Employment guarantee of a kind has been enacted and, as expected, has generated controversy. It is not the first time in recent history that inadequate employment generation is being debated in the country. In the 1980s, the Right to Work was discussed. The national movement itself wanted employment for all and the Constitution enshrined this ideal. Poverty has a link with under employment and the low incomes that the under-employed earn. Employment data is not particularly reliable since the black economy forces an overestimation of employment and wages in the economy (See Kumar, A. 2002. The Black Economy In India, Second edition. New Delhi: Penguin.). Thus, the full extent of poverty and of the employment problem faced by the country is not known.

No action was initiated in the direction of greater employment generation through constitutional provisions in the 1980s on the ground of the inadequacy of resources and in the 1990s on the plea that markets will take care of the problem. Those currently opposed to the scheme are again putting forth both these arguments and view it as anti-globalisation and anti-market. They call it populism.

The Employment Problem in India

The implementation of the current scheme is being discussed at a time when the government claims that the number of people below the poverty line has decreased sharply in the 1990s. So, is there a need for such a scheme? Data indicate weak employment generation in almost all sectors, especially in agriculture and the organised sector (See Kumar, A. 2004. `Globalization and India`s Food Security: Issues and Challenges`, Bhartiya Samajik Chintan, Volume II, No. 4, January). Further, the data do not capture the full extent of the problem since child labour is not counted (there are an estimated 20 million employed children) and many women and young are missed out since they are at home or in educational institutions and not in the market. The cost of living for the deprived sections has increased sharply since 1991 due to increases in the cost of food, transport, health and education. Further, with the increased reach of TV, expectations of good living have risen sharply, especially amongst the youth. The failure of expectations has resulted in revolt by the youth in the form of terrorism and growing criminalisation. Finally, with democratisation, parties are competing amongst themselves to promise the moon and claiming a rising level of prosperity, thus further raising expectations.

India faces a problem of employment generation due to the nature of the current globalisation. Capital has made nations compete for its favours and thereby extracts concessions from all of them. National and State policies have been geared to the needs of capital. This has weakened labour. Further, the technology that the MNCs use is highly capital intensive. It has been devised for a per capita income of $25,000 and not for a per capita income of $550, as in India. Indian capital is also forced to use similar technology in a globalising world and it is displacing the small-scale sector, which now does not have much of a protection. Thus, for every job created in the large-scale sector, if it is in the area of the formerly reserved small-scale sector, 29 jobs are lost in the latter sector. This is the situation, say, in the fishing industry or rope-making industry, or is likely to happen in the retail industry as FDI is allowed in it. The government only talks of the jobs created, not of the jobs that may be destroyed. Even the modern small-scale sector is typically capital intensive.

This problem is compounded by the inadequate investment in agriculture where little productive employment is being generated currently. The new areas opening up in agriculture are also capital intensive and are getting the bulk of the investment in agriculture while the traditional sectors are receiving little investment. Only 5 per cent of the total investment is anyway going to the agricultural sector. In brief, labour-intensive sectors are receiving little investment and, therefore, not generating employment and the capital-intensive sectors are receiving a bulk of the investment and not generating employment (in fact, the organised sector is shedding jobs).

The problem of employment is resulting in the creation of residual and self-generated employment at low levels of incomes, mostly in the unorganised sectors. The problem of low employment generation in the organised sector is what has aggravated the struggle for jobs amongst the youth. The fight over reservations has increased since there are few desirable organised sector jobs. A cutback in government employment has resulted in the demand for reservations in the private sector. The caste divide has worsened and conflict amongst castes has grown. These are the consequences of the retreat of the State in favour of capital. This has also coloured the judiciary`s attitude and it is coming down heavily against labour. There are also attempts at changing labour laws to further the agenda of capital, especially of international capital.

The current form of globalisation based on marketisation is resulting in an international division of labour in which low and intermediate technology production is getting concentrated in the developing countries and high technology production in the advanced countries. This might be considered to be conducive to employment generation in India. However, even the intermediate-level technology production is labour displacing when it dislodges the traditional industries in the developing countries. Further, the production that is getting relocated in the developing countries is not only low value added, such as call centres and BPOs, but also of polluting goods. So recycling of ships, lead acid waste, plastics, computer waste, etc., is coming to India and even though it provides employment, it is resulting in health problems amongst the workers and aggravating their poverty.

