Poverty & Inequality

DUET: A proposal for an urban work programme

  • Blog Post Date 09 September, 2020
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Jean Drèze

Ranchi University; Delhi School of Economics

jean@econdse.org

Jean Drèze presents a proposal for a simple scheme of subsidised public employment in urban areas, generated by multiple public institutions on their own initiative.

Editor’s Note:

Jean Drèze, who took part in drafting MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), has now proposed a scheme called DUET (Decentralised Urban Employment and Training) for urban areas. It is a thought-provoking proposal and also timely since there are reports of the Government of India already thinking about some urban employment scheme. We feel that it would be timely to have a public conversation about the basic as well as detailed aspects of the proposed scheme in ‘Ideas for India’. With this in mind, we have decided to hold a symposium.

Jean’s proposal is posted below. Note that the proposal is not just a temporary relief measure for those who have lost their jobs. It is meant to create a lasting institution as an antidote to urban unemployment and urban decay. Please note that the motivation for DUET is quite different from that for MNREGA. MNREGA offers insurance to rural workers in a slack season or in a drought year when agricultural jobs disappear. That is not the case of urban production. Yet, there is significant unemployment in urban areas. Urban areas could use some infrastructure and there is under utilised labour but there are no resources to use this labour to build the infrastructure. DUET may be one way to solve this problem?

We are inviting comments from a whole range of people who have thought about these issues (Please see links at the end of this page). There are some basic issues such as whether we need something like DUET to tackle the twin goals of urban unemployment and much needed environment. Or, would a more straight forward measure such as channeling more central government funds to the municipalities suffice? There are more detailed issues of the design to avoid graft and leakages. For example, would the creation of ‘placement agencies’ solve the problem of collusion possibilities between employers and employees?

With this as an introduction, we are launching our symposium. 

Context

  • There is a crisis of employment in the urban informal sector, as millions of workers have lost their job due to periodic lockdowns, and may or may not retrieve it soon.
  • Our public institutions and public spaces (schools, colleges, health centres, bus stands, jails, shelters, hostels, parks, museums, offices, etc.) have a chronic problem of poor maintenance.
  • As public institutions reopen after months of lockdown, much work will be needed to restore the premises (cleaning, sanitising, white-washing, weeding, repairing, painting, plumbing, and so on).
  • There is growing interest in an employment guarantee act, but little experience of relief works in urban areas. Decentralised Urban Employment and Training (DUET) could act as a step towards urban employment guarantee.

The basic idea

  • The state government issues 'job stamps' and distributes them to approved institutions – schools, colleges, government departments, health centres, municipalities, neighbourhood associations, urban local bodies, etc. Initially, the approved institutions will be public institutions (private non-profit institutions could be considered later).
  • Each job stamp can be converted into one person-day of work within a specified period, with the approved institution arranging the work and the government paying the wages (statutory minimum) directly to the worker’s account on presentation of job stamps with a due-form work certificate from the employer.
  • Employees are to be selected from a pool of registered workers by the approved employer, or, better perhaps (to avoid collusion), by an independent 'placement agency' – see below.

Rationale

  • Activating a multiplicity of approved employers will help to generate a lot of employment.
  • The approved employers will have a stake in ensuring that the work is productive.
  • The scheme requires little staff of its own since existing institutions are the employers.
  • Workers are assured of timely payment at the minimum wage, and possibly other benefits.

Further possibilities

  • To avoid abuse, the use of job stamps could be restricted to a list of permissible works. But the list should be fairly comprehensive, and not restricted to maintenance.1
  • The list of works should not be so broad as to displace existing jobs in public institutions.
  • All DUET employment should be subject to worker safety and welfare norms specified in the scheme and existing labour laws.
  • All urban residents above the age of 18 should be eligible to register under DUET, but special registration drives or placement agencies could be located in low-income neighbourhoods.
  • The scheme would cover both skilled and unskilled workers. Whenever a skilled worker is employed, an assistant (unskilled) worker could be mandatorily employed as well, to impart an element of training and skill formation to the scheme. Further training facilities could be developed or explored over time, for example, by some of the non-profit placement agencies if any.
  • Some cost-sharing could be introduced, with the approved employer paying a small portion of the wages, or paying for the job stamps instead of getting them for free. That would help to ensure that work is productive. However, it would reduce employment generation. Also, cost- sharing is a complication, perhaps best avoided initially.
  • Simple norms will be required for allocation of job stamps among public institutions. Some limited transferability of job stamps among these institutions can be considered.
  • An independent authority could be appointed or designated at the municipal level to monitor, inspect, audit and evaluate the works.
  • The National Urban Livelihood Mission (NULM) could possibly play a role in DUET as well.
  • DUET could easily be initiated on a trial basis in a particular district or even municipality.

The placement agency

  • The primary role of the placement agency is to assign registered workers to approved employers as and when required. But it could also serve other purposes, for example, certifying workers’ skills, protecting workers from exploitation and arranging social benefits for them.
  • Various options could be considered for the placement agency, such as: (1) a single agency for the municipality, run by the local government; (2) a worker cooperative; (3) multiple placement agencies, run as non-profit organisations or cooperatives.

