| {"metadata":{"id":"00f3378deb7d81bcf9b2fd36d7d9b0b6","source":"gardian_index","url":"https://www.iwmi.cgiar.org/iwmi-tata/PDFs/2012_Highlight-08.pdf"},"pageCount":10,"title":"Labor Market Dynamics in Post-MGNREGA Rural India 8 2 0 1 2","keywords":[],"chapters":[{"head":"","index":1,"paragraphs":[{"index":1,"size":51,"text":"2. Type II -Insignificant: This is the situation of no or insignificant interaction between MGNREGA and the local labor markets. In Godda (Jharkhand), Koraput (Orissa) and Nalanda (Bihar) villages, the volume of MGNREGA work on offer was too small compared to the demand and the total size of the labor market."},{"index":2,"size":25,"text":"Here, MGNREGA had no perceptible impact on the working of the local labor markets, nor was the scheme able to substantially animate the village community."},{"index":3,"size":151,"text":"3. Type III -Potentially Significant: This is the situation where MGNREGA wages are significantly higher than local wages and the volume of potential MGNREGA work also significant and yet, MGNREGA invokes a lukewarm response from the community owing to administrative bottlenecks, distrust, systemic corruption, lackluster implementation or lack of awareness. In Narmada (Gujarat), the prevailing local agricultural wages were roughly a third of the MGNREGA wages on offer. The local Panchayat rallied to initiate MGNREGA works in the village but was discouraged by a passive block administration. When they finally managed to initiate some work, there were long delays in the payment of wages prompting villagers to give up on MGNREGA and return to the residual labor market which paid out cash wages instantaneously (Verma 2010). Likewise, in Mandla, people initially took to MGNREGA enthusiastically but shifted back to lower-paying works as MGNREGA wage payments took as long as 6 months."},{"index":4,"size":60,"text":"4. Type IV -Significant: This is the situation in which MGNREGA presence is large enough to catalyze widespread interest in the community and to significantly alter the structure, conduct and performance of agricultural labor markets. We found this, to some extent, in Dholpur (Rajasthan) and to a much greater extent, in Palakkad (Kerala), Chittoor (Andhra Pradesh) and Jalna (Maharashtra) villages."},{"index":5,"size":60,"text":"Thus the prevailing labor market conditions define how village communities react and respond to MGNREGA. In labor-scarce village economies, MGNREGA is unlikely to find many enthusiastic takers as the prevailing market wage rate would be higher than the MGNREGA wages. However, in labor-surplus conditions with depressed market wage-rates, a well-implemented MGNREGA is likely to bring huge relief to the laborers."}]},{"head":"HOW DOES MGNREGA INFLUENCE LOCAL LABOR","index":2,"paragraphs":[]},{"head":"MARKETS?","index":3,"paragraphs":[{"index":1,"size":121,"text":"In 2004, Bhalla (2004) argued that the unemployment rate among the poorest -the agricultural workers -was only 1 percent and therefore, MGNREGA was unlikely to benefit them much, especially since it offers work at low (minimum) wages. According to the official statistics, however, in 2011-12 MGNREGA offered more than 2 billion person days of employment to nearly 50 million households across the country (MGNREGA 2012; Figure 2). The same author further argued that the figures of employment generation are grossly over-estimated and that the actual figures are likely to be closer to half these numbers (Bhalla 2010). Even if that were true, the response to MGNREGA and the scale of its implementation has been overwhelming, with significant and possibly irreversible impacts."}]},{"head":"A. Tighter and segmented labor markets","index":4,"paragraphs":[{"index":1,"size":11,"text":"Where the interaction between MGNREGA and labor markets has been 2)."},{"index":2,"size":201,"text":"For MGNREGA to have major impact on farm labor markets, it is critical that the volume of work offered under the scheme is substantial during the peak agricultural season. In Dholpur (Rajasthan), much MGNREGA work was scheduled during summer when farm labor demand was low; therefore, the scheme's impact on labor market was relatively small. Here, therefore, MGNREGA work was additive; it expanded the labor market by attracting new labor to the work force without drawing away a significant chunk of workers from the residual market. Similar results were reported from Bikaner and Rajsamand (Rajasthan); Idukki and Trivandrum (Kerala); West Sikkim District (Sikkim); and Chittoor (Andhra Pradesh). In Palakkad (Kerala), however, the plantation economy demands farm labor throughout the year; and here, MGNREGA offered nearly 100 days of work to anyone who asked; as a result, the scheme's impact on labor market was broad and deep, raising female wage rates from Rs. 60 to Rs. 90 and male wage rates from Rs. 100 to anywhere between Rs. 150 and 225/day. The impact of MGNREGA in Palakkad, therefore, was substitutive; it withdrew a sizeable, mostly female, work force from agriculture. To make up, farm wage rates had to go up 50-70 percent."