Making urban MNREGA workable: A question of getting the structure right

The urban population is more educated and generally has a different set of job preferences than the rural

An  urban job scheme along the lines of MNREGA is being debated again after a report commissioned by the Prime Minister's advisors recommended it.

The 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, recommended it 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 7 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 the following year. It rose to 38.6 per cent in urban areas in 2019-20, but the rise was faster in rural, at 40.8 per cent.

The crucial issue that arises in offering an MNREGA kind of scheme in urban areas is how much it will cost the central exchequer and the states, if the financial burden of the scheme is to be borne by both.

This depends on the design of the scheme, says Amit Basole who heads the Centre for Sustainable Employment at the Azim Premji University.

"It depends on which segment of the population the urban MNREGA targets and what you want to do with such a programme," said Basole, one of the authors of the report on a job guarantee programme for urban India, in 2019.

There wpuld be around 471 million workers in India in 2021, according to the 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 the unorganised sector in 2021.

However, urban MNREGA may not target the unorganised sector entirely.

A different cup of tea

In this context, former chief statistician Pronab Sen tried to distinguish between the MNREGA scheme and other job guarantee initiatives for urban areas.

"The whole idea of MNREGA is to support the unemployed. Before you start providing that kind of support in urban areas, you should be clear about the nature of unemployment in these parts," he explained.

He said MNREGA is very suitable for the rural setting, where unemployment is very low and is mostly underemployment.

"It (MNREGA) is not providing a permanent source of income. It is providing work and income for those periods when agriculture does not absorb labour. Agriculture uses labour for roughly 200 days a year. So, you give work for 100 days a year to each household," Sen pointed out.

However, the nature of joblessness is open unemployment in urban areas, he said, adding it is mostly the educated who are unemployed in urban India.

"We do have underemployment in urban areas. Casual labour is underemployed. For casual labourers you can say that okay, we know that you don't have work for so many days. For them, urban MNREGA can be implemented. So you put them to work for a fixed number of days. But that will (only) address the smaller unemployment problem in urban India," Sen said.

Since the educated class faces larger open unemployment, providing its constituents with jobs for a fixed number of days in a year will not solve their problem, he emphasised.

"If you give them 100 days of work, it (the remuneration) would just amount to pocket money, nothing more," Sen pointed out.

"The second problem is what kind of work you are going to put them to," he said, adding it is basically earth work--digging, building etc--in rural India that MNREGA targets.

"In urban India you neither have land nor projects. That particular way of providing a job does not work out very well. More importantly, they (the educated class) will simply refuse because their expectations of work are different. So, how do you solve the problem," he asked.

He suggested that urban MNREGA address the problem of casual workers initially.

Basole said the programme his report had proposed in 2019 also includes some other categories of workers, apart from casual labour.

"For example one can also think of people who have some education for providing them with an apprentice kind of programme. This would not be a permanent job but 3-4 months of apprentice programme for Xth or XIIth standard pass outs who would not be doing construction work," he said.

Any programme that local municipalities or Nagar Panchayats want to undertake can be included here, he said.

As for casual workers, Basole said all of them should be targeted irrespective of their status of employment.

"Casual workers who are idle for 2-3 days in a week are (actually) employed but underemployed. As long as they are willing to work for that wage rate, you should be giving them work. If you give them work for the remaining days of a week, then they would join the work," he said.

What Basole and his team proposed

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 and 150 contiguous days of training and apprenticeship for the educated youth in such urban clusters.

Some 4,000 urban local bodies, accounting for about 50 per cent of the population (census 2011 data), could be covered under the Act, they 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 the states in 80:20 ratio, while the non-labour costs would be shared between the Centre, the states, and the 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 for 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.

There is no practical experience in carrying out urban MNREGA at the national level.

Urban job guarantee schemes in six states

However, six states--Odisha, Himachal Pradesh, Kerala, Jharkhand, Tamil Nadu and Rajasthan--have implemented or are in the process of implementing it. These are very small schemes. For instance, Rajasthan has allocated Rs 800 crore and will offer 100 days of employment to those living in urban areas.

These programmes usually target casual labour in the unorganised sector because of the kind of work they provide--beautification of some areas or cleaning up of parks or water bodies. These are typically MNREGA kind of tasks, but little bit more adjusted to the urban setting. In some states such as Kerala and Tamil Nadu, the scope has been expanded a bit to cover women engaged in home-based activities such as agarbatti or bidi rolling.

The state schemes are confined to their respective inhabitants-- essentially those who hold aadhaar cards or ration cards in the state. However, there are some exceptions. For instance, Rajasthan’s urban employment guarantee scheme seeks to provide work to migrant labourers from other states only if there is an emergency situation such as the Covid-19 pandemic or a natural disaster.

Basole said the migrant worker issue is very important. The national programme needn't have the restrictions imposed by the states in this regard, he said, adding that a large part of the casual workforce is actually migrant only.