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Tag Archives | MNREGA

A song of public policy

In the hit HBO TV Series “The Game of Thrones”, the character Tyrion Lannister played by the actor Peter Dinklage has some of the best lines. Based on the books written by author George RR Martin, the show, in places, veers towards excesses of all kinds. That said, large portion of the books act like a mirror of societies from across the world. Plot elements include  prophecies,  violence, quest for peace,  food, famine, state finances, religion, deterrence, soothsaying, costs of war, alliances, etc.

Without delving too much into the story itself, a quote made by Tyrion in the latest season of the show demands attention, especially by public policy enthusiasts.

In response to another character’s question about “…what great thing has ever been accomplished without killing or cruelty?”, Tyrion Lannister says

It’s easy to confuse what is with what ought to be. Especially when what is has worked in your favor.

Essentially, this is how one can arrive at normative models to understand the dynamics of policy making. Intuitively, policy making must follow the process of selection ie., discard ideas those that do not work. However, the costs associated with a failed policy initiative are high (MNREGA is probably a good example) therefore it is imperative to evaluate and build normative models that work even in the ‘edge cases’.

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Improving MNREGA

Yash Daga

As seen in the 2009 elections, the UPA’s MNREGA program has earned the Government significant popular appeal. The program is also credited for securing the livelihood of several unemployed Indians, particularly in rural India. However, while the program has a very noble purpose, it is arguably ridden with several serious flaws, which have reduced social welfare instead of enhancing it.

From the issuance of the MNREGA cards, to the remittance of due payments- the implementation of the program is ridden with corruption and misuse. Moreover, MNREGA works are intentionally labour intensive, even when more efficient and cheap mechanised ways are available for the same job. So for instance, if a road costs ‘x’ to build, we spend ‘2x’ to get it built.

The main problem with the program is that it creates a disincentive for people to work. A labourer within MNREGA has little incentive to work harder, faster and more efficiently , because his supervisors are not judged by any performance metrics other than “number of people employed”.  These labourers therefore work slower than they would in a farm or factory making it detrimental to the society. If a labourer in MNREGA is offered a job at a local factory, his opportunity cost for taking that job is now the wage he gets at MNREGA, plus the cost of extra work that he will do at the factory.

This is artificially raising the input cost of farming and manufacturing and is also creating labour shortages in several farms and factories – in some cases labourers are simply refusing alternative work. In these cases, MNREGA is not just giving welfare to the unemployed, but is actually driving employed labour to move away from the industry and into the program. The country then ends up paying more than it should towards this welfare program.

These problems, as listed above, can be cured with a simple modification to the MNREGA program, to create the program into a Public Private Partnership. Private employers across sectors should be allowed to draw labour from the MNREGA pool. This would somewhat work in the following manner:

  1. If a farmer is hypothetically interested in hiring MNREGA labour – he may apply to the local administrator and file an application for say 25 people.
  2. A verification process is created to ensure that the workers are given a safe work environment, are treated fairly etc.
  3. The farmer in turn, commits to giving employment to these labourers for 100 or more days per year, and maybe even puts down a deposit for a part of the wages in an escrow.
  4. MNREGA allots 25 people to the said farmer and maintains checks to ensure that the terms mentioned in point 2 (above) are met.
  5. The minimum wage set by MNREGA still applies. In the case of excess demand for workers, the labourers are allotted to the employer that offers the highest wages.
  6. In case the demand from private employers is less than the supply, MNREGA allots the work to the labourers as per current practices.
  7. MNREGA charges an administration fee to cover related expenses from the employer.

Involvement of the private sector in this manner benefits the government, economy and society . It ensures that the MNREGA covers only those individuals who are genuinely unemployed and not those that have other opportunities for employment. This reduces the burden of welfare on the government drastically and keeps general productivity of labourers high. There is no incentive to leave productive workforce to join MNREGA. Furthermore, in some cases, this also provides a high degree of skill development for the workers, which MNREGA related jobs may not do. In turn, no employer suffers a workforce shortage on account of MNREGA, and the livelihood of all citizens is ensured.

Finally, it is important to note that MNREGA is not a program that can be easily suspended for strong political reasons. Such tweaks however, can bring about the desired outcomes without negative political ramifications. It may be the best solution for all stakeholders involved.

Yash Daga is a graduate of New York University’s, Stern School of Business, and is the Executive Director of RBBR Infrastructure Pvt Ltd.

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