What India Can Teach the US About a Federal Job Guarantee

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 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 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 (MGNREGA) in 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 , 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 (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 ): 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 . 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 .:

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?

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26 comments

  1. Chauncey Gardiner

    Although Modi’s decision not to fund the program adequately and the variable degrees of its success across the country are unsurprising, the support of the World Bank is. Thanks for your work and this post, Jerri-Lynn.

    Reply
  2. Jeanne

    During early-late spring, I participate in the Calling Frog Survey. The first run goes from late March to mid April. This year the temperature during the early evening did not reach the minimum temperature of 45 degrees F, the temperature at which frogs call to breed during this time period. Last year, I heard frog calling April 13, which was late; the previous year, I heard them in late March. This year April was so consistently cold, few of the bulb varieties bloomed and the trees were bare. It will be interesting to see this season’s results for critters and plants.

    Reply
  3. David

    From 2014,

    Originally one of the highest performing states, Rajasthan has seen a sharp decline from around 2010 onwards in the uptake of MGNREGA…It is primarily the supply-side factors that have led to a decline in MGNREGA’s…The greatest strengths of MGNREGA, i.e. demand-based nature and provisions around transparency, have been made it’s greatest shortcomings.

    I won’t spoil his conclusions, but so far it’s a good read.

    Reply
  4. Whoa Molly

    When I was 18 I enlisted in the Air Force. They did a pretty good job giving me training and experience as a radio relay technician. When I was 22 and newly discharged, I quickly found a good job working for Sylvania.

    Training unskilled people for decent, needed jobs is a known skill/ability. We (USA) do it all the time in military. Occupations we train people for include:
    Administrative Support
    Intelligence and Combat Support
    Arts and Media
    Legal and Law Enforcement
    Combat
    Mechanics
    Computers and Technology
    Medical, Dental, and Emergency
    Construction and Engineering
    Transportation and Aviation

    We did it also in the

    IMHO a job guarantee its not a matter of ‘cant’… its a matter of ‘wont’.

    Reply
    1. oh

      Nowadays there’s a constant chant about “re-training” people who are thrown out of work by huge corporations. The Congress passes billed for this re-training and funds them pretty sparingly. They and the companies who do the training fully know that this a way to enrich their buddies in these favored companies. After the training is over there’s no followup and the people trained are again out of work and fall into poverty! It would be much better to create federal jobs and let them earn a decent living.

      Reply
    2. Disturbed Voter

      A large percentage of young people are physically unfit for military duty. Many of those who are fit, are unwilling to cooperate with the mission. Definitely a population of the willing.

      It was a Clinton decision to downsize the military to get the post Cold War bonus.

      Reply
  5. OpenThePodBayDoorsHAL

    Indian shops already have a 100% employment policy (maybe it’s just the family-owned ones). There’s a guy to help you find a shirt. There’s another guy to carry the shirt over to the counter for you. There’s another guy whose job is to fold the shirt, and hand it to another guy waiting to put it in a bag. And another guy at the cash register. Then there’s a guy to put the unbought shirts back on the racks.

    Reply
  6. Menlo

    Thanks for this post NC! Reminds me of why I donate to you.
    I read the Galbraith article and have a quibble. He says that the job guarantee is not supposed to be competitive with the private sector. Its instead supposed to provide workers with steady employment when they are laid off from the private sector. But how will that challenge the private sector to raise wages? Wont they instead have a pool of labour that they can choose from anytime rather than compete for? Moreover, there may be many people stuck in the private sector whose personal values would like them to be in public service. How will they build fruitful careers on such a wage?

    Reply
    1. Disturbed Voter

      All rajas know, you have to the people enough to keep them from revolting, but not enough to impoverish the court.

      Reply
  7. Desai

    I would like to correct you, Jerri. Indian states do collect taxes , mainly GST , and before GST they collected Value Added Tax, Entertainment Tax, etc. However ,after introduction of GST , all other Taxes are subsumed in State GST(except taxes on alcoholic liquor and petroleum products). However States does not collect any Income Tax, because as per Indian Constitution states are only empowered to levy income tax on agricultural income, and most of the Indian farmers are way more poor for any kind of income tax.
    Though I concede that a good number of states’ are very poor and will not have enough revenue for supporting such a program without aid from central government.

    Reply
    1. Jerri-Lynn Scofield Post author

      You’re correct– I’ve tweaked the text accordingly. My aim wasn’t to discuss the complexities of the Indian tax system per se, but merely to note that the states cannot make up the shortfall, and are dependent on the central government to allocate necessary funds. Thanks for reading my work so carefully; I appreciate your taking the time to comment.

      Reply
  8. Carla

    In conjunction with a U.S. federal job guarantee, I hope a standard 30-hour work week will be seriously considered.

