NEGA-tive prospects

The Common Minimum Programme (CMP) of the United Progressive Alliance, released last week, contains six paragraphs on employment.

The first paragraph states the intention of the government to immediately enact a National Employment Guarantee Act (NEGA), which will provide a guarantee for at least 100 days of employment to at least one able-bodied member of every poor or lower middle class household.

These jobs, which will offer the minimum wage, will be used to create assets under public works programmes. While this programme is being initiated, a massive food-for-work programme has been promised.

No one doubts the sincerity of this government's intention to create a large number of jobs. In fact, since unemployment figured prominently in pre-election surveys as the issue of most concern to the largest number of people, its approval ratings will depend heavily on how it deals with the problem.

But, there are more and less efficient ways of creating jobs. The best way to create jobs is to facilitate the growth of competitive, labour-intensive activities. Whether these are in agriculture, manufacturing or services is less important than that they are being created, because value is being added and profits are being earned.

The government may be required to spend money to smooth the process, but the momentum must be generated by private motivations and initiatives. However, politicians with an eye towards re-election will argue, this is a long and risky route. Better to have some immediate results, even if it means that the government has to spend more money.

The problem is that the money spent can be considerable and at the end of the day there may not be much to show for it. For a start, the numbers of people who would volunteer themselves for this scheme can be humongous.

There is no official estimate of how many people are employed for less than 100 days, but the statistics suggest that the number could lie anywhere between 11 million and 30 million. For every million people who exercise their right under the law, at an average wage of Rs 50 per day, the cost of the guarantee is Rs 500 crore a year, apart from administrative costs.

The scheme will have to be managed at the local level, which carries with it problems such as the likelihood of leakage. This means that the government spends money, but those for whom it is intended do not get it. As Rajiv Gandhi famously declared, only 15 per cent of the money spent on such programmes reaches the beneficiaries.

Finally, the economic value of assets built this way is questionable, if we are to go by the experience of such programmes that we have so far.

So the government must recognise that such programmes work well in disaster scenarios, in which they provide a temporary safety net to affected people.

They cannot be seen as permanent substitutes for the more fundamental changes needed to create a sustainable and fiscally viable process of employment generation. But on these, the CMP is largely silent.