An Urban Jobs Safety Net

Context: It is time to formulate a wage employment-based national urban livelihood scheme, which is similar to MGNREGS.

Need for furthering urban job safety net

• Negative Economic Impacts of the Pandemic
  • GDP contraction: According to World Economic Outlook report of April, 2021 of the International Monetary Fund (IMF), almost all countries, except China (2.3% growth), experienced an economic contraction in 2020.
    • The global GDP shrunk by 3.3%. The contraction in U.S., Brazil, Japan, Canada, and Euro Area was in the range of 3.5%-7%. 
    • India’s GDP plummeted by 8%.
  • Rise in unemployment: The unemployment rate in the Euro Area, the U.S. and Canada shot up to 7.1%, 8.1% and 9.6% respectively.
    • As per the Centre for Monitoring Indian Economy’s estimates, the unemployment rate in India peaked at 23.5% in April 2020 before falling to 6.9% in February 2021.
• Rural-urban security divide: State support policies like Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) exists only in rural areas.
• Indications from reverse migration trend: Lack of safety net in urban areas was best visible during the lockdown in 2020, which led to migrant labour moving in large numbers from urban to the rural area.

Case study: Himachal Pradesh’s Mukhya Mantri Shahri Ajeevika Guarantee Yojana (MMSAGY)

• Launched with the objective of enhancing livelihood security in urban areas by providing 120 days of guaranteed wage employment to every household at minimum wages in FY 2020-21.
• Impact: In a year of its operation, a quarter-million man-days, benefiting about 3% of total urban households in H.P., were generated.
  • If the scope of MMSAGY is broadened to include muster-roll-based works, other municipal services, etc., it could enhance livelihood opportunities.
• Insights from HP’s experience:
  • An urban livelihood scheme can be launched within the existing fiscal space. 
  • Separate minimum wages for rural and urban areas do not cause migration to urban areas since the higher cost of living in urban areas has an offsetting effect. 
  • Focus must shift from asset creation to service delivery. The focus in urban areas should be on enhancing the quality of municipal services.
  • Such a scheme is like an ‘economic vaccine’ and will protect people against unemployment. It should be administered at the national level rather than at the State level.