All pay and no work…

For a person who regularly does overtime, would productivity be the same during normal and overtime shifts, if his compensation was not closely linked to output during regular hours? If he is paid based on productivity in overtime, but fixed wages for normal hours, would it not be rational to conserve energies for overtime and take it easy during regular hours?

If students in a college find that for similar work they get 100 per cent marks from a particular teacher and 25 per cent from another well-meaning colleague, would they not lean towards the more generous teacher over time? Extending the argument, even if the subjects are different, will not students prefer a high scoring (for a given effort) than a low scoring subject, and at least partially ignore the end use utility of the tougher course?

There are some similar questions about the impact of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

‘Net effective wages’

Most of the targeted beneficiaries of MGNREGA are near poverty level and when they find work in nearby rural industries it is at or near (if lucky) prescribed ‘minimum wages’ (in unorganised or local work it is mostly lower). But they may have to put in a full eight hours of work or more to earn their ‘minimum wages’.

With the lack of accountability in MGNREGA work, the work component (if and to the extent it is still getting done) is much less. Wages have not been linked to output but are based largely or solely on inputs of time. In places, work may only be on paper and wages may be more for signing registers and marking token presence. The effective work put in may not be more than 1-2 hours. For this the target beneficiaries get paid minimum wages under MGNREGA. In effective terms, MGNREGA pays 4-5 times (perhaps more) wages compared with other rural (organised or unorganised) industries.

Psychological impact on productivity

If someone is faced with a situation where he has two alternative jobs which pay equal ‘monetary wages’ but differ in effective terms by 4-5 times, what would be his psychological reception to the alternatives?

Can someone work for 4-5 times the wages one day but feel as much motivated to work at one-fourth the wages (in effective terms) the next day? Would he not gradually start diluting his output, motivation and commitment and equalise the net effective wages from both jobs?

What would be the comparative effect between someone entitled to MGNREGA and someone who is not? Would the person not having MGNREGA feel jealous or de-motivated?

Such comparisons are bound to have a dilutive effect on productivity and motivation. Output will tend towards the lower level, not the higher one. Thus, over a long term, productivity will slide and perhaps promote relative lethargy.

At the minimum, no one would want to lose his MGNREGA entitlement and will ensure he gets his share even if it means paying bribes. Or get more than his share. All this is fertile ground for corruption and bribery at lower levels.

There is a need for serious research on this aspect to address the long-term implications of MGNREGA. Even in economics, the effect of two distinctively different prices prevailing in the same market at the same time is not an adequately researched topic.

In parts of central Jakarta, vehicles are allowed to ply only with full complement of passengers. There are professional passengers who travel for a fee to fill in — a kind of private sector MGNREGA created by Government regulation. Even this non value-added service is a better income redistribution model since it requires commensurate time and ‘work’, and may not promote a lethargic outlook.

(The author is CFO of a large paper company. Views are personal)

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