Page 1 of 6
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 01
January 2019
Available online: https://ejbss.org/ P a g e | 415
Employment Guarantee and Rural Economy: A Review
Vandana Sheoran
Research Scholar
Department of Economics,
Ch. Devi Lal University
Sirsa, Haryana, India
Abstract:
NGRES is actually predicated on the experiences and knowledge gained during implementation of
previous schemes Socialspending has worsend the problem because it reduces work incentives and
creates a culture of dependency Developed countries, not been able to replace the same with the
employment subsidy. No need to compensate big businesses for higher taxes levied on them as there
are Iready multiple government schemes and incentIves for performing enterprises and businesses. The
fear that villages unduly gain at the expense of towns is unwarranted. It shall bridge the gap between
rural and urban areas in terms of Socio-economic indicators Government can think of giving incentives
for relocation or establishment of new industries including labour intensive ones in the backward areas.
Labour force participation in the economy has increased as a result of operation of such a scheme and
per capita income has also gone up.
Keywords : NREGS, Employment Subsidy, Incentive, Labour Intensive, Percapita Income
A liberal welfare state tries to ensure equitable distribution of the development pie by restoring to
myriad ways of redistributive alloacation of values among its citizens. One such Measure includes
employment guarntee scheme for the toiling masses to ensure them work for minimum number of days
on pre-decided subsistence wages. It is with this objective that the National Rural Employment
Guarantee Scheme (NREGS) was launched in all the districts of this country. This follows on the back of
various employment generation and food for work programmes including Integrated Rural Development
Programme (IRDP), Community Development Programme (CDP) and Swarnajayanti Jawahar Rojgar
Yojna (SIRY). NREGS is actually predicated on the experiences and knowledge gained during
implementation of all these previous schemes.
Since then, many observers have come up with suggestions and proposals for further fine tuning of this
flagship employment guarantee programme. There has been a proposal recently which espoused the
idea to provide employment subsidies to employers instead of providing garanteed jobs through state- run employment generation programmes like the NREGS. The underlying assumption of the said
Page 2 of 6
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 01
January 2019
Available online: https://ejbss.org/ P a g e | 416
proposition is the belief that such an approach would create jobs more efficiently and effectively than
done by the present employment guarantee scheme.
Nobel Laureate Prof Edmund Phelps is quoted as saying, “Although such programmes have been
substantial in Europe and the US, the working poor remain as marginalised as ever. Indeed, social
spending has worsened the problem because it reduces work incentives and, thus, creates a culture of
dependency and alienation from the commercial economy, undermining labour force participation,
employability and employee loyalty”
Proposing an alternative, Prof Phelps says, “The best remedy is a subsidy for low-wage employment,
paid to employers for every full-time low wage worker they hire and calibrated to the employee’s wage
cost to the firm. The higher the wage cost, the lower the subsidy, until it has tapered off to zero. With
such wage subsidies, competitive forces would cause employers to hire more workers, and the resulting
fall in unemployment would cause most of the subsidy to be paid out as direct or indirect labour
compensation. People could benefit from the subsidy only by engaging in productive work.”
It is believed that the employment generated through this alternative scheme that Prof Phelps proposes,
shall be an asset for the economy instead of a burden many also believe that the present approach
provides for taxes to be imposed mainly on urban business enterprises while money spent in rural areas.
Th urban businesses have to hear the tax burden while the benefits are reaped by faraway villages: The
business sector suffers on account of higher wage rates the availability of some employment in the
village’s acts as a disincentive for workers to move from Iaboursurplus to labour-scarce areas because
some employment is available locally under the Rojgar Guarantee Scheme. Theybemoan the fact that
the business enterprises do not only have to pay higher taxes, but also have to pay higher wages. It is
believed that if Prof Phelps’ suggestion is accepted then the taxes paid by businesses are recouped by
receiving employment subsidies. The net outgo on wages shall be reduced due to subsidies thus
received.
While the suggestion for subsidy to labour-intensive industries does make spme sense, but going whole
hog for Prof Phelps’ proposed alternative definitely does not; more so j the Ifldian context. To begin
with, notwithstanding the supposed failure of the employment guarantee scheme in the developed
countries, they still have not been able to replace the same with the ‘employment subsidy’ approach as
advocated by many including Prof Phelps.
This is not with standing the fact that such employment guarantee schemes have been in force for over
50 years in most of these developed countries. Prof Phelps’ proposal is fraught with loopholes and
complexities and prone to more corruption than one thinks. Moreover, it also does not promise to
increase the job opportunities for the jobless as has been proved to be practicably possible by the
present employment guarantee scheme, the many implementation-level hitches and glitches
notwithstanding.
Page 3 of 6
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 01
January 2019
Available online: https://ejbss.org/ P a g e | 417
First and foremost problem with this approach is the moral hazard of passing off the extant employment
in a firm to claim wage subsidies falsely and dishonestly. The employers led by petty and comprador
bourgeoisie, instead of creating new employment, would try to ingenuously cheat the system for
claiming the subsidies After all, we don’t necessarily have a database of employed manpower of all such
firms and industries. And such a database, even if created and maintained, may not be completely
sacrosanct. Our experience tells us as to how such database is often tinkered and tampered with, often
to the advantage of the high and mighty
So, any system of working out compensatory subsidies for employers by establishing contrived, linkages
to employment generation is going to be very complex and is also likely to involve a lot of scope for
discretion and subjectivity for the bureaucracy than the extant system. There is definitely no need to
compensate big businesses for higher taxes levied on them as there are already multiple government
schemes and incentives for performing enterprises and businesses. Moreover, even after paying those
taxes, they are still left with decent profit margins to go shopping the. World over for acquiring many of
the renowned companies even in times of recession. Over the years, our tax and incentives structure
have come to be comparable with the best in the world
The assumed fear that such employment guarantee scheme actually encourages mediocrity and
dependence on government is far from the truth. The present system is an incentive based transparrent
system where a more productive worker can earnmore if she/he gives more output and her/his wages
shall correspondingly be higher compared to others whose output is less. The fear that villages unduly
gain at the expense of towns is unwarranted, to say the least. The fact remains that towns are always
better endowed in terms of bash services and facilities than those found in the villages. The
employment guarantee scheme not only ensures assured employment for a household throughout the
year (considering 100 days for each adult member of a family including the handicapped), it also
envisages creation of basic infrastructures in the countryside.
It s believed that the progressive creation and availability of such infrastructures and employment
opportunities in the countryside shall discourage people from migrating to the urban areas where basic
infrastructures and services are already feeling pressure of increasing population. It shall also bridge the
gap between rural and urban areas in terms of socio—economic indicators which are quite uneven at
the moment. It is believed that wages in the urban areas shall go up consequent to reduced emigration
and reduced availability of Workers from the rural area. With less workers competing formore works,
the real wages in urban areas shall go up which would continue to attract a minimal number of workers
from the countryside as per changing demand and supply curve. The increased wages for urban workers
shall be in keeping with the increased expenses required for urban living eventually enabling them to
lead a better life than has been possible otherwise
