Narendar Pani

Let's rejig rural job scheme

NARENDAR PANI | Updated on March 12, 2018

If MGNREGA is for asset creation, there can be no case for paying less than the statutory minimum wage

The jobs scheme stands the risk of falling between the two stools of acting as a safety net and creating valuable assets. Since these objectives cannot be easily married, it is best to break the scheme into two components.

The Supreme Court's refusal to stay the Karnataka High Court's order making the government liable to pay statutory minimum wages under the MGNREGA strikes all the right emotional chords.

Any fiscal arguments about the additional burden of such payments are bound to come up short against the fact that the MGNREGA targets some of the most vulnerable sections of Indian society. But the more important arguments for and against paying minimum wages under the MGNREGA go far beyond the emotional reactions or even the legal issues involved. The two views arise from very different conceptions of the MGNREGA itself. Indeed, the dispute is really a case for splitting the MGNREGA into two distinct parts.


At one end of this debate is the view that the purpose of the MGNREGA is not just to create employment but to also generate assets that will help Indian agriculture break out of its current productivity bottlenecks.

The focus then must be not just on the employment generated but also on the quantity and quality of the assets created. The workers would be expected to put in the hard labour that the creation of worthwhile assets would require. There can then be no case for paying anything less than the statutory minimum wage for the hard day's work that the labour has put in.

At the other end we could take the view that the MGNREGA is essentially a rural safety net. The main purpose of the schemes under the Act is to ensure that every family has a guarantee of wages for 100 days. The focus here is not so much on the assets created or on the quality of work but on ensuring every family earns enough to survive the bad times. And this earning does not have to be the same as those who do a hard day's labour. Indeed, any effort to equate the wages paid in the safety net to the minimum wages will distort the labour market.

Given equal wages the MGNREGA would compete for labour with a variety of other activities ranging from agriculture to construction work in cities. And this could have a less than desirable effect, especially if the higher costs lead to higher food prices.

In its current form, the MGNREGA tries to strike a balance between these two very different perceptions of an employment scheme. It has several dimensions that suggest it is a safety net. It guarantees work, it has several concessions for Scheduled Castes, Scheduled Tribes and other underprivileged groups, and it demands a labour-material ratio that makes projects under the Act labour-intensive.

At the same time there are several measures that are, on paper at least, designed to improve the value of the assets created. It lays down detailed guidelines for the type of projects that can be taken up. There are also detailed examinations of the amount and quality of the work done.

In reality, the MGNREGA stands the risk of falling between the two stools of a safety net and viable asset creation. One the one hand, when it is presented as a safety net it is very difficult to set meaningful targets in asset creation. It is very difficult to generate moral pressure on workers to carry out the required labour when the wages paid are at levels that would get a private employer into trouble for breaking the law.

On the other hand, when it is viewed as a process designed to create productive assets, there are a number of constraints on making the most efficient choices. The labour-material ratio, for one, often rules out the most efficient technological choices in creating durable productive assets.

In the midst of these contrasting requirements it becomes very difficult to identify meaningful criteria to evaluate the schemes. Those who would prefer to focus on the MGNREGA as a safety net would have to concentrate on the person-days of employment generated, without paying too much attention to the quantity and quality of the assets created. And those who see it as an asset-creating exercise would prefer confining the schemes to cases where durable productive assets are created, even if that means the MGNREGA cannot be an effective safety net.


The way forward would then be to recognise that the requirements of a safety net and that of asset creation cannot be easily married. The MGNREGA could be broken up into two parts. The first part would be targeted at asset creation. All constraints on making the right choices for efficient asset creation, such as the labour intensive labour-material ratios would have to be done away with. Statutory minimum wages would have to be paid.

And there would have to be strict monitoring not only to prevent leakages but also to evaluate the quality and quantity of the assets created. This part of the scheme may create fewer jobs to begin with, but once the productive assets add to economic activities there will be more jobs created. The task of providing a safety net would then have to be met by the second part of the MGNREGA. Those who seek a job but cannot be accommodated in the first part could be given an unemployment dole per day which would be well below the wages paid in the first part.

Since there would be no work done this lower payment would be perfectly fair. And the ceiling of a hundred days could be for the total of work days under the first part as well as the dole days of the second part. Such a split in the MGNREGA to deal with its conflicting objectives would allow for greater efficiency without carrying the stigma of a government scheme paying less than minimum wages for labour.

(The author is Professor, School of Social Science, National Institute of Advanced Studies, Bangalore. The views are personal)

Published on February 01, 2012

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