts, which will be operational till the EGA is passed, is expected to enable the government to understand the full implications of the legislation "" the anticipated demand, financial implications, the wage rate to be fixed, among other things "" as well as operational and organisational issues.

Economist Jean Dreze's draft legislation, which has been considered by the National Advisory Council (NAC), deals only with rural employment, while the CMP's promise covers urban areas as well.

It's not clear if the Dreze's draft will be adopted by the government, unless the NAC approves it and its word is considered final. The draft is a near-replica of the Maharashtra Employment Guarantee Act, 1978, but those given the task of drafting the national legislation are not too keen on replicating that model.

There is recognition that the scheme has not led to a significant reduction in poverty in areas such as Vidarbha where poverty levels are as high as that of Bihar and Orissa.

Delhi University's Faculty of Management Studies professor Raghav Gaiha, who has extensively researched the EGS, points out that two-thirds of the employment generated under EGS is concentrated in one-third of Maharashtra's districts though the scheme is operational in 33 out of the state's 35 districts.

The Planning Commission has asked the Maharashtra government for a report on the working of the EGS, especially highlighting its weaknesses so that the national programme avoids them.

What's worrying planners and bureaucrats is the element of guarantee, which is what sets the proposed programme apart from other employment generation schemes and a feature that is present even in Dreze's draft. Government sources are worried that this will bring in a justifiable element into the whole programme.

Perhaps that is why the thinking now seems to be that instead of providing a legal guarantee, the scheme will be some form of incentive for labour-intensive employment that will result in huge numbers of people getting employed.

But what needs to be remembered is that though the Maharashtra EGA does say that the state government has to pay Rs 2 per day in the event of not providing work, this unemployment allowance has never been paid in the 30-year history of the scheme.

Not because all eligible people have been provided work, but simply because there is no record of anyone having been refused work! In Maharashtra, too, there is an EGS Fund, funded by various taxes, but utilisation has been below 50 per cent since the late 1980s.

Which only proves that insisting on registration of job seekers and setting up of dedicated funds may sound great on paper but can be quite a problem to implement.

Maithreyi Krishnaraj, professor at the SNDT University, has pointed out in a paper, "Employment Guarantee Scheme: An examination of the administrative mechanism", written for UNIFEM, that the EGS suffers from the usual problems of red tape, corruption and mismanagement that dog all welfare programmes.

Apart from these "normal" failings, Krishnaraj points to certain design deficiencies in the EGS. Perhaps the biggest indictment of the EGS is the fact that it, according to Krishnaraj, provides mainly for short-term employment rather than creating conditions for sustainable and long-term employment.

It has not, she argues in her paper, equipped the rural poor with skills that will help them access the mainstream labour market. This fear, says Gaiha, is a trifle exaggerated.

Many of the poorest withdrew from the EGS, he argues, when alternative employment opportunities were available. Often, what prevents them from accessing those opportunities are other issues such as lack of credit.

There's also the question of the spread of the scheme, over regions and across groups.

A uniform scheme for the whole country could well result, say bureaucrats, in the guarantee being applicable even to Punjab, where poverty is not as stark as it is in Bihar or Uttar Pradesh.

The trick, they say, will be to work in some self-selecting mechanism so that the legislation covers only the extremely deprived regions.

One way of doing this would be to fix the wage at a level at which only those in abject poverty will participate.

This will also exclude the richer states. But fixing a national-level wage is fraught with problems and the government may well have to fix the wage in relation to the minimum wage in different states, in which case completely excluding the better-off states may not be possible. Besides, there are different wage rates for different seasons as well as activities.

Even under Maharashtra EGS, the wage has been a vexed issue. According to Gaiha, an increase in the wage rate under the scheme in 1987 saw the very poor being crowded out.

With the national scheme including practically all unemployed people, the chances of the poorest getting left out only increases. The wage hike in Maharashtra also saw EGS works being rationed (by asking people to travel large distances for work, giving physically strenuous work, not starting projects under EGS), which, argues Gaiha, is against the spirit of the guarantee.

Krishnaraj and Gaiha both lament the change in the profile of projects taken up under EGS. The emphasis, they say, has changed from community assets like check dams, roads and so on, to individual assets such as wells, percolation tanks and so on, which benefit only those owning land.

Besides, such structures invariably involve contractors who prefer to employ physically strong people, thus excluding the poorest sections.

At the same time, both researchers are strong votaries of EGS. "There is a case for an EGS," insists Gaiha, who is not too sure about whether the free market will adequately cater to the deprived sections. However, the lacunae shown up in their studies raise a very basic question: is the government capable of generating productive employment at all?

The mid-term evaluation of the Ninth Five-Year Plan, the June 2001 Report of the Task Force on Employment Opportunities, which was headed by present Planning Commission Deputy Chairman Montek Singh Ahluwalia, and several other documents are testimony to the fact that state-run employment generation schemes are not as successful as they are meant to be.

Yet there seems to be little attempt to think out of the box. Planning Commission member B Mungekar is clear that "in a country like India, some kind of EGS will always be necessary given the magnitude of the labour market, which it will be impossible for the mainstream economy to cater to."

At the same time, he admits that "giving continuous meaningful employment will always be a challenge. There is no easy solution." If the government blindly adopts the Maharashtra model of EGS, it may just be taking the easy way out.