Author: Kevin Kuriakose
Another May day (Labour day) went by and writers,
intellectuals, economists, social critics could not help but pause and
wistfully remember the most divisive political and economic thought that
circumscribed a moral and economic hyperventilation of 200 years, and perhaps
beyond. “Working men of all countries
unite…” wrote the young philosopher and journalist in the making, Karl Marx.
Karl Marx is both a figure of contention and massive
intellectual fervour to the world of an economist. From Marx, “a capitalist”[1]-
who is often derided to have spent more time studying capitalism than
propagating alternatives to it, we are chillingly reminded of the greatest
threat of our times, of capitalism, and that which looms like a dark cloud in a sloppy plain-
the problem of unemployment. From the far developed United States, to the
developing “elephant” economy of India, the persistent lack to both create and
sustain jobs is a matter of concern, ignoring the easy use of the term “jobless
growth”, with unemployment rate within the US observed to be one of its highest
at 4.1% this March. [2]
With the gift of Keynesian economics, we no longer live
under the unbridled delusion of laissez faire as the last word, and as economic
thought has progressed, we have familiarised ourselves with the concept of
state postulated Employment Guarantee, or rather the state as the Employer of
Last Resorts (ELR). The idea became more relevant post the industrial
revolution, based on the idea that capitalism if left to its devices will never
gravitate to full employment levels. For more than three centuries
neoclassicals took unemployment to be a transitory phenomenon and denied the
existence of voluntary unemployment. However, the push back of the Great
Depression (25% unemployment rate) and revelations of Keynes, propelled the US
government to introduce the New Deal program, giving rise to the earliest
relief to the “reserve army of labour”[3].
The literature first proposed by John H.G. Pierson proposed
an Economic Performance Insurance, which would institute the state as an
employer of last resorts, ensuring ‘guaranteed’ full employment. However, it
was not enough to ensure employment, but to sustain it in the long run, which
is only possible with high levels of consumer demand. To avoid unforeseen
scenarios of ‘oversaving’, he emphasized on the need for government to
guarantee the “volume of consumer spending that is consistent with the full
employment level of production”. That is, it is not enough to ensure current
market demand, but also future markets.[4]
In the present day, in an ambitious take the Democrats
rallying behind the rackety Bernie Sanders can be found triggering new debates
on ‘job guarantee’. [5]
A job for everyone sounds a novel idea, and displays too suspiciously
benevolent a state, but there is a barrage of reasons to be sceptical.
Firstly, job guarantee is too large a burden on the
exchequer with estimated as $378 billion annually in the first five years and
$415 billion each of the following five years for the US itself. [6] Apart from the issue of the bills, critics
have for long had doubts about its “capability to deal with structural
unemployment, inflation, and logistical problems”. [7]
Another critique of such programs is the fear that a diminishing “reserve army
of labour” increases labour bargaining power, putting pressure on the
wage-inflation spiral. However, a counter argument suggests that “a skilled
pool of employable ELR workers presents a greater “threat” to private sector
employees than the traditional reserve army of the unemployed”. Thus, there
should not fear of runaway inflation. Of course, there can be expected a short
run pressure on businesses to increase their prices to be set competitively as
set by the government[8].
But if we go by the term Marx coined, “socialization of investment”, perhaps to
maintain a stability in price and low unemployment, job guarantee is the way to
go in the long run.
“I expect to see the
State . . . taking an ever-greater responsibility for directly organizing
investment . . .” [p. 164]-Das Kapital
However, the central problem with employment by the state lies in its
implementation, and top-to-bottom corruption. And thereby lies the tale.
The Swedish Story
After World War II the Swedish implemented a full employment
model that has garnered immense interest. Introduced by two Swedish economists-
Gösta Rehn and Rudolf Meidner – it emphasized strongly on “right to work” than
“right to income”. Apart from guaranteeing work to individuals who seek them,
it essentially entailed “solidaristic wage policies within but also between
sectors” with the help of its strong trade unions, which left firms which were
unable to withstand international competition to potentially shut down, the
driving factor being that employment had to be “defended”, owing to the idea
what Schumpeter likened as “creative destruction”.
Most certainly such a policy leads to massive downsizing in
the short run. It is here that they envisioned the role of public authorities,
in reintegrating people into the labour market, especially the ones victims of
structural unemployment, and developing their productive capacities. [9]Without
a doubt these programs were very expensive, and along with other Nordic
countries Sweden too had to incur tremendous amount on public facilities. But the
results have been favourable.