},{"index":3,"size":69,"text":"Several parallel effects seem to be in operation here. The scheme puts into the hands of poor people significant amount of cash that reduces the need for distress or forced labor. Our survey found that, on an average, annual income of MGNREGA workers increased by roughly 50 percent. Where MGNREGA is implemented on full scale, farm and non-farm labor markets become tighter, putting pressure on wage rates (Figure 3)."}]},{"head":"B. Increased women participation and reduced male female wage ratio","index":5,"paragraphs":[{"index":1,"size":152,"text":"MGNREGA work has found particular appeal for poor women who find the wages attractive and the facilities at the work site -such as crèche and shade -particularly convenient. Finding work close to their home also increases the scheme's appeal. In Bambara village of Adilabad, the Panchayat also offered flexi-time on MGNREGA works which enhanced its appeal even further. The convenience and appeal of MGNREGAbesides the general impression of MGNREGA work being light and poorly monitored -also attracts relatively less poor rural women to the scheme, some entering the labor market for the first time. In a Dholpur village (Rajasthan), students found that when SC/ST women first joined the MGNREGA work force, Thakur women stayed aloof; but soon, they too joined and got away with shirking work while the SC/ST women did the hard labor. Likewise, in Idukki (Kerala), students reported that almost all economically-inactive middle class women joined the MGNREGA labor force."},{"index":2,"size":132,"text":"Since the residual labor markets pay significantly higher wages to male workers than to their female counterparts, MGNREGA sites were doubly more attractive to women workers. In Palakkad villages, the labor market got vertically segmented: women, old and the infirm choosing MGNREGA but able-bodied men demanding higher wages in farm jobs. Likewise in Rajsamand and Dungarpur (Rajasthan) where migration to urban centers like Udaipur, Ahmedabad and Surat offers lucrative opportunities for men, much of the MGNREGA workers were found to be women and older men who had discontinued migration. Women found MGNREGA work attractive since it gave them extra cash they could spend on themselves and on household items for which they earlier had to depend on their husbands and had to wait for them to return home during festivals (Verma 2010)."},{"index":3,"size":50,"text":"Wage data from our surveys in 75 villages shows that not only have the wages in the residual market been rising steadily, the ratio of male wages to female wages has been declining (Figure 3). This is a positive outcome of the pressure MGNREGA exerts on the residual labor markets."}]},{"head":"C. Less clear impact on migration","index":6,"paragraphs":[{"index":1,"size":63,"text":"Students reported that farmers in popular migrant destinations repeatedly complained about reduction in the inflow of migrants and the demand for higher wages and better facilities by the migrant workers. At the same time, students in migrant-source locations found no significant reduction in out-migration. Shah and Indu (2010) Farmers are now using JCBs to get their earth work done (Shah and Indu 2009)."},{"index":2,"size":81,"text":"Our overall impression was that while MGNREGA implementation reduced distress migration, opportunistic migration continued as before. MGNREGA wages could not match up to the wages able-bodied men could earn by migrating to urban centers, where the wages are much higher. Moreover, administrative bottlenecks might have tempered any potential impact on out-migration. In Mandla (Madhya Pradesh), MGNREGA implementation initially reduced out-migration but delays in payment of MNGREGA wages led the people back to their migrant ways. Similar delays were also reported elsewhere."}]},{"head":"ATTITUDE OF THE RICH AND THE POOR","index":7,"paragraphs":[{"index":1,"size":101,"text":"The principal-agent problem comes to full play in MGNREGA. Moral hazard is openly evident as is adverse selection. A working hypothesis we had was that works on private lands would be better monitored compared to CPR works. In some villages of 24 Paraganas district in West Growing labor scarcity and the consequent rise in wages were the obvious grouses, as were the growing laziness of laborers and a decline in the work ethic. Our survey in 75 villages of Bihar, Gujarat, Kerala and Rajasthan tried to better understand the perceptions of the rich and poor regarding MGNREGA and its various aspects."},{"index":2,"size":75,"text":"In focused group discussions, we asked about the most beneficial and most worrisome aspects of MGNREGA in each village (Figure 4). Not surprisingly, most groups nominated 'availability of work close to home' as the most beneficial aspect of MGNREGA; 'empowerment of village communities, including women' was second; closely followed by 'creation of useful rural assets'. In terms of the worrisome aspects, the most prominent was a dilution in work ethic expressed as 'labor becoming lazy'."