Employment Guarantee Scheme: Implementation and Attendant Risks

No matter what kind of Employment Guarantee Scheme is pursued, truncated or full blown, with a budget of Rs 20,000 crore or twice that much, only in rural areas or in 150 districts, etc., the basic issue of employment is not being tackled. It is only a safety net that helps soften the blow of rising under employment but does not tackle the root cause of the problem as suggested above. Resistance from capital, which does not favour it since it sees it as distortionary and interference in the market, is going to come in the way of its implementation. The media, largely controlled by the corporate sector, is also largely pro-capital and ignores the voice of labour. To sidetrack issues, it has taken to projecting soft issues, such as entertainment, films and parties, and has marginalised the coverage of difficult issues such as poverty and unemployment. Serious issues, such as discussions and seminars on child labour, distress amongst poor women, or destruction of environment and the effect on the poor are often given a go by in favour of the inauguration of beauty parlours, crime, etc.

If globalisation is the reason why the system is not only unable to solve the problem of unemployment and underemployment but also aggravating it, as data on employment elasticity indicates, can the scheme under consideration reverse this trend or will it make no difference? In the past, such schemes have come at the expense of other pro-poor schemes since they resulted in a rise in the fiscal deficit to keep which in check, increases in social sector expenditures were curtailed. Will it be the same this time around also? That would partially undo the positive effects of the scheme. In the past years, a rising level of fiscal deficit has led to a cutback in the Plan expenditure by up to Rs 10,000 crores. Further, transfers to the States have slowed down and since they are the ones implementing social sector schemes, they have had to cut back even if the Centre has increased its expenditures so that, overall, these expenditures have suffered (See Kumar, A., S. Chattopadhyay and S.A. Dharan. 2005. `Fiscal Reform and the Deficit of the States: Declining Social Sector Spending`, in Disequalizing Growth. Alternative Economic Survey, India 200405, New Delhi: Rainbow Publishers).

Further, there is the danger that this pro-poor scheme may become the fig leaf that provides the excuse to liberalise the economy more rapidly and thereby reduce employment generation further. For instance, further disinvestment that will result in retrenchments and golden handshakes in the financial sector, railways, etc., can only lead to more unemployment. Similarly, further displacement of small and cottage sectors by the large, or more automation will slow down employment generation.

If as a result of globalisation, policies become more market-friendly, investment would flow more to the advanced districts, starving the backward ones and further entrenching poverty there. Hence, the design of the scheme itself should help overcome poverty rather than letting it continue to fester. Self-sustaining employment needs to be generated. It should help create conditions to enable more investment to flow into the poorer areas to create more employment there.

This would happen if assets of lasting value are created to improve the social and physical infrastructure of the backward districts. Already existing schemes should be accelerated and new ones planned with greater speed in the backward districts. What can these schemes be? Small irrigation and drainage, non-mechanised road construction in rural areas, house building, literacy schemes, construction of school buildings and employment of teachers, and primary health centres could be some. Some bureaucrats feel that a turf battle amongst the ministries would break out to frustrate these schemes. This may or may not be true depending on the existence of political will.

Those who think that money will be wasted in schemes that would amount to “digging holes and filling holes” should not oppose such programmes. Poor people can be given money to build/improve their own homes, build roads in the areas they live in, construct a school building for their children, etc. This can be organised through self-help groups. They may be expected to mobilise their own local resources to supplement what is available through the scheme. This may reduce the problems linked to leakages and poor administration because of the self-interest of the local population. The scheme suggested here would mean greater transfers to States and to ministries dealing with the social and physical infrastructure.

What about resources? Cess of different kinds can be used to raise resources from the well-off sections and those with large black incomes. The issue of resources is always linked with the available return on the project. Why do we go in for, say, the Golden Quadrangle project? The reason is that it would pay back the nation through increased efficiency. The return on investment on Employment Guarantee Scheme would be orders of magnitude higher than of any other conceivable project since the dignity of our citizens is involved; that to any democrat would have a higher value than anything else.

No doubt there will be problems. Which scheme does not run into unforeseen problems? Has the Golden Quadrangle not created displacement and other problems even though the country went ahead with it? The only thing to bear in mind is that it should be designed to lead to conditions for its own redundancy over time. In other words, policies that reduce employment generation need to be curtailed. Employment generation has to be the first priority and not a residual as it is at present. This requires a relook at the current form of globalisation and it needs to be in the interest of the poorest in the land. As Gandhi ji said, “Last person first.”

When in doubt, look at what is the need of the poorest and the marginalised. Then we would always be correct. For proper implementation, the Right to Information is needed to check the rampant corruption. But this should not just be a slogan, and movements need to continue for its implementation. The government is not serious about it since it has handed control of its implementation to former favourite bureaucrats who have spent their entire life being opaque. They cannot be expected to implement it except in a few high-profile cases. What is required is effective implementation in rural areas, which is a difficult proposition and is possible only if movements come up.

In brief, the scheme is viable if devised as suggested above and not if it is a mere palliative and a sop so that more iniquitous policies can be rapidly pursued by the ruling classes.