The Fascinating Indian Job Guarantee Program

What we can learn from a policy providing employment to 90 million people in 2020

In passing at the end of my Nation article advocating a local half-time job guarantee, I mentioned that India has had a job guarantee for rural workers for a decade.

Now, there are a bunch of fascinating things about this policy.

First, there is the size, with the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) – its formal name - offering government-provided work to 90 million workers in 2020, a critical safety net in the middle of the pandemic apocalypse. Even accounting for the scale of India’s population, that is a hell of a large program, almost 20% of the total Indian workforce of 463 million in 2019. And considering that such a small percentage of the Indian population has any kind of regular employment (see chart below from the International Labour Organization), any kind of guaranteed employment is a major intervention in the country’s labor market.

Given the program only operates in rural areas where formal employment is even more scarce, the availability of any dependable additional work income is a tremendous change. While reports are that the official guarantee of 100 days of work annually is not always met, the success for most participants seems to be quite large.

Which brings us to the second fascinating result of the program, namely the absolutely glowing reports on its broader impact on the Indian economy. It’s not just the increased income security of participants but the broader changes in the rural economy that any degree of security allows.   As a World Bank study finds:

“NREGS led to a marked increase in agricultural wages and higher levels of nonfarm casual work and on-farm self-employment. The program trig­gered more intensive use of irrigation and greater diversification of crop portfolios, especially by small farmers. It also increased productivity, largely by alleviating liquidity constraints and improving access to insurance.” 

Studies have also found, complementing these results, that “participants increased accumulation of non-financial assets by 16%, strengthening their resilience to economic and environmental shocks.

Another study (involving a randomized experiment) found that low-income households saw overall earnings increase 13.3 percent, partly because it gave the bargaining power to bid up wages in the private sector.  Encouragingly, it also increased employment in the private sector. As the authors argue:

“If a job guarantee comes in, it can increase competition for workers and increase both wages and employment in the private sector as different employers keep bidding up wages and hire more people to help make up for highly productive workers they lose to other firms.”

This idea that job security of part-time government-guaranteed work can let participants make long-term investments and increase their income from OTHER endeavors in their life is the tantalizing UBI-like promise of a half-time job guarantee I explored in my Nation article. If extended to urban areas, one can imagine the analogy to increased investments in rural productivity would translate into pursuit of educational opportunities, taking the risk on creating new businesses, and gaining skills in a new area that could translate into better employment.

Which has not been overlooked by the urban poor in India, who are broadly demanding the extension of the program to urban areas. A recent survey by the London School of Economics suggests that 82 percent of urban Indians favor a comparable job guarantee in urban areas, with only 16 percent preferring cash guarantees.  The latter number suggests that, even after some substantial Covid-related govt spending programs for households, most urban residents see a job guarantee as a more reliable support system.

The national Indian government under the control of Narendra Modi of the Bharatiya Janata Party (BJP) has resisted extending the job guarantee program to urban areas, but a number of state governments not controlled by the BJP have begun experiments to create such programs.

Which brings us to the fourth fascinating aspect of the job guarantee, its politics. The original rural job guarantee program was enacted by the Congress Party and its allies in 2006 when they controlled the national government. When Modi became prime minister in 2014, the BJP described the program as a ‘living monument of failures” of the previous government, but under pressure from rural workers and its own grassroots activists in those areas, the BJP government was forced to embrace the program and even call it the “nation’s pride.”  With multiple crises in the rural sector, Modi’s government felt impelled to keep increasing funding for the program, leading to the massive number employed by 2020.

But the BJP still has resisted extending the program to urban India. While extending the program seems an obvious response to mass unemployment driven by Covid, the BJP’s ideological underlying hostility to the program still remains. While a few urban jobs programs have been implemented, the government has made clear that no job guarantee feature is part of their goals.

This has created a political opening for opposition parties. Back in the 2019 elections, some opposition parties began promoting an urban job guarantee and individual Indian states controlled by the opposition have begun pilot urban job guarantee programs.  The southern state of Kerala implemented an urban jobs guarantee program as early as 2010, although it has struggled to meet the goal of 100 days of work yearly for participants.  Another left-leaning state, West Bengal, also implemented an urban jobs program, with three other Indian states initiating urban employment guarantee schemes in 2020.  So, the pressure for a national urban guarantee program is only likely to build.

As the program continues to spread to urban areas in India, it is becoming a pathbreaking policy that will influence labor market interventions globally.

While a largely rural job guarantee in India has only so many lessons for the United States, the program’s political resiliency, scale and popularity is a lesson we should recognize- and holds promise that any job guarantee program implemented is likely to build a political base that is hard for even hostile political leaders to later kill off.