In a move that may reignite the much-needed debate on employment and social security for workers, Rajasthan announced rollout of two bold initiatives in its budget on February 23: urban employment guarantee scheme in line with MGNREGS and revival of the old pension scheme (OPS) for government employees.
While the demand for the first sprang from the massive distress migration of workers from urban areas during the pandemic waves of 2020 and 2021 (11.43 million in 2020 and 0.52 million in 2021, according to a parliamentary committee report), the second is a response to the long-pending demand of government employees to replace the contribution-based National Pension Scheme (NPS) introduced in 2004. The NPS replaced the old guaranteed pension scheme (about 50% of the last drawn salary).
Rajasthan’s urban job guarantee scheme
Rajasthan declared introduction of ‘Indira Gandhi Urban Employment Guarantee Scheme’ (IGUEGS) in the budget which would provide 100 days of work to urban jobless on demand. The details of the scheme are yet to be unveiled, although a budgetary provision of ₹800 crore has already been made. Rajasthan chief minister Ashok Gehlot said he intended to help street vendors and others working in restaurants and dhabas who lost their livelihoods due to the pandemic disruptions.
A study by two economists from London School of Economics, published in September 2020, had highlighted the plight of urban workers. It said the national lockdown had indeed “decimated livelihood in urban India and created a new underclass of workers who are being pushed into poverty” and that, “Several states in India are debating an urban job guarantee to address the crisis. 70% of urban workers have no guarantee of a minimum number of days of work in the year. Of them, 70% would like to have a guarantee of 100 days of work, primarily to overcome the livelihood insecurity from Covid-19.”
The issue attracted wider attention in India. Development economist Jean Dreze outlined his urban job guarantee scheme, named “Decentralised Urban Employment and Training (DUET)” and many economists and experts joined him to discuss the challenges an urban job scheme would face (arising out of limited choice and scope of work) and how to address those. Dreze was part of the team which had conceptualised and drafted the MGNREGS in 2005.
The issue was later taken up by the Parliamentary Standing Committee on Labour which, in its August 2021 report, said “there is an imperative need for putting in place an Employment Guarantee Programme for the urban workforce in line with MGNREGA”, among others for “reducing poverty and vulnerability of the urban poor households”.
The Centre ignored its recommendation.
That urban unemployment is growing is clear from the last quarterly PLFS for January-March 2021 (for urban areas only) as well. It shows a fall in worker population ratio (WPR) from the corresponding (pre-pandemic) period of 2020 in all age categories (15-29 years, 15 years and above and all ages). This means more urban people have dropped out of the workforce because of lack of opportunities. It also shows a fall in regular wage/salaried jobs (best quality jobs) and rise in all other categories of workers which are vulnerable, like own account, helper in household enterprises, self-employed and casual.
Whether Rajasthan succeeds or not would depend on the design of the scheme and the nature and quantity of jobs it offers because an urban job scheme may involve skilled and semi-skilled jobs, not just menial work that MGNREGS offers, and private agencies. A success would mean more states lapping it up.
It must, however, be kept in mind that such a scheme is to provide temporary relief in times of distress, not a substitution or solution for the growing unemployment. The real threat of the scheme is that it may provide an excuse for governments to not actively work for creating quality jobs but allocate more funds to meet the demand, just as the case with MGNREGS.
Old pension scheme or new?
When Centre first introduced NPS in 2004, it was seriously concerned about the mounting pension liabilities which would have made it unsustainable in the long run. States adopted it too, except West Bengal which remains unconvinced even now.
Gehlot justified his move by saying that government workers were feeling insecure about their post-retirement life and this had to be addressed to keep their morale high and ensure they contributed better to governance. Before him, Samajwadi Party and Bahujan Samaj Party promised their electorate in Uttar Pradesh to bring back OPS if voted to power.
Rajasthan’s move has already attracted adverse comments and further criticism can be expected, particularly from economists and others worried about the fiscal health of state governments. They also have a valid point when they argue that instead of spending more money on government workers who have secured and well-paid jobs with many social security covers (PF, gratuity, free health facilities etc.), the money should be better spent to help informal workers with no such luxury. As per the latest Economic Survey (2021-22), informal workers constitute 89% of the total workforce who are without social security.
But before panning Rajasthan’s experiment a few things should be considered. Firstly, government jobs are not growing but reducing; more and more workers are being engaged on contracts. For example, sanctioned posts of the central government have steadily fallen from 41.76 lakh in 1994 to 38 lakh in 2018. The situation is no different with states. This implies the pension burden may not be as alarming going forward as earlier assumed.
Second, Delhi’s Kejriwal government has amply demonstrated that good fiscal management can support welfare spending which was earlier unthinkable. For example, it gives free electricity (up to 200 units) and subsidized electricity (50% up to 400 units) to a large population without resorting to higher tariff. Before him, rise in electricity charges was virtually an annual affair. It also gives water free (up to 20 KL) to all. Yet, its fiscal resources have not diminished. Many states and political parties are now following his model (Rajasthan announced 50 units free for those consuming 100 units in the recent budget) or promise to do so.
Third, the Centre’s gross tax has grown at annual average of 10.7% between FY15 and FY22 (RE) – despite the pandemic disruptions. GST, which is part of the gross tax, clocked an annual average of 12.3% growth during FY19-FY21. This indicates robust growth in tax collections. By expanding the tax base and rationalising it (basing it on ability-to-pay principle), India can raise more resources.
There is yet another aspect to it.
Here is an opportunity to look at the entire social security system in India, which is nothing to be proud of. A vast majority of workers (89% is informal) don’t have any social security cover. Even the best quality jobs outside government – regular wage/salaried employment (22.9% of all jobs) – doesn’t guarantee social security. The last PLFS of 2019-20 (annual) says, 67.3% of such jobs didn’t have written contracts, 52.3% were not eligible for paid leave and 54.2% ineligible for any social security benefit.
The new Code on Social Security 2020 promises social security for all, including informal workers, but it is neither operational nor does it provide a blueprint or funding mechanism. It merely promises social security schemes in future. It was passed in a hurry amidst the pandemic lockdown without public or parliamentary debates. Forget social security, the new Wage Code legislated in 2019 remains on paper and the national minimum wage stuck at ₹176 for years.
Often debates on social security and welfare are hamstrung in India because of lack of clarity on the role of government in it. Increasingly governments are seen as facilitators of private enterprises and free market, which are then assumed to take care of all the developmental needs of people. In the constitutional democratic framework of India, people elect their governments (at the Centre and state) once every five years for taking care of their needs and welfare. Free enterprise and free market are some of the tools to achieve that, not the entire raison d'être of governments.