Publication: Right to Work? Assessing India's Employment Guarantee Scheme in Bihar
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2014-02-26
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2014-02-26
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India’s 2005 National Rural Employment Guarantee Act creates a justiciable 'right to work' by promising up to 100 days of wage employment per year to all rural households whose adult members volunteer to do unskilled manual work. Work is provided in public works projects at the stipulated minimum wage. This study asks: Are the conditions stipulated by the Act met in practice? How much impact on poverty do the earnings from the scheme have? Why might that impact fall short of its potential? How can the scheme bridge that gap? The bulk of the study focuses on the scheme’s performance in one of India’s poorest states, Bihar, where one would hope that a scheme such as this would help reduce poverty. The study finds that the scheme is falling well short of its potential impact on poverty in Bihar. Analysis of the study’s survey data points to a number of reasons. Workers are not getting all the work they want, and they are not getting the full wages due. And participation in the scheme is far from costless to them. Many report that they had to give up some other income-earning activity when they took up work. The unmet demand for work is the single most important policy-relevant factor in accounting for the gap between actual performance and the scheme’s potential impact on poverty. The study finds that there is very low public awareness of what needs to be done to obtain work. The study uses a randomized control trial of an awareness intervention—a specially designed fictional movie—to show how knowledge of rights and processes can be enhanced, as a key step toward better performance. While the movie was effective in raising awareness, it had little discernible effect on actions such as seeking employment when needed. This suggests that supply-side constraints must also be addressed, in addition to raising public awareness. A number of specific supply-side constraints to work provision are identified, including poor implementation capacity, weak financial management and monitoring systems.
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“Dutta, Puja; Murgai, Rinku; Ravallion, Martin; van de Walle, Dominique. 2014. Right to Work? Assessing India's Employment Guarantee Scheme in Bihar. Equity and Development;. © http://hdl.handle.net/10986/17195 License: CC BY 3.0 IGO.”
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Publication Does India's Employment Guarantee Scheme Quarantee Employment?(World Bank, Washington, DC, 2012-03)In 2005 India introduced an ambitious national anti-poverty program, now called the Mahatma Gandhi National Rural Employment Guarantee Scheme. The program offers up to 100 days of unskilled manual labor per year on public works projects for any rural household member who wants such work at the stipulated minimum wage rate. The aim is to dramatically reduce poverty by providing extra earnings for poor families, as well as empowerment and insurance. If the program worked in practice the way it is designed, then anyone who wanted work on the scheme would get it. However, analysis of data from India's National Sample Survey for 2009/10 reveals considerable un-met demand for work in all states. The authors confirm expectations that poorer families tend to have more demand for work on the scheme, and that (despite the un-met demand) the self-targeting mechanism allows it to reach relatively poor families and backward castes. The extent of the un-met demand is greater in the poorest states -- ironically where the scheme is needed most. Labor-market responses to the scheme are likely to be weak. The scheme is attracting poor women into the workforce, although the local-level rationing processes favor men.Publication Testing Information Constraints on India's Largest Antipoverty Program(World Bank, Washington, DC, 2013-09)Public knowledge about India's ambitious Employment Guarantee Scheme is low in one of India's poorest states, Bihar, where participation is also unusually low. Is the solution simply to tell people their rights? Or does their lack of knowledge reflect deeper problems of poor people's agency and an unresponsive supply side? This paper reports on an information campaign that was designed and implemented in the form of an entertaining movie to inform people of their rights under the scheme. In randomly-assigned villages, the movie brought significant gains in knowledge and more positive perceptions about the impact of the scheme. But objectively measured employment showed no gain on average, suggesting that the movie created a "groupthink," changing social perceptions about the scheme but not individual efficacy in accessing it. The paper concludes that awareness generation needs to go hand-in-hand with supply-side changes.Publication Is Workfare Cost-Effective against Poverty in a Poor Labor-Surplus Economy?(World Bank, Washington, DC, 2013-10)Workfare schemes impose work requirements on beneficiaries. This has seemed an attractive idea for self-targeting transfers to poor people. This incentive argument does not imply, however, that workfare is more cost-effective against poverty than even poorly-targeted options, given hidden costs of participation. In particular, even poor workfare participants in a labor-surplus economy can be expected to have some forgone income when they take up such a scheme. A survey-based method is used to assess the cost-effectiveness of India's Employment Guarantee Scheme in Bihar. Participants are found to have forgone earnings, although these fall well short of market wages on average. Factoring in these hidden costs, the paper finds that for the same budget, workfare has less impact on poverty than either a basic-income scheme (providing the same transfer to all) or uniform transfers based on the government's below-poverty-line ration cards. For workfare to dominate other options, it would have to work better in practice. Reforms would need to reduce the substantial unmet demand for work, close the gap between stipulated wages and wages received, and ensure that workfare is productive -- that the assets created are of value to poor people. Cost-effectiveness would need to be reassessed at the implied higher levels of funding.Publication Evaluating Workfare When the Work Is Unpleasant : Evidence for India’s National Rural Employment Guarantee Scheme(World Bank, Washington, DC, 2012-11)Prevailing practices in evaluating workfare programs have ignored the disutility of the type of work done, with theoretically ambiguous implications for the impacts on poverty. In the case of India's National Rural Employment Guarantee Scheme, past assessments have relied solely on household consumption per person as the measure of economic welfare. The paper generalizes this measure to allow for the disutility of casual manual work. The new measure is calibrated to the distribution of the preference parameters implied by maximization of an idiosyncratic welfare function assuming that there is no rationing of the available work. The adjustment implies a substantially more "poor-poor" incidence of participation in the scheme than suggested by past methods. However, the overall impacts on poverty are lower, although still positive. The main conclusions are robust to a wide range of alternative parameter values and to allowing for involuntary unemployment using a sample of (self-declared) un-rationed workers.Publication Is a Guaranteed Living Wage a Good Anti-Poverty Policy?(World Bank, Washington, DC, 2005-06)Minimum wages are generally thought to be unenforceable in developing rural economies. But there is one solution - a workfare scheme in which the government acts as the employer of last resort. Is this a cost-effective policy against poverty? Using a microeconometric model of the casual labor market in rural India, the authors find that a guaranteed wage rate sufficient for a typical poor family to reach the poverty line would bring the annual poverty rate down from 34 percent to 25 percent at a fiscal cost representing 3-4 percent of GDP when run for the whole year. Confining the scheme to the lean season (three months) would bring the annual poverty rate down to 31 percent at a cost of 1.3 percent of GDP. While the gains from a guaranteed wage rate would be better targeted than a uniform (untargeted) cash transfer, the extra costs of the wage policy imply that it would have less impact on poverty.
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