},{"index":3,"size":54,"text":"Nearly half the groups complained about the 'lack of sufficient work' and one-third felt that MGNREGA offered 'low wages'. These groups demanded that MGNREGA be implemented more forcefully and at a larger scale. Interestingly, corruption and malpractices in MGNREGA did not figure prominently; and were reported by only one-fourth of the groups as worrisome."},{"index":4,"size":141,"text":"Next, we interviewed more than 600 landless and marginal farmers -the most likely beneficiaries of the wage benefits of MGNREGA -and asked them to list down reasons why they found it attractive; and reasons that made it unattractive to them (Figure 5). As in the group discussions, 'availability of work close to home' was found to be the most attractive aspect of MGNREGA. This was followed by 'MGNREGA offers higher wages' than the prevailing residual market wage rates; somewhat contradicting the results from the group discussion. Laborers acknowledged that MGNREGA wages acted as the new wage-floor and offered negotiating power to the laborers vis-à-vis their employers. The laborers also appreciated the 'improved work-site facilities'; putting pressure on residual labor market to provide the same. Several laborers, especially women, acknowledged that 'MGNREGA work is lighter' compared to the residual farm labor market."},{"index":5,"size":99,"text":"Our respondents found frequent delays in MGNREGA wage payments and the non-availability of sufficient quantum of work as the most unattractive aspects of MGNREGA; several laborers were also unhappy with the unclear/ arbitrary manner in which actual wages were calculated, leading to suspicions of corruption and malpractices. In some villages, laborers suspected that Note: The values on the y-axis represent the percentage of villages that chose the particular variable. Water Policy Research Highlight-8 large farmers colluded with the MGNREGA administration to ensure that no works were carried out during the peak agricultural season. This significantly reduced their bargaining power."},{"index":6,"size":109,"text":"Finally, we interviewed roughly 350 large farmers -the people most likely to hire laborers to work on their farms -in order to understand their perceptions about the impact of MGNREGA implementation (Figure 6). These farmers, not surprisingly, thought that the biggest impacts of MGNREGA have been the growing scarcity of labor and Note: The values on the y-axis in (a) and (b) represent a composite index which was calculated based on ranks given by the respondent to the different variables. The of respondents giving each variable a particular rank (1-4) was divided by the rank itself and the totals were added to form the composite index for each variable."},{"index":7,"size":41,"text":"the resultant hike in wages and benefits. Several of them acknowledged improvements in local water security and appreciated the creation of useful rural assets. The erosion of work ethics among laborers and their growing laziness was another key impact they reported."}]},{"head":"CONCLUSION","index":8,"paragraphs":[{"index":1,"size":134,"text":"It is clear from our field studies and survey results that in several places, post-MGNREGA rural labor markets come with significantly altered rules-of-the-game. By offering 100 days of convenient and accessible work close to home at competitive wages, MGNREGA has: (a) brought into the labor force a new segment of previously economically inactive people, including a large number of women; (b) tightened the residual labor markets and lifted depressed wage rates; (c) set wage-floors and provided greater bargaining power to the laborers by introducing a high opportunity cost for their time; and (d) affected the labor work ethic and segmented the village labor markets into two. These impacts, however, have not been the same throughout the country and the nature of local labor markets has deeply influenced the attractiveness, effectiveness and impacts of MGNREGA."},{"index":2,"size":23,"text":"We identified four distinct kinds of interactions between MGNREGA and local labor markets. Their respective implications have been summed up in Table 2."},{"index":3,"size":86,"text":"As Table 2 shows, the net impact of MGNREGA can be maximized if it is implemented in the areas where it is most needed, at a substantial scale, and with strict adherence to the MGNREGA protocol, in letter and in spirit. A target-driven, supply-push to MGNREGA in areas where there is little demand would result in adverse Data Sources: IWMI-IRMA student surveys in 4 states: Bihar (Kumar and Chandra 2010); Gujarat (Gaur and Chandel 2010); Kerala (Nair and Sanju 2010); and Rajasthan (Singh and Modi 2010)."