Commenting on Drèze’s DUET proposal and related views, Ashok Kotwal argues that we need to consider the rationale for such an urban work programme, before diving into the design details. 

Though the very first paragraph of the proposal mentions the unprecedented job loss brought about by the lockdowns triggered by Covid-19, what is being proposed is a permanent rather than a temporary measure. The hardship caused by Covid-19 lockdowns has been so horrific that any measure to create jobs as a temporary relief measure would be welcome. Both Jean’s proposal and Debraj’s comments indicate that they are looking at it as a step toward creating a right to employment as a citizenship right in India. Therefore, I will examine the proposal with the perspective that DUET is being contemplated as a permanent measure. Employment as a citizenship right is an appealing idea. However, before we get into the design details, I would like to raise some basic questions that many readers would want to see answered.

DUET is an employment creation programme like MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) but there are some key differences. The case for MNREGA was totally compelling as it was an insurance mechanism in agriculture where the production is seasonal. It provided a fall-back option in a slack season or in a drought year. Urban production is not seasonal.

Why then do we need DUET? What purpose is DUET supposed to serve? As I understand, it is being conceived to tackle the twin problems of urban unemployment and urban decay. Indeed, as things stand, the urban infrastructure leaves something to be desired and urban unemployment is a fact of life. Why then do the municipalities not employ the unemployed to repair, clean-up, and build infrastructure? Perhaps, they lack necessary resources as their tax base is rather small. Fine, then why not just make more central government resources available to urban local governments (municipalities)? One possible answer is that municipalities may just ignore the objective of tackling unemployment. Instead of spending it on hiring more workers they may opt to buy or hire more capital. Is this the justification for DUET?

It is legitimate to ask, what are the factors responsible for generating urban unemployment in the first place? The fact that there are so many migrant workers coming from rural areas to cities indicates that there is excess demand for labour in urban areas. If so, is the observed unemployment simply due to a mismatch between available skills and skill requirements for the available jobs? If that is true, what we require is a skilling programme. Or, should we look at DUET simply as an effort to create jobs to suit the available skills?

Note that up to this point, I have not even raised the question: whether ‘urban works’ should have a priority over other claims for central government resources such as ‘rural infrastructure’ or ‘public education’ or ‘public health’.

There is another possible rationale for DUET. Regard it as a kind of unemployment insurance scheme. All developed countries have unemployment insurance schemes. It is a highly desirable safety net. But in India over 90% of employment is in the unorganised sector in which it is difficult to identify the unemployed. We need a scheme that uses self-selection – in other words, a workfare scheme. Would DUET work as an unemployment insurance programme in a largely unorganised (informal) economy? Perhaps! But there are some intrinsic difficulties. First, self-selection in a workfare programme can work only if the work required is purely physical. Any work requiring specific skills would make it inaccessible to most aspiring beneficiaries. Second, many unorganised jobs pay less than the designated minimum wage. However, DUET, a government sponsored scheme, would have to pay the legal minimum wage as per the Karnataka High Court judgment on MNREGA wages. In which case, how do you prevent it from drawing labour away from their normal occupations, and what will happen when the number of people offering themselves for work vastly exceeds the number of vouchers in existence?

Also, what sort of urban works can we expect the urban unemployed to be able to do? I understand that a lot of construction work is done by teams of workers brought in by labour contractors. Many of them are migrant workers from rural areas. Some of the jobs that Pranab Bardhan mentions seem like they have much greater skill requirement that we can hardly expect the untrained urban youth to have¹. At the very least, they will need to apprentice under an experienced hand before any employer would hire them. How does DUET plan to carry out the ‘T’ part of the acronym? In fact, those who are unemployed for the lack of skills would get employment if they acquire employable skills with or without DUET. DUET would be needed only if skilled workers find no jobs. Or, should we think of DUET as mostly a training and skilling programme? If job stamps are given to the potential employers for taking on unskilled workers for apprenticeship, it could help raising the skill level of the otherwise unskilled.

Is DUET an antidote against the dysfunctional local governments? Municipalities are created to keep up urban maintenance. There is a whole system set up with elections of municipal councillor who are voted out of power if they leave voter residents of the area dissatisfied. If municipal governments are not doing well in advancing social welfare, why would DUET function any better? Perhaps, due to the pressure put on them by the needy unemployed? But unlike MNREGA, DUET is not proposed as a demand-driven programme. It does not give any collective bargaining power to the unemployed workers in the area. MNREGA creates a constituency of workers who know each other and whose joblessness is correlated. They can put pressure on the Gram Panchayat for asking for projects and exercise their citizenship right of employment. DUET is unlikely to generate any such collective action by the urban unemployed. Why then would DUET do any better than municipalities in either creating urban assets or generating employment?

Last but not the least, the goal should be to create more employment and not to reduce urban unemployment. What part of urban unemployment is Harris-Todaro unemployment? In other words, are many of the urban unemployed rural migrants to urban centres hoping to get a good job in the organised sector? If so, this sort of unemployment will never go away. DUET, if it succeeds in creating minimum wage jobs will draw more rural migrants as the odds of landing a good job go up.

It would be good to get these questions answered before we dive into the design details.

Acknowledgements: I have benefitted from conversations with Ashwini Kulkarni, Bharat Ramaswami, Dilip Mookherjee, Jean Drèze, Milind Murugkar, Parikshit Ghosh, Pranab Bardhan, and Pronab Sen. 

Note:

1. “In deciding on projects, one should give preference to (i) particularly labour-intensive projects, and those that serve (ii) environmental and (iii) health goals. For example, (i) construction projects like building and repairing roads, public housing, etc. (ii) sorting and recycling garbage, refurbishing public spaces and parks in neighbourhoods, building mass transit, fitting solar cells, restoring and cleaning water bodies, rainfall harvesting, and so on (iii) spraying for mosquitoes, covering sewage drains, building public toilets particularly in slums, personnel for primary healthcare centres, hiring more ASHA (Accredited Social Health Activist) workers, etc.”