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. Based on wage data from the periodic labour force surveys, it has pegged the share of the top 1 per cent at around 6-7 per cent in total income, with the top 10 per cent estimated to earn around 30 per cent. In comparison, the report has pegged the bottom 50 per cent to hold only 22 per cent of income. Alongside, it has also explored inequities in access to health and education facilities. While this is rather commonplace, the more concrete suggestions of the report to tackle the issue of rising inequality in India — these range from putting in place an urban equivalent of MGNREGA to introducing universal basic income — require careful consideration.
The proposal to introduce an urban employment guarantee scheme comes in the backdrop of the pandemic exposing the precarious position of workers, especially those employed in the informal sector in urban areas. Proponents of this idea have 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. However, there are several problems with replicating the rural employment guarantee programme in urban areas. 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. More critically, what are the kinds of public works in urban areas? Lastly, there is also the question of financing such a scheme at the national level.
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.