The Dilemma of Fixing MGNREGA Wage Rates

Despite a committee recommending a new method of wage calculation, the Narendra Modi government has failed to increase salaries under the MGNREGA in real terms.

Women work at a dry pond under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) in a village on the outskirts of Kolkata, 11 February 2014. Credit: Reuters

Women work at a dry pond under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) in a village on the outskirts of Kolkata, 11 February 2014. Credit: Reuters

It is not surprising that the government has not accepted the indexation method suggested by the Mahendra Dev Committee, which can lead to higher wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) labourers. The wage rate increase over the last couple of years has been too meagre, as little as Rs 1-2 in some states. Does this cover inflation of the rural consumption basket? Is it not required that wage rate increases compensate for inflation and also provide an increase in real terms?

Under the MGNREGA, members of rural households work in their own villages on infrastructure works as manual labourers. The wages paid are calculated based on a piece rate, so it is not a daily wage. The piece rate is anchored on a wage rate stipulated by the Centre. This rate is revised every financial year.

Right from the beginning of the scheme, there has been lot of discussion around this wage rate. It is quite tricky: Since this is a government employment programme, can government shy away from paying minimum wage? How will the wage rate affect the local labour market? What affects the local market more, the time of year when MGNREGA is made available, the number of days available per family or the wage rate? What is a fair wage that safeguards labourers from inflation? Most importantly, do we consider wage that ‘should’ be or wage that ‘could’ be based on budget constraints?

All these questions have come back to haunt the government after news report that a committee to consider the basis for wage rate revisions submitted its report, but the government decided not to accept its recommendations. This was the committee headed by Dev, director of the Indira Gandhi Institute of Development Research. If accepted, it would mean higher wage rates and consequently higher expenditure for the government.

Presently, the MGNREGA is going through tough times. The last three years have seen drought in most of the parts of India. Agrarian distress, due to multiple factors, has led to a slowdown in farm incomes, especially for the rain-fed farm. Under the MGNREGA, average employment days per household has been between 40 and 50, while the promise is for 100 days in a year. The number of households getting the full 100 days employment in a year has decreased, the total households who worked in a year has decreased and total labourers who have worked has decreased over the last four years. This is a grim scenario.

Though the finance minister in his Budget speech announced the highest ever outlay for MGNREGA this year, this is deceptive. There are pending payments for the last financial year that are still under consideration, a year in which the government already spent more than the outlay. Moreover, under the guise of convergence, some other programmes under the rural development ministry are being funded through MGNREGA, namely the housing scheme and the toilet scheme. So in reality, the outlay is inadequate for the real need and potential of the programme.

If the MGNREGA is meant to be one of the flagship poverty alleviation programmes, then is it not imperative that there be a real increase in wages? Small and marginal farmers, working on their farms during the monsoon and depending on MGNREGA in the non-monsoon period, are often voiceless and powerless. For them, this is distress employment since other avenues have failed to provide a livelihood. This is not dole – it’s a scheme which provides funds for infrastructure. This is investment in agriculture and allied livelihood activities like fisheries and poultry.

Considering this programme in its entirety is essential to discuss the indexation of wage rates. Though higher wage rates might increase the Budget outlay, the government has to at least provide a real increase in wages to counter rural distress. If this government can give seventh pay commission packages to its own bureaucracy, can it not give basic wages to the toiling labourers under its scheme?