Unemployment rate in Sweden kept well under 3% until the
late 1980’s, which saw opposition from white collar unions to the reduction of
wage differentials between high and low profit industries, as well as the
gradual localization of bargaining.
Ever since then, Sweden has seen unemployment rates that
have well crossed its familiar low rates fluctuating between 4-7%, reaching a
record high 9.6% in July 1993. [10]
The Indian Story
The Indian Parliament in 2005 passed the Mahatma Gandhi
National Rural Employment Guarantee Act (MNREGA) which chose 200 districts out
of 600 rural districts in India for
undertaking rural projects that aimed at guaranteeing 100 days of employment to
a member of every household, with an estimated expenditure of 1.3% of GDP in
its first year of implementation.[11]
Included in this employment scheme is the guarantee that if the government is
unable to provide a job to a qualified applicant within 15 days of an
application being submitted, the applicant will receive unemployment insurance.
This attempt by India to target the rural population, which accounts for 75% of
its population, widens the scope of the idea “Employer of Last Resorts” for the
state, regardless of still being a developing country.
After more than a decade of its inception, it is imperative
to critically examine NREGA. Often chided for its mismanagement and lack of
administrative backup for providing for grievances and even discriminatory
practises [12],
it is plagued by concerns of barely fulfilling even 50 days out of its 100-days
guarantee within the act. In 2006-07 after it was implemented, only 17 days of
employment were available on average per rural household, which though rose to
an average number of days worked per householder to 54, but still way below the
ceiling. [13]
The average days of employment provided per Household in as recent as 2017-18
is as low as 45.87 out of the guaranteed 100 days. [14]
It must be noted that it is not the amount of work, but also the wage that has
cast aspersions to this scheme. Wage delays have been increasingly a case of
worry for the Indian states, with the figure going to as huge as 78.88% of the
total Wage Liability (Payment Due) under MGNREGA by 2016. [15]
Moreover, despite revisions in its wages, the highest ceiling on per day wage
is nearly just 3.5 dollars. [16]
Conclusion
Certainly there is some silver lining to the proposed job
guarantees that are making the rounds. In the Indian context, a study done by a
group of economists — UC San Diego's Karthik Muralidharan and Paul Niehaus and
the University of Virginia's Sandip Sukhtankar gives some astounding results. They estimated that the job guarantee scheme in Andhra (one state with such scheme) increased
not only earnings for low-income households by 13.3 percent but 90 % of that
increase is due to higher wages and increased work in the private sector, not
the job guarantee program itself. Further, it also increased employment in the private
sector! [17]
[1] Gaven
McCrea. “To celebrate May Day is to remember Marx, who showed us what
capitalism is”. |1 May 2015| https://www.theguardian.com/commentisfree/2015/may/01/may-day-marx-capitalism-work-class
US Jobless Rate Drops to Near 17-1/2-Year Low
[3] Karl
Marx. |Das Kapital, chapter 25|
[4] Fadhel
Kaboub. May 2007| |Page 6|. Working Paper No. 498 |Employment Guarantee
Programs: A Survey of Theories and Policy Experiences|
[6] https://www.bloomberg.com/news/articles/2018-04-17/u-s-jobs-guarantee-held-out-as-path-to-true-full-employment
[7]Fadhel
Kaboub. May 2007| |Page 14| Working
Paper No. 498 |Employment Guarantee Programs: A Survey of Theories and Policy
Experiences|
[10]
Fadhel Kaboub. May 2007| |Page 11|
Working Paper No. 498 |Employment Guarantee Programs: A Survey of
Theories and Policy Experiences|
[12] Ankita
Aggarwal. |Vol. 51, Issue No. 22, 28 May, 2016| “Insights from Jharkhand :The
MGNREGA Crisis” Economic and Political Weekly
[13] Rhonda
Breitkreuz*, Carley-Jane Stanton, Nurmaiya Brady, John Pattison-Williams, E.D.
King, Chudhury Mishra and Brent Swallow| Development Policy Review, 2017, 35
(3): 397—417| “The Mahatma Gandhi
National Rural Employment Guarantee
Scheme: A Policy Solution to Rural Poverty in India?”
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