Data from the Centre for Monitoring Indian Economy (CMIE)’s Consumer Pyramids Household Survey (CPHS) show that employment fell precipitously during the nationwide COVID-19 lockdown, especially in April and May 2020. It exhibited a V-shaped recovery in June-July, when mobility restrictions were eased, but tapered off thereafter and has remained below the pre-pandemic level since the economy was opened up further from August onwards. A key measure that the government undertook to pump up employment was increased allocation for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA).
This year’s Budget allocation for MNREGA is Rs 73,000 crore – 34% less than the revised estimates of Rs 111,500 crore for 2020-21. The allocation for last year was increased from the initial allocation of Rs 61,500 crores following the COVID-19 migrant crisis. While the allocated amount for MNREGA this year is 18% more than the budget estimate for 2020-21, it is only 2% more than what was spent in 2019-20 (Rs 71,600 crore).
Employment gains from MNREGA spending in 2020-21
In the context of budgetary allocation, it is imperative to understand what the overall employment gains from MNREGA spending were last year and where the gains accrued. This is because the programme can potentially lead to not only direct gains in employment, but also have a multiplier effect on the economy by spurring demand for goods, as additional income reaches the hands of people.
The programme generated approximately 202 crore person-days of work until September 2020, compared with 188 crore for the entire fiscal year of 2019-20. Figure 1 compares the district-level monthly average person-days of work per rural inhabitant generated under the scheme in 2020 and 2019. The average person-days of work generated in May-June 2020 saw a sharp spike, which again fell in July-August 2020 (the peak agriculture season) but remained slightly higher in 2020 than in 2019 even during August. Thus, the person-days of work provided under MNREGA increased manifold between January-March and April-May 2020 (19%), June-July 2020 (94%) and August 2020 (20%).
District-level monthly average MNREGA person-days per rural inhabitant, 2020 and 2019
A closer look at the data shows that the increase in person-days of work provided in 2020 was higher in districts with above-median historical state capacity to provide MNREGA person-days – measured by the average number of person-days per rural inhabitant provided under the scheme during 2014-2018 in a district.
Districts with historically higher state capacity to generate person-days under MNREGA not only generated more person-days in 2020 under the scheme but also witnessed a sharper absolute rise (from 0.53 to 1.12 person-days per rural inhabitant) in generation between March and June 2020, compared to historically low performing districts (from 0.09 to 0.31 person-days per rural inhabitant). Hence, state capacity to utilise public funds has been a critical determinant of governments’ ability to respond quickly to economic crises.
Our analysis using the CMIE-CPHS data shows that an increase in historical state capacity to provide employment under MNREGA by one day per rural inhabitant (approximately moving a district from 50th to 95th percentile of the MNREGA historical state capacity distribution) in a month reduced job losses in rural areas during April-August 2020 by 3.1 percentage points overall or 7% over the pre-crisis employment rate.
Rural women’s employment increased relatively, by 8.6 percentage points or 74%, suggesting that not only were employment losses for women stemmed, but women who were previously not in the labour force may also have entered the market during the crisis in districts with high MNREGA state capacity. Thus, it appears that women benefitted more than men from the employment guarantee, in terms of bolstering their overall employment rate. However, we find no spillover effects due to MNREGA on the urban labour market.
Why did women benefit more?
Reservation for women in MNREGA jobs and possibly higher allocation of MNREGA person-days to women during the crisis cannot explain the disproportionate – female workers made up for approximately 48.5% of MNREGA person-days, both before and during the pandemic crisis. Women’s labour market participation has been shown to be countercyclical in existing research – with significant losses to household incomes, women often join the workforce.
However, women are likely to prefer jobs near their home due to mobility restrictions, safety concerns, and the need to balance care work with market work (paid work outside the home and besides MNREGA) as well as a guaranteed job. Since MNREGA guarantees work within the village precincts, it meets many, if not all, of the preferred job characteristics of women.
We find that gains in employment for rural women, in areas with historically high MNREGA state capacity, varied by marital status, education, children and poverty levels. Married women’s employment probability increased by 33% more than women who were never married, and that of women with primary school-going children increased by 33% more than those in households with no child in that age group. These findings support the hypothesis that limited mobility and the need to balance childcare duties could have led to women accessing a public guarantee programme like MNREGA more than men in the past year.
Employment probability of women who were less educated or in households classified as ‘poor’ increased relatively more due to MNREGA. However, we do not find any significant difference in employment increase due to MNREGA state capacity, by previous employment status of women. In other words, women who were previously employed as well as those who were not reportedly employed pre-crisis, benefitted in historically high MNREGA state capacity areas.
Lastly, rural women in districts having low migrant worker population were more likely to join the workforce during April-August. This can potentially be attributed to the lower demand for limited MNREGA jobs in low-migrant districts, as primarily male migrant workers returned to rural regions post the nationwide lockdown in March.
On the other hand, we find no differential employment effects along the dimensions of marriage or children in the household for rural men. Thus, mobility and childcare concerns were additional factors due to which women may have benefited more from MNREGA during the crisis.
Capacity-building is critical
Demand for social protection peaked during the crisis and is likely to remain high. While women’s labour force participation has been dismal in India, even more so in urban areas, they are likely to join the workforce during periods of economic distress. Thus, the nature of guaranteed jobs – the skills required and wages offered – can be a critical determinant of which demographic groups benefit from such social protection.
Our analysis shows that past state capacity to utilise MNREGA funds has aided employment recovery, and more so for women. Augmenting MNREGA funds – along with efforts to ensure that local bureaucracy and grassroots institutions have the capacity to quickly translate funds into jobs on the ground – is thus critical for protecting livelihoods and creating a multiplier effect on aggregate demand in the economy.
This article was published in collaboration with Ideas for India.