Wage Rate Issues in Employment Guarantee Acts
Introduction
The debate around the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act (VB-G RAM G Act) has largely overlooked a critical issue: wage rates. The wage rate is essential for enthusiasm among workers and thus the success of these programs.
Wage Determination under MGNREGA
- Central Government Notification: According to Section 6(1), the central government can notify different wage rates for different states.
- State-specific Minimum Wages: Under Section 6(2), if the central government does not notify wages, the state's minimum wage for agricultural laborers applies.
- Historical Context: Until 2009, state-specific minimum wages were applied, often higher than market wages, making MGNREGA popular.
Issues with Wage Rate Notifications
- In 2009, the central government set MGNREGA wages at ₹100 per day, which initially increased wages but eventually led to a wage freeze in real terms.
- This resulted in MGNREGA wages lagging behind state minimum wages and market wages, undermining the goal of sustaining minimum wages.
- Real wages in rural areas rose between 2009 and 2014, partly due to MGNREGA tightening the labor market. However, MGNREGA wages started falling behind.
Payment Delays and Corruption
- MGNREGA wages often faced delays, in some cases, were not paid due to technical failures, causing a "discouragement effect" among workers.
- This effect, combined with resurgent corruption, has led to a decline in MGNREGA's effectiveness.
Concerns with VB-G RAM G Act
- The Act does not introduce provisions for timely wage payments or corruption control.
- Section 10 empowers the central government to determine wage rates, ignoring the rationale for states determining wages under shared cost arrangements.
- Unlike MGNREGA, there is no legal provision to pay below the minimum wage, raising questions about the central government's ability to set lower wages.
Proposed Solutions
- Notify wage rates equal to or higher than minimum wages to resolve legal ambiguities and increase real wages.
- Challenge the real-wage freeze in court, especially with the non-obstante clause removed, making sub-minimum wages illegal.
Conclusion by Jean Drèze: For the success of employment guarantee programs, wage rates must be legally sound, align with minimum wages, and be timely to sustain worker enthusiasm and reduce corruption.
