Redesign with skill

The rural job guarantee scheme must not be allowed to distort skilling incentives further.

A chorus is growing louder that claims that the labour supply to agriculture is tightening following the launch of the jobs programme under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and that rural wages are consequently rising. The evidence also indicates that machines are increasingly replacing men, especially for labour-intensive farm operations. Going by industry estimates, the sales of tractors have jumped by over 50 per cent and that of combine harvesters by over 150 per cent between 2007-08 and 2010-11. Meanwhile, the wages of farm workers are reckoned to have surged by between 70 per cent and 170 per cent in different states, especially those growing labour-intensive crops like paddy and sugarcane. Moreover, the sales of herbicides to control weeds, a substitute for having them uprooted through human labour, have also doubled in the past five years. This may have nothing to do with MGNREGA; labour wages usually go up seasonally, and that growing mechanisation and herbicide use are part of the process of modernisation of agriculture to improve overall efficiency of farm operations. It is also the case that the total number of man-hours that MGNREGA provides as a fraction of the agricultural market is at most five per cent. That is unlikely to be significant enough to warp agricultural wages throughout the country.

Yet there is a perception among farmers that farm labour is scarce, and the jobs scheme is to blame. This perception has caused them to demand higher support prices, and insist that MGNREGA work be stopped during sowing and harvesting seasons. Agriculture Minister Sharad Pawar has repeated some of these complaints in a letter to the prime minister. A committee headed by Planning Commission Member Mihir Shah is reportedly contemplating widening the programme’s mandate – in an obvious bid to placate farmers – to include certain agriculture-related activities that can benefit farming. These include, among others, soil conservation measures and the making of organic fertilisers, liquid manures and bio-pesticides. Yet it is difficult to see why the government should further subsidise agricultural activity in an even more indirect manner or why it should intervene, using state power, to prop up an archaic landed-landless power dynamic.

However, there is little doubt that the distortions that government action on this scale have caused to the rural economy should prompt policy makers to pause. Extending it to other jobs will cause those distortions to increase, and not decrease. While designers of the scheme have a point in that its poverty-reduction efficacy would be harmed by forcing it to be excessively symbiotic with agriculture, there are other reforms possible to increase its efficiency and sharpen its focus. One suggestion is to use MGNREGA funds and time to impart such skills to the rural unemployed as would make them eligible for skilled jobs in the farm as well as non-farm rural sectors. That could open up more employment avenues for the rural jobless, but the danger is it might distort the existing market for training people and increase the demand for more funds under MGNREGA to be diverted to finance such training.