Reaching Inclusive Growth Through Employment Guarantee Programme:

Outline of a Strategy

Indira Hirway

Centre for Development Alternatives, Ahmedabad

JNU – IIAS Conference, 28-29 June 2007

This Presentation

• Argues that a well designed EGP can be viewed as a an important component of a full employment strategy in a developing country like India

• Such a strategy can lead to economic growth that is inclusive in terms of employment by addressing

• Some of the major concerns that India is facing with respect to its growth that has caused multiple exclusion in the economy.

What is Inclusive Growth With Respect to employment?

• Generation of productive employment (decent work) for labour force in the economy, as employment is a key to inclusive growth,

• Employment generation in all sectors, regions and for all socioeconomic groups

• Particularly (1) for poorer sections of population, (2) backward regions, (3) lagging sectors and (4) ST / SC / OBC / women etc

• Inclusion of small enterprises / producers preferably in a decentralized framework

• Controlling inequalities and disparities

ELR Strategy or Employment Guarantee for Achieving Full Employment

• New Deal was the first major programme in industrialized countries that showed how employment generation by government can promote full employment

• This approach is now developed in to a major strategy under which government is seen as Employer of Last Resort (ELR) to promote full employment in industrialized countries (Minsky, Abba Lerner, Philip Harvey)

• In the case of developing countries also state sponsored EGP can lead to full employment though the context will be different.

The Indian Scene of Employment

• The high growth rate has failed miserably to generate adequate ‘decent’ employment for the labour force

• In fact, there is deceleration in aggregate employment generation in spite of high growth

• Neo liberal policies promote technical progress, i.e. high growth in labour productivity leading to high growth of GDP, but lack any built in mechanism to ensure full employment

• Higher growth or labour flexibility though offered as solutions are not real solutions

Manifestation of Exclusion / Hurdles to Full Employment

• Low productivity leading to subsistence status

• Low incomes and low levels of living

• Inadequate avenues for productive employment

• Poor quality of employment in terms of social protection

Contd..

• Supply side constraints: poor physical & economic infrastructure

• Poor social infrastructure and low human capabilities / skills

• Degradation & depletion of natural resources which support livelihood of 60 % population

• Unstable and lagging agriculture• Rising inequalities and disparities• High incidence of poverty with poor at the

bottom frequently starving• Demand side constraints

An Alternative Approach

• In stead of addressing these constraints directly, the neo liberal policies advocate a development path that focuses on economic growth through privatization, liberalization and globalization

• And when this path poses problems, we think of controlling technical progress or using surpluses for social sectors

• Why can’t we start with what we have and what we lack rather than what others have

EGP can construct

• Social infrastructure (for care, education, health, water & sanitation) for improving human capabilities / skills, and quality of life

• Economic infrastructure (for example, roads) to promote economic growth,

• Infrastructure for agriculture (WSD, irrigation, etc)• Natural capital building (related to land development,

water augmentation, forestry) for raising productivity of workers in allied activities

• Assets (farm ponds and other asset building) for private farms / enterprises particularly for small producers

EGP and Gender

• Women’s unpaid work consists of (1) drudgery like collection of fuel, fodder, water etc, (2) child care and other care, (3) other low productivity activities that deprive them from accessing productive activities

• These can be seen as ‘hidden vacancies’, as many of these activities can be shifted to the market through public provisioning, infrastructure development and public services, and this in turn can release women for productive work

• EGP can substitute portions of this unpaid work by creating suitable assets that can reduce burden of unpaid work of women (and men) that is particularly taxing for the poor.

• EGP has proved to be attractive to women, who can also gain in terms of employment and wages

Unpaid work of Poor and EGP

• Non-market economic Activities: Acquiring / Collecting basic necessities like water, fuel wood etc

• Non-market economic activities: collection of raw material for income generating activities (fodder for animal husbandry, bamboo for craft, raw materials for manufacturing - NTFP)

• Non-market subsistence production at low productivity (crop cultivation, subsistence fishery, forestry etc)

• Unpaid domestic work: care related activities • Unpaid domestic work: household repair in non durable

shelter • Unpaid work: Traveling

Role of EGP: Short Run

• Reduce drudgery• Improve quality of life• Improve public provisioning / infrastructure• Improve productivity / technology in income

generating activities• Release women and poor for productive

activities• Promote capital formation • Improve labour absorbing capacity of the main

stream economy

EGP in the Long Run

• Promote labour intensive development• Encourage sustainable development• Increase labour productivity / technology in

economic activities• It engenders development• Promote manufacturing and structural

transformation in the economy• Integrate small producers / poor in to the growth

process• Participate in the world trade based on

advantages

EGA A Full Employment Strategy

• Employment guarantee for the poorest to ensure their full employment

• Insurance in terms of employment for the poor in crisis

• Labour intensive growth for the economy in the second round through assets that generate main stream employment

• Rising aggregate demand that will push up growth along with changing its composition, and push up employment

EGP is only a component / Starting point

• EGP is not for creating a permanent army of unskilled workers – it is successful when it is not needed (Dantwala)

• It is a tool for transition of the economy from labour surplus economy to labour using economy

• It requires productive use of the assets generated including infrastructure

• It requires a set of supplementary policies in the areas of skill formation, credit, marketing, institutions etc

• It needs a long term vision and suitable interventions

EGP based strategy is not a Low Income Strategy

• This strategy involves up gradation of technology and improved labour productivity

• It incorporates globalization based on comparative advantages

• It promotes economic growth that is broad based and inclusive

• It answers some of the concerns that India is facing today

Assessing NREGA

• NREGA lacks a long term perspective in designing and in implementation

• Weak planning component: (1) lack of perspective planning, (2) lack of convergence and (3) lack of multi level planning

• Designing problems of NREGA: role of institutions / social mobilization not recognized

• Lack of commitment, and poor supervision & monitoring

• Lack of political strategy to address structural issues

Concluding Observations

• This is an outline of a strategy, needs further detailing

• We are not recommending some thing that is not doable, not feasible.

• We have an EGP Act, an EGS and we have to build on it