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Employment Guarantee Schemes: The Solution to the Vicious Poverty Trap?

The Income-Education Trade Off

An important aspect of improving the lives of the rural poor is to consider the improvement of every member of their household, in particular, the next generation. The quality of life of children belonging to rural households is heavily dependent on the employment status of the parents. Economic conditions of a household are one of the main determinants of child schooling in a developing country like India. Lack of a stable income often forces households to prioritise income generation over the education of the child. Children of poorer households, irrespective of caste and religion, are likely to have more absences, higher dropout rates, and higher school-enrollment ages. These children also display a lower school retention period (they stay in school for shorter periods of time). Due to lower engagement with educational activities, such children are unable to get access to better career and occupational opportunities in the future, forcing them to remain in the vicious poverty trap.


As income plays such a key role in determining the access to education of a child, the decision to go to a school is not always an easy decision for the families of young children in developing economies, especially in rural households. The benefits of education are not always obvious and are often weighed against the hidden costs of attending school. Hence, the decision is often shaped by the range and nature of governmental policies at offer. One such policy offered by governments of developing countries is employment guarantees which aims to increase the stable source of income of the household.


What is MGNREGA?


The MGNREGA is one such policy implemented in India, it is one of the world’s largest employment guarantee programs. In September 2005, the Government of India announced the National Rural Employment Guarantee Act (NREGA or NREGS), and in 2009 named the program after Mahatma Gandhi (MGNREGA). The Act was first started in Anantapur, Andhra Pradesh and initially covered 200 of the most impoverished districts with effect from February 2006. The Act was carried out in phases, 130 districts were added from 2007 to 2008 and gradually spread to over 626 districts across the country. While the ambit of work provided by MGNREGA has expanded over the past few years, it only provides unskilled work (traditionally, unskilled work has been defined as work that requires no formal education or training).


MGNREGA is estimated to have had substantial labour market impacts in rural districts. It has increased lower-skilled worker wages and reduced rural-urban migration of lower-skilled workers by providing them with sufficient opportunities. These wage increases are also reflected in an increased household consumption and reduced exposure to seasonal drops in consumption. MGNREGA has caused an increase in the purchasing power of consumers and allowed them to improve their quality of living. Moreover, MGNREGA has also targeted the female labour force participation, reserving one-third of jobs for women and stipulating no wage discrimination casuing an increase in female labour force participation and empowering women to play a greater decision-making role in financial matters of the household.


Scratching under the surface of MGNREGA


Until now, MGNREGA seems to have only positive impacts on rural households by improving affordability as well as empowering marginalized communities; one would naturally expect education to be impacted for the better as well. As established above, MGNREGA guarantees a fixed income for at least 100 days, a stable source that many rural households lacked earlier.

The common assumption is that MGNREGA will increase a household’s fixed income causing their liquidity to increase and hence, be more likely to invest in the education of their children. A fixed income, as compared to an unstable income from agricultural activities, is also likely to improve the stability of a household’s income sources and they will not require children to contribute. As the child is not expected to generate income, they can not only gain access to education but also spend more time engaged in educational activities.


However, employment guarantee schemeswhich provide immediate relief have also raised concerns that providing lower-skill (or unskilled) employment may discourage investment in human capital and long-term income growth. MGNREGA may raise the opportunity cost of schooling for older children, in particular. While they cannot be directly hired by MGNREGA, as its work is restricted to adults over the age of 18, there might exist a perception that older children may earn more from MGNREGA work as it increases its employment ambit. Individuals may not be encouraged to pursue higher education as the income earned from unskilled work is now increased; families may not be inclined towards investing in university or college education for their children.


Moreover, due to gender wage equity in MGNREGA, many women have been pushed to the forefront in MGNREGA jobs, this results in a loss of household labour which forces older girls to take on more childcare and domestic responsibilities at home causing them to spend lesser time engaged in educational activities. This sudden increase in household and caretaking responsibilities will hamper their ability to gain a quality education limiting their future opportunities. If girls are unable to attain a certain level of educational prowess, they may not be accepted into higher education institutions and will have no other option but to undertake unskilled work.


MGNREGA may also increase the cost of schooling younger children as more adult women continue to join the workforce. Women are usually responsible for the upbringing of the child, this includes (but is not limited to) the schooling of the child, apart from the obvious logistical assistance, a mother’s presence provides care and patient guidance. They may have lesser time to provide any support to younger children’s education. Those families which can afford private tutoring services may invest; however, children of those families who are unable to afford to such external services, may be at a disadvantage.


Is MGNREGA really the boon it claims to be?


When one delves deeper into the effects of employment guarantee schemes, especially in a developing nation like India, we observe the negative spillover impacts it has. By limiting access to higher education, rural communities will be forced to remain in the vicious trap of poverty by only subscribing to unskilled or low-skilled employment opportunities. To ensure that schemes such as MGNREGA provide short-term poverty alleviation without hampering long-term growth, governments should work towards creating more holistic policies which encourage the pursuit of higher education and vocational training as well.


(Written by Yasashvi Paarakh and Edited by Anoushka Gehani)


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