Does the Employment Guarantee Scheme benefit the rural poor in India? Some recent evidence

Asian Survey

Volumn 45, Issue 6, 2005, Pages 949-969

  Gaiha, Raghav ^a  

^a UNIVERSITY OF DELHI   (India)

Author keywords

[No Author keywords available]

Indexed keywords

EMPLOYMENT; POVERTY; RURAL AREA;

ASIA; EURASIA; INDIA; SOUTH ASIA;

EID: 32144449416     PISSN: 00044687     EISSN: None     Source Type: Journal    
DOI: 10.1525/as.2005.45.6.949     Document Type: Article

References (57)

1. For a rich and insightful review of the EGS along these lines, see R. Herring and R. M. Edwards, "Guaranteeing Employment to the Rural Poor: Social Functions and Class Interests in the Employment Guarantee Scheme in Western India," World Development 11:7 (1983).
2. SCs/STs are communities accorded special status by the Constitution of India to help them overcome their social and economic disadvantages.
3. This section draws upon the GOM, "Employment Guarantee Scheme" (Mumbai: Planning Department, 1997).
4. For an exposition of how the EGS evolved and the controversies surrounding it, see Herring and Edwards, "Guaranteeing Employment"
5. and J. Echeverri-Gent, The State and the Poor: Public Policy and Political Development in India and the United States (Berkeley: University of California Press, 1993).
6. Following the High Court directive, the EGS wage rate was hiked in conformity with the Minimum Wages Act. The piece rates for different types of manual/unskilled work are so fixed that an average person working diligently for seven hours a day would earn a wage equal to the minimum wage prescribed for agricultural labor for the concerned zone, under the Minimum Wages Act. See GOM, "Employment Guarantee."
7. See ibid.
8. For a review of the findings based on the ICRISAT survey, see R. Gaiha, "Rural Public Works and the Poor: The Case of the Employment Guarantee Scheme in India," Research in Labor Economics vol. 16, ed. S. W. Polachek (Greenwich, Conn.: JAI Press, 1997);
9. and R. Gaiha, "Rural Public Works and the Poor: A Review of the Employment Guarantee Scheme in Maharashtra" (Washington, D.C.: Revised version of the report submitted to IFPRI/IFAD, as part of a larger study entitled "Non-Farm Employment and Poverty Alleviation in Asia," 2003a).
10. About 50% of the reduction in EGS participation between 1988 and 1989 was a direct consequence of the lowering of the EGS expenditure and the hike in wage rate. Taking this as an approximate measure of rationing, it follows that the extent of rationing was large. For details, see R. Gaiha, "Rural Public Works." However, M. Ravallion, G. Datt, and S. Chaudhuri attribute 86% of the reduction to rationing. See "Does Maharashtra's Employment Guarantee Scheme Guarantee Employment? Effects of the 1988 Wage Increase," Economic Development and Cultural Change 41:2 (April 1993), pp. 251-75.
11. In 1995, for example, the share of females among persons registered for the EGS was 57%, while their share in total person days of employment ran about 37%.
12. The promised unemployment allowance is not paid to persons still unemployed after 15 days.
13. As these schemes are reviewed later, their details are not given here.
14. 2 statistic is weakly significant (i.e., at the 13% level), in all other districts it is significant at the 5% level, implying significant changes in the pattern of allocation of EGS outlays.
15. Details of the econometric evidence, controlling for the effect of EGS expenditure, will be supplied on request.
16. See, for example, A. Ranade, "Maharashtra's EGS: Regional Patterns, Scope for Reforms, and Replication" (Mumbai: Indira Gandhi Institute of Development Research, mimeo, 1998).
17. The top 10 districts were Ahmadnagar, Aurangabad, Beed, Bhandara, Bhule, Nanded, Nasik, Osmanabad, Pune, and Sholapur. For further details, see ibid.
18. This index was devised by the Center for Monitoring the Indian Economy, taking into account social and physical infrastructure.
19. The definition of marginal and small farmers used corresponds to that of the National Bank for Agriculture and Rural Development (NABARD). This takes into account whether the land is irrigated or rain-fed. Typically, the cutoff point for small farmers in rain-fed areas runs at least twice as much as in irrigated areas.
20. For elaboration with illustrative evidence, see P. Bardhan, "Decentralized Development," Indian Economic Review 31:2 (July 1996), pp. 139-56;
21. R. Gaiha, "Decentralization and Poverty Reduction," in Poverty, Growth, and Institutions in Developing Asia, eds. E. Pernia and A. Deolalikar (London: Palgrave Macmillan, 2003);
22. R. Gaiha and V. Kulkarni, "Common Interest Groups, Village Institutions, and Rural Poor in India: A Review of the District Poverty Initiative Project," revised version of a paper presented at a U.N. Expert Meeting on Social Funds and Poverty Alleviation, New York, October 2003;
23. "75 Years of Development Research Conference," Cornell University, May 2004, mimeo;
24. and R. Nayyar, India Country Study (New Delhi: Planning Commission, 2003).
25. For details, see GOM, "Employment Guarantee."
26. The fieldwork was conducted by P. Sadolikar. The names of officials interviewed are withheld.
27. For details, see GOM, "Employment Guarantee." However, because there is a large subsidy of $1,000 in a total cost of $1,555-$2,222, manipulation of these quotas is not implausible.
28. For an exposition, see R. Ravallion, "Market Responses to Anti-Hunger Policies: Wages, Prices, and Employment," in The Political Economy of Hunger, 2, eds. J. Drèze and A. Sen (Oxford: Clarendon Press, 1991).
29. For an exposition and comment, see R. Gaiha, "Do Anti-Poverty Programs Reach the Rural Poor in India?" Oxford Development Studies 28:1 (February 2000).
