India’s job guarantee scheme is a costly joke

India’s job guarantee scheme is a costly joke

Just as evidence of waste and corruption was mounting against India’s two-year-old rural employment guarantee programme, the authorities in New Delhi decided to extend the profligate project to the entire country.

From April, almost 600 districts of India will be legally bound to provide at least 100 days of work in a year to every village household that wants to earn the statutory minimum wages. At present, the programme covers 330 districts.

By bringing forward the nationwide implementation of job guarantee from its original schedule of September 2010, the Manmohan Singh government has given yet another indication that elections are near.

To diehard optimists, the job guarantee is a democratic expression of the poor person’s right to life and livelihood. That’s all pure nonsense. The real objective of the programme, apart from garnering votes with cheap populism, is to curb migration of surplus rural labour to cities. A fast-growing economy desperately in need of faster urbanization has no reason to spend taxpayers’ money to condemn landless rural labourers and sharecroppers to a life of penury.

Yet, instead of tackling the economic and social challenges of urbanization, and creating the capacity to absorb tens of millions of rural workers every year in labour-intensive manufacturing, the Union government is paying people to stay where they are.

The reason isn’t hard to see. Most cities lack the capacity to provide even basic urban services, such as clean water and sanitation, to their existing population. And while there’s no Chinese-style “hukou" system of residency permits in India, and labour is free to migrate, there’s a growing urban middle-class resentment because shanty towns are swelling with new arrivals from the countryside.

One goal of the programme is to create “durable assets", another is to keep contractors out. After 40 years of socialism, politicians and their advisers have yet to learn that one doesn’t produce capital by disallowing the profit motive.

In the fiscal year ended 31 March, some 900 million person-days of work were created. The government spent Rs8,800 crore, with more than a quarter of it going toward the purchase of materials.

A recent study by the New Delhi-based Centre for Environment and Food Security estimated that about 75% of the money spent on the job guarantee programme in Orissa never reached the intended beneficiaries. The report concluded that, on average, the state government created five days of work for every needy family, compared with the 57 days claimed in official statistics.

Even if you forget about fudged job cards and fraudulent muster rolls and take the official statistics at their face value, the net result is this: The Union government transferred an average of $65 (Rs2,581) a year to 21 million families supported through the programme. And this “average" is misleading because the gains aren’t evenly distributed.

Rather than expand this elaborate charade of job creation at a cost of $5 billion, the government should spend twice as much, though in a way that makes a real difference. For $10 billion annually, India could provide $200 a year to each of the country’s poorest 50 million families—both rural and urban—through vouchers that they can use to buy education and health-care services from non-state providers.

The?coupons,?since they will be portable, won’t restrict migration. But they will be non-transferable, so as to prevent the desperately poor from selling their entitlements for cash.

If its health and education needs are taken care of, a family subsisting on the equivalent of $1 a day gets a lifeline, especially if the government leaves the poor people free to find real jobs rather than tying them down in public works of questionable economic value.

A study last year by economists Abhijit Banerjee and Esther Duflo at the Massachusetts Institute of Technology found that 58% of the extremely poor Indian households had visited a private health-care provider in the month prior to the survey. And while three out of four children aged 6-14 years are enrolled in government schools, there’s a growing frustration with teachers absenting from work.

“In the parts of India where public-school absenteeism is the highest, the fraction of rural children attending private schools is also the highest," the study said.

Once the middle class stops using government health clinics and schools, there is no pressure on the state to maintain even a minimum quality standard. This has already happened in India.

The intelligent thing for the Union government to do now is enable poor people to buy these services from the open market, while diligently regulating their quality and prices.

In the run-up to the elections, which may be called next year, the government on Monday announced a health-insurance plan for poor families. Each household will get a free smart card, which will allow it to spend as much as $750 a year. If implemented well, the plan might provide the vulnerable sections of society with cover for chronic and debilitating illnesses. The only problem is that genuine social security doesn’t have the vote-grabbing appeal of stuffing cash in people’s wallets, however wasteful doing so might be. BLOOMBERG

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