By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently working on a book about textile artisans.
Last month, Bernie Sanders announced he would soon propose a federal job guarantee program. Jamie Galbraith wrote a piece in The Baffler last week, debunking criticisms of the program– which weren’t confined to the usual suspects on the right.
Some criticisms of a federal job guarantee focus on the costs and purported difficulties of administering such a program. Dean Baker wrote in The Daily Beast
…The proposal calls for the program to be administered at the state and local level. This also presents issues (many of these governments have serious corruption problems), but even using state and local employment as a denominator, we would still be talking about doubling current levels.
It requires some serious faith in government to think that this sort of leap in employment levels can be well-managed if done in a short period of time. It doesn’t help that many of these workers will have little education and job experience.
(I note in passing that Baker seems to assume– mistakenly– that the new workers would have a guaranteed federal job, rather than a federal job guarantee– a point I don’t intend to discuss further– see the Galbraith piece above for further analysis).
India’s Rural Job Guarantee
India has for more than a decade had a rural jobs guarantee program in place, for unskilled workers. If India can succeed in designing and implementing such a policy, why can’t the US?
Economist Jayati Ghosh wrote this assessment of The Mahatma Gandhi National Rural Employment Guarantee Act of 2005 (MGNREGA) in The Guardian in 2015:
It was a historic legislation based on two interlinked goals: ensuring livelihood security to rural residents by providing at least 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work; and using the programme to mobilise existing sur labour in the countryside, to unleash productive forces and generate more economic growth in rural areas.
The treatment of employment as a right of citizens that must be delivered by the state involved a crucial reversal of the underlying basis of public delivery in India, which has mostly been driven by a paternalistic view of the state as delivering “gifts” to the people.
The jobs provided a minimum wage– which varies by Indian state (the current per diem rate in the state of West Bengal, for example, is 176 INR– a bit less than USD 3). Employment must be provided within five km of the worker’s home.
Roughly 70% of India’s population still lives in the countryside, according to the Business Standard (2013 figures). The jobs are unskilled labor and one program priority priority is infrastructure: e.g., roads, canals, ponds, wells.
Over to Ghosh again for a synopsis of the program’s positive effects::
Obviously, such a major transformation was never going to be easy, and there have been concerns about corruption and unevenness in implementation across states. Even so, the programme has had several tangible positive effects ): increasing rural wages and reducing gender wage gaps; smoothing and stabilising consumption by poor people; enabling better access to nutrition, health and education; increasing financial inclusion because of payments through bank accounts; and reducing distress migration. In some places it has helped to improve rural connectivity and agricultural productivity by creating more sustainable forms of irrigation and production. It has also served as a built-in stabiliser of the economy during downturns.
World Bank Approves
MGNREGA’s success has been so manifest even the staunchly neoliberal World Bank lauded it in its 2014 World Development Report.:
India’s Mahatma Gandhi National Rural Employment Guarantee Act illustrates how good governance and social mobilization go hand-in-hand. This law, enacted after pressure from the Right to Food Campaign and others, creates an entitlement of 100 days of unskilled employment per year, at minimum wage, to all workers in rural areas who demand it. The law also provides for social audits and redress of grievances. Demand for work is massive, mostly from poor and disadvantaged groups, and at times of the year where no other work is available. Not only does the program offer a useful safety net, but it also helps spread awareness of rights and promotes dignity (p. 155).
This is not the the type of policy one would expect the World Bank usually to praise, to say the least. The World Bank also acknowledged the program has drawn more rural poor–many of whom lack bank accounts– into the formal banking system– as wage payments are made into bank accounts (World Development Report p. 30, and 202).
The high-water mark of the program’s success was 2009-2010, according to Ghosh:
The peak period for the programme was the fiscal year 2009-10, when more than 2.8bn days of employment were provided to members of 54m rural households. Even at its peak, total spending on the programme amounted to only 0.8% of GDP, making it probably the most efficient employment programme ever.
The purpose of this post is not to focus on the Indian job guarantee scheme per se. It has never been perfect, and although the legislation promises a minimum guarantee of days of employment, that goal has never been met. Over to the World Bank report:
A state such as Rajasthan, which promotes transparency and accountability and has a long history of popular mobilization, performs relatively better: in Rajasthan, 84 percent of job seekers report being successful (against 56 percent nationwide), receiving 71 days of employment (against 37 nationwide), on average. The fact that the law is organized as a right motivates job seekers’ collective action to hold authorities accountable for supplying employment instead of siphoning off the allocated funds (p. 155; citations omitted).
Modi Starves Funding
More seriously as Ghosh discusses in detail, the situation has further deteriorated since Narendra Modi became Prime Minister, as a consequence of a policy decision not to fund the program adequately. But that’s a problem with Modiism rather than a flaw in the program per se.
In West Bengal, eligible unskilled rural workers currently are offered far fewer than the program’s promised one hundred days of guaranteed labour per year– and usually don’t even manage fifty. Chief Minister Mamata Banerjee is firmly committed to the rural employment policy, and has pressured state authorities to improve administration; but her hands are tied if the central government fails to allocate necessary funding. In India, most all taxes, including all income taxes, are assessed and collected by the central government, and revenues in turn allocated to the states; most Indian states themselves collect de minimis taxes, and none collect enough to make up the shortfall.
Starving the program of necessary funds has moderated upward pressure on rural wages, as well as reduced the bargaining power of rural workers and lowered their standards of living, according to Ghosh, who discusses further details and implications in her piece.
The Bottom Line
The point of this post isn’t that the Indian program provides a turnkey model for the US. The Indian program is limited to rural employment– rather than being universal; it only guarantees one hundred days of employment rather than a full-time job; the jobs on offer are funded by the central government and administered at the state level. The US program would be different in at least these three aspects.
But MGNREGA’s existence and ten-year track record rebut the general criticism that a federal job guarantee is simply too costly and difficult to administer. No less a natural critic of such a scheme than the World Bank has lauded the Indian program. There’s also a stereotype floating about that India is bad at at managing government bureaucracies and implementing complicated programs. When properly funded, MGNREA was certainly successful, Ghosh suggests, at raising rural wages, improving living standards, and increasing the relative bargaining power of the rural poor.
So, tell me again, why can’t a federal job guarantee work in the United States?