    Reply
  9. Dan Lynch

    “…For unskilled workers.”
    .
    American has an aging and highly skilled workforce. Older skilled workers do not want to do unskilled manual labor.
    .
    “…who has worked as a securities lawyer and a derivatives trader. ”

    Like most JG advocates, the author has never had a real job in her life and would not consider doing JG-type work, but in her elitist mind she believes she knows what is best for the disadvantaged.
    .
    “… one program priority priority is infrastructure: e.g., roads, canals, ponds, wells.”
    .
    Apparently farms in India are often communal — in other words, communism. In the U.S., canals, ponds, and wells would be private and hence not suitable to JG work. In the U.S., roads are built by private contractors and maintained by local road districts using expensive machinery. Road work is capital-intensive and material-intensive, not labor intensive.
    .
    “…even the staunchly neoliberal World Bank lauded it.”
    .
    Because the JG is a neoliberal program. MMT is merely neoliberalism tweaked to include fiat money.
    .
    So what can the U.S. learn from the Indian JG? We learn that it has failed to make a dent in the most pressing economic issue — inequality. We learn that the JG is only suitable for unskilled communal jobs that would be largely inappropriate in the U.S.. We learn that the JG has failed to make a dent in India’s inflation rate. We learn that elitists like the author and neoliberals like the World Bank love the JG.

    Reply
  10. Jamie

    We will have to wait for the actual proposal to judge its viability. We’ve been back and forth in discussions of UBI on the issue that any program can be torpedoed by the same government that implements it. So the argument that the government can’t do it is weak, though the argument that the government won’t do it, even if it seems like they are going to do it, cannot be dismissed.

    I was most surprised that Galbraith led off with the implication that the Sander’s proposal would replace much of the welfare state. Yes, it’s a logical argument. But it is a favorite argument of JG proponents to use against UBI, while here is a JG proponent explaining how that is a good thing.

    Reply
  11. RRH

    Sander’s proposed program would be 5 times more costly on labor cost alone–labor rate $3-vs-$15. And a full-time job would more than double the number of days offered–100-vs-240, thus our program would be more than ten times more costly than India’s. A program like this might work well in infrastructure poor countries, but building a freeway takes somewhat more skill than a rural road.

    Reply
  12. Luke

    The only way that any kind of guaranteed job program would work in this country (short of just marching poor slobs at gunpoint ala Commie style) would IMO entail ALL of the following:

    1) essentially end Third-World net immigration into the U.S.;

    2) have private companies do most of it, rather than just featherbed government agencies where already thousands are doing the work of hundreds;

    3) end welfare for anyone over the age of 14 that can stand up and isn’t blind or the like;

    4) make it absolutely clear that this work is all that’s going to be a source of food (other than perhaps some remaining, spread super-thin private charity), so people in it have GOT to show to work on time, not whine, and do the work;

    5) and, let quitters and the fired starve, with lots of rapid either executions or long terms as slave laborers for those who try theft.

    Since the gov’t at all levels is rapidly and inevitably going broke (thank you, deindustrialization + regulatory/taxation insane excesses + productive people not having enough children), I expect what we’ll see is all of the above, minus the guaranteed jobs.

    Reply
    1. Tim

      NC says a few nice things in defense of President Trump where warranted, and loathes on Hillary, and comments like this are the thanks we get?

      Reply
      1. JBird

        Some do think that Libertarianism as practiced in Dickensian Britain is the way to do things. I sometimes think that the Koch Brothers, Walton Family, and like them are actively trying to recreate it American style.

        Reply
  13. nihil obstet

    Any policy will always “work” for some definition of work. As the post notes, giving unskilled, rural residents in a developing country up to 100 days a year of wages at minimum wage has done good things for the rural poor in the developing country. So it works. I’m not convinced that it would work positively in the U.S. Nor am I convinced that the program proves that a substantially different program in a substantially different country would have good outcomes.

    I’d think a better model for the U.S. would be the Great Society CETA program (Comprehensive Employment and Training Act), which did really good things and was killed in the rise of neoliberalism. It sought not just to employ the unskilled but to train people in skills and place them in permanent jobs. Why has it been ignored in all these discussions of creating employment?

    Reply
  14. Tim

    My 2 cents on a JG.

    – As somebody else mentioned above, the US military is an excellent example of On the Job Training while providing employment.

    – In spirit a JG should be about finding needs within our economy AND society and filling them as a business of last resort (i.e. nonprofitable ventures, that still may have a small net drain on the economy as a whole). Example is it may not be profitable to have a business that caters to serving the elderly in need, but it would take a service job that does not require extensive training or manual labor ability to do).

    -Things that provide cost avoidance, but don’t have an ROI in a reasonable time scale. (unleashing youth mentors into poor communities for example).

    Reply
  15. Neil

    Very interesting – it would be worth considering why Latin American countries have not tried this, focusing instead on conditional cash transfers. Incidentally, have these been tried in India?

    Reply
    1. nihil obstet

      As recounted in an earlier post by Randy Wray here at NC, Argentina did a job program. I find the description and analysis problematic for the usual reasons, but it does explain how such a problem works for poor people who want jobs.

      Well, OK, I’ll point out one of the problematic frameworks. The approach is to contrast having a job with enforced idleness, and the people with jobs were interviewed. Guess which side was preferred. When welfare payments were higher than wages in the program, “women would rationally take the higher pay in welfare but continue to work in their jobs (without pay) because they found substantial benefits in the social networks they had created through work”. This is problematic to me because I read so often that most people who didn’t have to have a job for income would lie around doing nothing all day.

      Reply

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