The GDP estimates of India for the FY21 and a glimpse into the impending future with a contraction in GDP by 23.9% in the first quarter itself has created an alarming situation for India. Different suggestions are coming in from national and international economists, but the government has not yet given any concrete response on its plans. Given that there is mass unemployment, poverty, hunger and malnutrition, it is clear that the economy is not doing very well.
The lockdown impact
A study conducted by the Centre for Economic Performance at the London School of Economics (LSE) with 8,500 urban workers showed that more than 50% of them did not earn any income between April and May. Under these circumstances, Economist Jean Dreze has suggested a proposal to introduce an ‘urban job guarantee scheme’ in India. This scheme is seen as an extension of Mahatma Gandhi Rural Employment Guarantee Act (MGNREGA) which has come as a saviour of rural India amidst the global pandemic. The pandemic has hit the informal sector of the economy very hard, but the organized sector remains the worst affected. More than 15.5 % workers lost their jobs and 21.7% worked 0 hours according to the same survey by LSE. Even the Centre for Monitoring Indian Economy recently surveyed and found that more than 21 million salaried employees have lost their jobs till August 2020 in India.
Source: The Wire
Decentralized Urban Employment and Training
Dreze has proposed an Indian DUET for urban jobs where the government issues ‘job stamps’ and distributes them to ‘approved public institutions – public health facilities, schools, colleges, shelters, jails, municipalities, transport corporations etc.’. These approved public institutions, as per the proposal, would be “free to convert each job stamp into one person-day of work within a specified period, as long as they arrange the work”. The significant benefits of such a system are plenty, as Dreze says,
- a) A variety of affirmed managers would help produce a considerable measure of work through open organizations;
- b) Employers will have a stake engaged with the work being made and this is useful for boosting higher efficiency that is work serious (which India needs given its factor blessings);
- c) Institutions will require little staff since they will be simply the businesses for these positions; and, ultimately (in particular); and
- d) Workers would have a safe privilege to the lowest pay permitted by law, attached with some different advantages”.
Some side-effects to remember
The DUET system is expected to work as there is clearly high demand for public work in the urban areas. But one cannot ignore that such a proposition requires a higher minimum-wage base created for such jobs. Economist Rathin Roy talks about the structural demand problem in India and says, “The vectors of relative (factor) prices have not been seen to be conducive to broad-basing aggregate home market demand”, and when “relative (factor) prices do not serve the national good, there is a justifiable case for government intervention”. Definitely, any calculation of a minimum wage needs to be in correspondence with the reality of existing macroeconomic considerations.
Suggestions by the Policy Times
- The operations of designing a comprehensive National Minimum Wage structure has been extensively debated in the country but so far no implication has been seen.
- A decentralized system can make the working and living conditions of the daily workers in the urban areas, better.
- A DUET-like scheme can also ensure that municipal work such that of a landfill site worker or sewage cleaner that lack a worker-representation body, are better paid and taken care of, in the cities.