Precedents

  • Some countries have employment-subsidy schemes of similar inspiration, e.g. “service voucher schemes” (SVS) in several European countries. Belgium has a very popular SVS for domestic services such as cleaning and ironing. It was used by 1 out of 5 households in 2016.

Towards employment guarantee

  • It would be relatively easy to move from DUET towards demand-driven 'employment guarantee'. That would require the municipality to act as a last-resort employer, committed to providing work to all those who are demanding work but not finding any with other approved employers. Alternatively, DUET could become part of a larger employment guarantee programme in urban areas.

See related writing by Jean Drèze here: https://www.bloombergquint.com/opinion/an-indian-duet-for-urban-jobs

Notes:

  1. Elements of a possible list can be found at https://cse.azimpremjiuniversity.edu.in/wp- content/uploads/2019/04/SWI2019_Urban_Job_Guarantee.pdf (a useful complement to this post).

Perspectives on the Proposal:

DUET: Need to keep open mind, pilot cautiously - Sandip Sukhtankar (University of Virginia)

DUET: Weighing the costs and benefits - Farzana Afridi (Indian Statistical Institute, Delhi Centre)

DUET: Learning from the experiences of other countries - Martin Ravallion (Georgetown University)

DUET: Addressing ‘why’ before ‘how’ - Ashok Kotwal (Editor-in-Chief, Ideas for India)

DUET: Decentralise employment generation to urban local bodies - Dilip Mookherjee (Boston University)

DUET: Employment programme in public works in small towns - Pranab Bardhan (University of California, Berkeley)

DUET: Towards employment as a universal right - Debraj Ray (New York University)

3 Comments:

By: Narasimhan Srinivasan

As a layperson (non- economist) with a keen interest in Jean Dreze's work, I am eager to see his proposal go through to the pilot/implementation stage via the central government which should realise the merits of such an initiative. Additionally, having belatedly realised the benefits of MGNREGA, the government should strengthen the programme (increase outlay, review of wages, expansion the scope of works, audits etc) and (further) improve rural infrastructure (interestingly, via the same programme) across the country so that rural migration to urban centres is reduced to very low levels vis-a-vis pre-COVID times, lest as a few other reviewers have pointed out, DUET attract rural folk in droves and exacerbate the unemployment levels and other conditions that the initiative intends to address in the first place. Ideally, the aforementioned improvement aspects should be a pre-condition for DUET but practically, can happen only in parallel.

By: E Somanathan

This seems both complicated and grossly insufficient since it is limited to public-sector employers. (The extension to non-profits is a non-starter. For-profit 'non-profits' will spring up to exploit the profit opportunity.)

Why not just have unemployment insurance, with income insurance for the self-employed? This can be financed by a straightforward payroll tax or its equivalent for the self-employed. You pay a fraction of your income in taxes and when you are unemployed, or, in the case of self-employed suffering a negative shock, you get a suitable payment based on how much you have paid in tax in the past year. There will be a progressive redistribution component to this scheme if the insurance contributions are made compulsory. This is because higher incomes are correlated with more secure incomes. This means that insecure and low-income workers whose incomes are harder to monitor will self-select into the program. Secure and high-income workers whose incomes are easy to monitor will have no choice.

Why try to reinvent the wheel? Why not just do what has worked in the civilized parts of the world?

One objection to unemployment insurance instead of a workfare programme like Duet is that unemployment-cum-income insurance does not deliver the dignity and satisfaction that work does. But this takes a very narrow view of comprehensive unemployment-cum-income insurance (UcII). Unlike a narrow programme, that will necessarily have limited coverage, comprehensive UcII will have the macroeconomic effect of being an automatic stabiliser. It will, therefore, reduce unemployment and underemployment. It will also have a very important effect on monetary and fiscal policy. In the absence of unemployment insurance, the government has no good data on unemployment. Therefore, unemployment does not even enter the monetary policy discourse, which in India is obsessed with inflation targeting alone. However, once unemployment is measured reliably at high frequency, which will immediately follow from a programme that pays the unemployed and underemployed, it cannot be ignored in monetary and fiscal policymaking. While the weight given to full employment will still be a matter of the balance of political power, the situation will still be far more favourable to full-employment policy than the current state of affairs in which full employment, being unmeasured, cannot even enter the discussion.

By: Ritwika Basu

A very timely and a prudent proposal for recovery in urban informal work. Thoughtful in the way it recommends possible responses to the already undying and now covid-exacerbated sources and risks of work in informal labour spaces in India. Eager to see critical as well as pragmatic responses it re cieves and the currently trending conversations around overlapping issues of employment, security, migration and wellbeing in India. Regarding the proposal, I feel like the category ‘unskilled labour’ yet again may become a policy blindspot and arena for wage manipulation, exploitation and discrimination.

Thanks
Ritwika

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