},{"index":4,"size":144,"text":"Note: The values on the y-axis represent a composite index which was calculated based on ranks given by the respondent to the different variables. The number of respondents giving each variable a particular rank (1-4) was divided by the rank itself and the totals were added to form the composite index for each variable. impacts on the local labor markets and the agrarian economy. Finally, in the long run, the success of MGNREGA may be measurable in terms of its reduced demand. Regions and communities that require MGNREGA work today should be able to improve their economic condition and reduce their need for unskilled, minimum-wage employment over time. This would happen only if the labor markets become more productive and the MGNREGA assets are able to enhance the profitability of agriculture by providing enhanced water security, improving land productivity, connecting villages to markets etc. "}]}],"figures":[{"text":"Figure 1 Figure 1 Districts covered as part of field studies undertaken by IRMA students "},{"text":"Figure Figure 2 Performance of MGNREGA over the years "},{"text":"Figure 3 Figure 3 Impact of MGNREGA implementation on male and female wages in the market "},{"text":"Figure 4 ( Figure 4 (a) Most beneficial and (b) Worst aspects of MGNREGA implementation "},{"text":"Figure 5 Figure 5 Reasons why MGNREGA work is (a) attractive and (b) unattractive for laborers "},{"text":" Figure 6 Key impacts of MGNREGA for medium and large land-owning farmers 200 180 160 140 120 100 80 40 20 0 Creation of Useful Assets Improved water security Scarcity of labor Higher wages and benefits Labor has become lazy Other Impacts "},{"text":" "},{"text":" "},{"text":"the MGNREGA Table 1 Four distinct types of MGNREGA-labor market interactions Type I -Misfit Type II -Insignificant Type III -Potentially Significant Type IV -Significant market and the residual labor market. By removing a market and the residual labor market. By removing a block of labor supply from the residual labor market, block of labor supply from the residual labor market, MGNREGA has created labor shortages and pushed up MGNREGA has created labor shortages and pushed up wage rates in the residual market. Further, administrative wage rates in the residual market. Further, administrative pressures to implement MGNREGA works can create pressures to implement MGNREGA works can create incentives for site supervisors and managers to be lenient incentives for site supervisors and managers to be lenient in work measurement. This means that the MGNREGA in work measurement. This means that the MGNREGA segment of the rural labor market, over time, becomes less segment of the rural labor market, over time, becomes less productivity-sensitive vis-à-vis the residual market. This, productivity-sensitive vis-à-vis the residual market. This, among other factors, has attracted women and less able among other factors, has attracted women and less able men to MGNREGA works which explains the high share men to MGNREGA works which explains the high share of female participation in MGNREGA (Figure of female participation in MGNREGA (Figure significant, it has altered the local labor significant, it has altered the local labor markets in several ways. It has increased work markets in several ways. It has increased work participation rates by offering attractive, accessible and participation rates by offering attractive, accessible and convenient work opportunities, thereby shifting the labor convenient work opportunities, thereby shifting the labor supply curve outward. It has partitioned the pre- supply curve outward. It has partitioned the pre- MGNREGA labor market into two: Wage Rates W > W LOCAL MGNREGA W > W MGNREGA LOCAL W > W MGNREGA LOCAL W MGNREGA > W LOCAL MGNREGA labor market into two: Wage Rates W > W LOCAL MGNREGA W > W MGNREGA LOCAL W > W MGNREGA LOCAL W MGNREGA> W LOCAL Conditions Booming local labor market offering much greater opportunities MGNREGA work insignificant vis-à-vis local demand MGNREGA potentially significant implemented but poorly MGNREGA significant vis-à-vis local demand ConditionsBooming local labor market offering much greater opportunitiesMGNREGA work insignificant vis-à-vis local demandMGNREGA potentially significant implemented but poorlyMGNREGA significant vis-à-vis local demand Examples Kutch (Gujarat), Uttarkashi (Uttarakhand), Kangra (Himachal Pradesh) Godda (Jharkhand), Koraput (Orissa), Nalanda (Bihar), Narmada (Gujarat) Narmada (Gujarat), Mandla (Madhya Pradesh) Dholpur (Rajasthan), Palakkad (Kerala), Chitoor (Andhra Pradesh), Jalna (Maharashtra) ExamplesKutch (Gujarat), Uttarkashi (Uttarakhand), Kangra (Himachal Pradesh)Godda (Jharkhand), Koraput (Orissa), Nalanda (Bihar), Narmada (Gujarat)Narmada (Gujarat), Mandla (Madhya Pradesh)Dholpur (Rajasthan), Palakkad (Kerala), Chitoor (Andhra Pradesh), Jalna (Maharashtra) "},{"text":"Share of women in MGNREGA employment Total expenditure (billion US$) (1 US$ = Rs. 50) Number of households offered employment (millions) Pesondays of employment generated (billions) 2.84 2.84 2.57 2.57 2.16 2.11 2.162.11 1.44 1.44 91 91 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 50% 50% 10 47.88% 48.10% 47.73% 48.18% 1047.88% 48.10% 47.73% 48.18% 9 48% 948% 8 7.58 7.88 7.51 46% 87.587.887.5146% 7 7 6 4 5 3.17 5.45 42% 44% 40.65% 42.52% 6 4 53.175.4542% 44%40.65%42.52% 3 40% 340% 2 1 1.76 38% 2 11.7638% 0 36% 036% 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2006-07 2007-08 2008-09 2009-10 2010-11 2011-122006-07 2007-08 2008-09 2009-10 2010-11 2011-12 "},{"text":" reported that in many villages of Punjab and Haryana, MGNREGA is reducing inflow of migrant labor; and even those workers who come often prefer to work on MGNREGA works. In Rithal village of Rohtak district in Haryana, farmers depended heavily on migrant labor from Madhya Pradesh. These migrants however started working on MGNREGA works in Rohtak. Farmers felt that poor people and migrants prefer MGNREGA work at Rs. 135 per day rather than farm work at Rs. 200 per day, because the former is lighter and less rigorously supervised. "},{"text":"Table 2 Implications of different MGNREGA-Local labor market interactions If MGNREGA is artificially pushed by administration, it will likely lead to poor implementation and will encourage corruption and malpractices; (-) It will also distort work ethic among laborers and reduce productivity of agriculture MGNREGA unlikely to have significant impact on local labor market because its scale is negligible vis-à-vis local surplus labor availability; (±) Substitutive impact is likely but at a low level; (±) Wages in the residual market unlikely to be affected and will continue to remain depressed; (+) Clamor for more forceful implementation Segmentation of the labor market into: (a) less productivity-sensitive MGNREGA market comprising largely of women, elderly and less-abled; and (b) highly productivity-sensitive residual market comprising of ablebodied youth; (-) Possible decline in work ethic if MGNREGA works not supervised well; (-) Higher input costs in agriculture, higher prices of agricultural produce Type Community Response Implications TypeCommunity ResponseImplications (-) MGNREGA unlikely to excite local village community; (-) MGNREGA unlikely to excite local village community; (-) Negligible impact on (already tight) local labor markets; (-) Negligible impact on (already tight) local labor markets; (+) Might bring new entrants to the labor force, including women who were (+) Might bring new entrants to the labor force, including women who were Type I: Misfit Lukewarm economically inactive, elderly and disabled; Type I: MisfitLukewarmeconomically inactive, elderly and disabled; (-) Type II: Insignificant Demand more forceful implementation Disappointment and (±) MGNREGA has potential to have significant and positive impact for laborers; (-) But this does not happen because of administrative bottlenecks and/ or (±) Type III: systemic corruption; disillusionment; Potentially expectation of better (-) Village community will initially get excited by MGNREGA but feel significant implementation disillusioned; (-) Type II: Insignificant Demand more forceful implementation Disappointment and (±) MGNREGA has potential to have significant and positive impact for laborers; (-) But this does not happen because of administrative bottlenecks and/ or (±) Type III: systemic corruption; disillusionment; Potentially expectation of better (-) Village community will initially get excited by MGNREGA but feel significant implementation disillusioned; (-) Laborers will return to residual labor market and/ or migration due to (-) Laborers will return to residual labor market and/ or migration due to poor implementation poor implementation (+) MGNREGA catalyzes widespread interest; (+) MGNREGA catalyzes widespread interest; (+) Higher wages and better work conditions for laborers; (+) Higher wages and better work conditions for laborers; (+) Fixing of wage-floor at MGNREGA level and greater bargaining power (+) Fixing of wage-floor at MGNREGA level and greater bargaining power for laborers; for laborers; Non-wage benefits of (+) Reduction in distress migration; Non-wage benefits of(+) Reduction in distress migration; MGNREGA will attract (+) Reduction in ratio of male-female wage rates; MGNREGA will attract(+) Reduction in ratio of male-female wage rates; Type IV: entire village (±) Creation of rural assets can potentially benefit entire community if Type IV:entire village(±) Creation of rural assets can potentially benefit entire community if Significant community; boon for implemented well; Significantcommunity; boon forimplemented well; laborers; bitter-sweet for (±) laborers; bitter-sweet for(±) large land owners large land owners "}],"sieverID":"141da573-7523-4290-873a-d32e315e8dcf","abstract":"When it was launched in 2004, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was expected to materially alter the working of rural labor markets. Besides offering a modicum of employment security, it was expected to absorb some of the labor supply slack, lift equilibrium wage rate in the open market, put more purchasing power into the hands of the labor class, and reduce 'distress migration'. It was also expected that medium and large farmers would view MGNREGA as a rival, creating peak-season labor shortages, pushing up farm wage rates and making farming even more unviable.Have all these happened? In 2009-10, and then again in 2010-11, IWMI deployed more than 50 masters students of rural management to survey the landscape of these interactions. This highlight offers a quick synthesis of what the students found."} |