India’s “right to work” scheme

A 12-year old scheme is supposed to guarantee full employment for unskilled workers in rural India. Four World Bank researchers evaluate its performance, and find it wanting.

In 2006, India embarked on an ambitious attempt to fight rural poverty. The National Rural Employment Guarantee Act of 2005 created a justiciable “right to work” for all households in rural India through the National Rural Employment Guarantee Scheme, renamed the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in 2009. This promises 100 days of work per year to all rural households whose adults are willing to do unskilled manual labor at the statutory minimum wage notified for the program. Work is to be made available to anyone who asks for it within 15 days of receiving an application to work, failing which the state government is liable to pay an unemployment allowance. ….

[So, how is the scheme working? We find that] actual participation rates in the scheme are not (as a rule) any higher in poorer states where it is needed the most. The reason for this paradox lies in the differences in the extent to which the employment guarantee is honored. The answer to the question posed in our title is clearly “no.”

Puja Dutta, Rinku Murgai, Martin Ravallion and Dominique P. Van de Walle, “Does India’s Employment Guarantee Scheme Guarantee Employment?“, World Bank Policy Research Working Paper 6003 (March 2012).

States are responsible for paying 100% of unemployment allowances, whereas the central government picks up 100% of the tab for wages, three-quarters of the non-wage component of MGNREGS projects, plus an additional 6% to defray administration costs.

How much, precisely, is the unemployment allowance? This is not reported, but can be found online. According to this site, “The rate of employment allowance shall be one forth [sic] of the wage rate for theĀ  first thirty days and not less than one half of the wage rate for the remaining period.” That should encourage states to provide MGNREGS jobs for all who seek them. It doesn’t because governments are not following the spirit or the letter of the law. This reason “virtually no un-met demand for work on MGNREGS” is recorded is simply that “state and local governments have an incentive not to report un-met demand given that this implies they should pay unemployment allowances.” These same governments also have an incentive to see that local job-seekers are kept in the dark, ignorant of their legal rights.

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