30. Various officials at district and state levels attributed the sharp decline in EGS attendance to the low wage rate offered, compared with prevailing agricultural wage rates. In the interviews of households that the author conducted in Pune District, however, it was confirmed that the EGS wage rates quoted were considerably lower than the actual EGS wage rates. So, the justification offered for lower EGS outlays is specious. Further details will be furnished on request. For other illustrative evidence, see Echeverri-Gent, The State and the Poor;
31. Ranade, "Maharashtra's EGS"
32. Ravallion et al., "Does Maharashtra's Employment"
33. and I. Hirway and P. Terhal, Towards Employment Guarantee in India: Indian and International Experiences in Rural Public Works Programs (New Delhi: Sage Publications, 1994).
34. The surplus was maintained presumably to respond to a drought quickly. For details, see Ranade, "Maharashtra's EGS."
35. This is in striking contrast to the findings based on the ICRISAT sample in R. Gaiha, "On the Targeting of the Employment Guarantee Scheme in the Indian State of Maharashtra," Economics of Planning 33:3 ([no month] 2000). As the mean income and the dispersion around it were higher, and the EGS wages rose markedly after the 1988 wage hike, crowding out the poor by the non-poor was high and rose sharply over time in this sample.
36. On this, see Herring and Edwards, "Guaranteeing Employment."
37. This may be a little more than the slack period wage in Padoshi and a little less than that in Panodi. So, as an average it is approximately right.
38. As an illustration, two members of this household participated in the EGS. Both worked for 40 days and earned $1.11 each per day. The direct transfer benefit measured as the net daily gain of $1.33 (i.e., $2.21 minus 88 cents) multiplied by the duration of participation in the EGS (i.e., 40 days), which worked out to be $53 (i.e., 60% of total EGS earnings of $89).
39. The short and long-run results of the EGS on agricultural wages in the ICRISAT sample are, however, large. Specifically, if EGS wages rise by.02 cents, agricultural wages would rise by .004 cents in the short run and by about .006 cents in the long run. Apart from the fact that this is a different sample, it must be emphasized that the scale of EGS activities during the 1980s was in general larger. For details of the Granger-Sims causality tests with the ICRISAT data and other details, see Gaiha, "Rural Public Works."
40. A tribal laborer in Panodi reduced his intake of oil and spices; another - a laborer in Panodi - sold his wife's earrings to cover the deficit; and a third - a laborer in Panodi - was forced to take a loan at 6% per month.
41. An analysis based on the ICRISAT panel data suggests that the poor withdrew from the EGS when a rapid expansion of farm and non-farm employment opportunities occurred. Of those who withdrew from the EGS, some became better off. For details, see R. Gaiha, "Rural Public Works."
42. For a more detailed analysis of switches between the EGS and regular labor market opportunities in a dynamic optimization framework, see P. Scandizzo, R. Gaiha, and K. Imai, "Option Values, Switches, and Wages: An Analysis of the Employment Guarantee Scheme in India," University of Rome-Tor Vergata, mimeo, 2003.
43. For an exposition of forms and pervasiveness of corruption in the EGS, see Herring and Edwards, "Guaranteeing Employment." Echeverri-Gent, The State, is, however, emphatic that corruption under the EGS is much lower than in other anti-poverty interventions because of the organizational setup of the former and greater accountability at different levels.
44. Following J. Drèze and A. Sen, Hunger and Public Action (Oxford: Clarendon Press, 1989), the protective role focuses on protection of the vulnerable from falling into poverty; the promotional role focuses on enabling the poor to escape persistent poverty. Their quantification requires panel data.
45. Simulations with the ICRISAT panel data confirm that the protective and promotional roles of the EGS are significant when substantially larger outlays are combined with a Rawlsian variant in which priority is given to the poorest. For details, see R. Gaiha and K. Imai, "Rural Public Works and Poverty Alleviation," International Review of Applied Economics 16:2 (April 2002).
46. A glaring example of misuse of EGS funds is reported by Echeverri-Gent in The State. For example, a percolation tank that should have cost $5,022 instead cost $62,222.
47. For details, see Bardhan, "Decentralized Development"
48. Gaiha and Kulkarni, "Common Interest Groups"
49. and Nayyar, "India."
50. As emphasized in R. Wade, Village Republics: Economic Conditions for Collective Action in South India (New Delhi: Cambridge University Press, 1987), under certain conditions, maintenance of common property resources by villagers themselves is a rational self-interested response in a sample of South Indian villages. But more generally this is not so. Maintenance is thus the responsibility of the zilla parishads (district councils), but there is no specific budgetary provision. As a result, nearly 25% of EGS works are poorly maintained.
51. See Echeverri-Gent, The State and the Poor.
52. For details of the survey, see ibid.
53. See, for example, simulations in Gaiha and Imai, "Rural Public Works"
54. and M. Ravallion, "On the Coverage of Public Employment Schemes for Poverty Alleviation" (Washington D.C.: World Bank, mimeo, 1989).
55. JRY is a nationwide RPW; EAS is a special case inasmuch as it involves a diluted form of guarantee without any obligation to compensate those denied employment.
56. Since the targeting of the EGS is better than that of other RPW in general, some gains in targeting are also likely. For some recent estimates, see R. Gaiha, K. Imai, and P. D. Kaushik, "On the Targeting and Cost-Effectiveness of Anti-Poverty Programs in Rural India," Development and Change 32:2 (March 2001).
57. A case in point is the Janata Parry's Shet Majoor Panchayat (Agricultural Workers' Assembly), with a membership of 24,000 workers. The Panchayat has used the EGS to expand its membership.