Killing MGNREGA to Reduce Workers’ Wages

            The MNREGA has many problems and inadequacies, no doubt. But it has provided a crucial alternative source of employment and wages in rural economies where most workers are not able to access even minimally decent work for the greater part of the year. Studies across India found that by 2014 MNREGA had a substantial impact in increasing rural wages and reducing gender wage gaps, smoothing and stabilising consumption of the poor, enabling better access to nutrition and other essential consumption, reducing extreme distress migration and providing opportunities for more household expenditure on health and education. In some areas it has also played a positive role in improving rural connectivity, improving supply conditions in agriculture and creating more sustainable forms of irrigations and production. It has also served as a built-in stabiliser of the economy during downturns and has the potential to add to longer run development possibilities.
            The programme proved to be especially welcoming of women workers – even though the work is physically arduous and essential legal requirements like worksite crèches are frequently not made available – simply because it offers wages mostly on par with male workers. It has been important in improving income opportunities for single women and women-headed households and providing more autonomy to women within their families. Indeed, the participation of women workers has continuously improved over the years of implementation. The share of work days of women increased from 41 per cent in 2006-07 to 52 per cent in 2012-13 – but that could simply reflect the fact that women workers’ days of employment have remained largely stable while male employment has fallen.
            This was also reflected in the positive role in stabilizing rural wages and in reducing gender wage gaps in much of rural India. Across rural India, real wages increased and the wages received by women increased faster than male wages, which meant that the very high prevailing gender wage gaps (with female wages on average only 60-65 per cent of male wages) were slightly reduced. Also, distress migration of extremely destitute rural people – both men and women – came down to some extent because of the assurance of at least some wage income near the home village.
            However, the improvements in workers’ conditions were not allowed to continue for long. Backlash from employers (not just large landlords in rural areas but also those employing migrant labour in construction and other industries) combined with pressure from those seeking “fiscal consolidation” by reducing public spending on various kinds of social protection and realisation of socio-economic rights. As a result, the reduction in spending on MNREGA that was evident from 2010 onwards has been further intensified. The NDA government at one stage even sought to restrict the programme to the poorest districts, before public outcry reversed that decision.
            Even without official statement, there is de facto compression of the programme. The way this is done is by putting an effective cap on the amount of money the central government provides to state governments for running the programme. Since the rural employment guarantee is meant to be demand-driven, with jobs being offered (up to 100 days per year) to all rural households who ask for it, the idea of a cap is in principle absurd – and in any case it is prohibited in the Act itself.  Even more absurdly, the central government’s budgetary allocation is only around half the Ministry of Rural Development’s own estimates of the “approved person days as per the labour budget”. This means that funds released to the states for the programme have been rationed to the point that state governments have been unable to pay wages and have large and growing arrears.
            A further sleight of hand by the Centre is simply to push the excess of actual spending over outlay into the next year’s spending – thereby reducing the next year’s outlay even more. In the current year, the budgetary outlay amounts to only 0.25 per cent of GDP after taking into account the arrears from the previous year.
            As a result, payments to workers have been delayed – the current official estimate is that nearly three-quarters of wage payments are delayed, sometimes by as much as one year or more! State governments that do try and meet their obligations have been forced to do this out of other funds. Obviously workers get disheartened and reduce their demand for work even when they need it; in other cases, the state and local level authorities try to dissuade them or do not register their demand for work because they simply do not have the funds to provide the required work. At least five state governments have written increasingly desperate letters to the Centre demanding the release of funds and three state assemblies have passed resolutions opposing dilution of the Act and demanding increase in funds. The state government of Tripura – which is widely recognised to run the best and most effective NREGS in the country – has been particularly hard hit, and the Chief Minister of Tripura even sat on dharnain the capital city of India to demand central payment of dues for the programme.
            All this, so far, has been to no avail. Instead, the central government seems to be quite happy that it has reined in this expenditure and thereby reduced rural workers’ bargaining power and standards of living. The government’s Mid Year Review of the Indian Economy of December 2014 page 10 states gleefully that “a dramatic change seems to have happened to rural labour markets since 2012 because wage growth has plunged. A combination of softness in the economy and reductions in MGNREGA expenditures (declines of 3 and 36 percent in the last two years) have played a key role. If these trends continue, rural wage growth can continue to decelerate, further moderating inflationary pressures.”
Clearly these real wage declines will have the worst effect on women workers, who were as we have seen the main beneficiaries of the programme. Already there is evidence from many parts of India that along with the decline in real wages, gender wage gaps are increasing and distress migration is once again on the increase. Clearly, just as struggle brought the NREGA into being, another one will now have to be waged to save it.