Tackling Urban Unemployment in India post COVID19: The Way Forward

The mantra of the year 2020 became, lives over livelihood.  However, the COVID-19 cases continued to climb and no respite was within sight. Therefore, the mantra soon became saving lives while also securing livelihood. We had to get back up, however, social responsibility was still key. The economy has been gradually opening up and almost a year later, it is business as usual and many declare that a V shaped recovery is in sight meaning a sharp fall and a subsequent gradual rise in economic activity. 

It now becomes imperative to solve the other statistic growing at an alarming rate – unemployment. More so in urban and semi urban areas. Much like the rural labor force, even the urban labor force has been hit hard by first the economic slowdown and then by the pandemic induced lockdown.

This despite a rapid growth in urbanization. Alternatives need to be explored as to how we can reduce the growing inequality and re-skill urban labor and make them employable again and this article is an attempt at exploring the possible remedies to what can impact India’s growth in a major way if we do not pay attention to it at the moment.

Urban India – A Brief Picture

Urbanization in India has been accelerating after Independence and has been happening at a faster pace after 1991 LPG economic reforms. Statistics from the World Bank show that close to 35 % of Indian population i.e., around 47 crores reside in urban areas (a 4 % jump in a period of 8 years; from 2011). The fast pace of urbanization and an even faster pace of growth of the service sector (which is majorly dominated by private players) is inducing large migrations of the workforce to urban areas in search of alternate sources of employment. This is resulting in the creation of a large pool of unskilled and skilled labor force in urban areas open to employment of different kinds. 

Need for an Urban Unemployment Scheme Post COVID Crisis

CMIE data shows that the unemployment rate in India had always been around 5 to 6%  pre-covid.  Urban unemployment, ranging between 8 to 9%, has always been higher than the rural rate of unemployment. Post COVID, given the stringent lockdown measures and an already badly hit informal sector (which employs the maximum), unemployment has only gone to alarming levels. CMIE data shows that urban unemployment, when adjusted for the last one year (since March) is around 11 % and the rural is, obviously lesser at 9 % 

An MGNREGA scheme, implemented by Gram Panchayats, is only applicable to rural areas under which 100 days of unskilled manual work is provided and unemployment allowances are paid if employment is not provided. All the urban areas which include both municipalities and corporations are not covered under MGNREGA. There is no equivalent national scheme for Urban areas. This makes the large pool of unskilled and low-skilled informal workers in urban areas much worse than their counterparts from rural areas who are at least paid some minimum unemployment allowances. 

Initiatives at the State Level

SchemeState and Initiation dateFeatures of scheme
Ayyankali Urban Employment Guarantee scheme (AUEGS)Kerala – 2011100 days of wage employment, Rs.271 wage rate per day (2018) same as MGNREGA.
Urban Wage Employment Initiative (UWEI)Odisha – April 2020100 days of wage employment, Rs.286 wage rate per day- same as MGNREGA.
Mukhya Mantri Shahri Ajeevika Guarantee Yojna (MMSAGY)Himachal Pradesh – May 2020120 days of wage employment, Rs.70 wage rate per day. Skill training and loans will also be provided to set up own enterprises.
Mukhyamantri Shramik Rojgar Yojana (MSY)Jharkhand – October 2020100 days of wage employment, wages are likely to be at least 40% higher than Rs 194 under the MGNREGA programme in the state

The above schemes being implemented by state governments have budgets less than or equal to Rs. 100 crores, which is less than what is required for full-fledged implementation covering all eligible workers. States like Kerala had faced the issue of shortage of funds. Many states do not have the political will to implement such a scheme and some report the issue of lack of funds. Also, the wage rate under the scheme in Himachal Pradesh is way less than the MNREGA wage rate. 

Madhya Pradesh government in April 2019 had launched a scheme titled ‘Mukhyamantri Yuva Swabhiman Yojana’ in urban areas guaranteeing 100 days of employment a year, the applicants will get a stipend of Rs 4000 per month and a total of Rs 13,500 for 100 days. This scheme could not be implemented successfully as reports showed,  only 3 per cent of applicants received their stipends over the next 6 months. 

So, a national scheme will address these issues and provide a livelihood to all unskilled informal workers and migrant workers across the country, but not just to those of some states.

What types of jobs can be provided under the Urban Employment guarantee scheme?

Many works which are being provided in MNREGA can also be provided in an urban equivalent scheme. Works that help in addressing the problems and challenges caused by urbanization such as water scarcity, air and water pollution, waste management, disaster management, environmental issues, ecological conservation etc. In addition, public infrastructure works such as city roads and highways need to be stepped up and in proportion unskilled labour has to be employed.  

The scheme should be a demand-driven one and also help in creating productive assets, improving overall standards & ease of living of societies as a whole. Such a scheme will also boost the aggregate demand and production capacity. To enable this to be replicated on a big scale, every major city administration has to create a separate wing directly overseeing the progress of such schemes, by which in future, we can not only avoid extreme migrant exodus and provide adequate facilities but also generate data on them from time-to-time frame policies.

As far as skilled labour is concerned, given the ongoing pandemic, there is emerging a big need for subject matter experts and governments can rope in graduates to teach those in colleges and schools and provide a monthly stipend (on a contractual basis) and encourage private players to tap into such a labour pool and take the advantage.

Roadmap to Implement a National Urban Employment Scheme

Experiences from MNREGA should guide us going forward. Leakages, false payments and late payments are some of the issues observed from the implementation of MGNREGA. To avoid leakages and false payments, the Direct Benefit Transfer process should be used in a big way. Decentralized and transparent mechanisms must be put in place using technology and the involvement of local governing bodies. 

Concerns over public debt, fiscal deficit, increased migration to urban areas are being raised. There are no concrete studies that show that MNREGA has directly resulted in increased inflation. Since the urban employment scheme is a demand-driven one and helps in the creation of productive capital assets, it will not be a major factor that will lead to increased inflation. Funding for a national urban employment scheme should either come from borrowings or trading off government spending on some unproductive schemes at the state level. So, initially, the scheme should be implemented in all towns and urban areas except Tier 1 cities, with the same wage rate as in MNREGA and only allowing one adult member of a household to apply for the scheme. 

Eventually, the scheme could be extended to all Tier 1 cities, allowing all adult members to apply for the scheme and also increasing the wage rate above the MGNREGA level, as the poverty line and cost of living are different for rural and urban areas. Allocation of budget for the national urban employment scheme can be split between Centre and State governments in the same ratio as in MGNREGA. All in all, such a mega scheme requires decentralization, adequate financing of local bodies and identifying clusters of the informal economy to tap into the urban migrant and migrant labour.