The urban unemployment crisis
Because of the coronavirus’s highly contagious nature, the forced world to go into lockdown. As a result of people not stepping out of their homes, many people worldwide lost their jobs. Most of these people who lost jobs belong to the informal sector, which means that there is no formal document to secure employment. Now, if you work in an office, you have a legal document that mentions your pay structure, your compensation, and most importantly, secures your employment.
However, if you work as an electrician or a plumber, you have no formal document of sorts, and you’re just casually employed by contractors, subcontractors, or any other temporary agency. In India alone, many people belonging to the informal sector had lost jobs because of the lockdown.
So left them with no income source and no benefits package or policy to take care of them. It is said that because of the lockdown, urban unemployment rates have increased three times as much as before. So the question that pops up is how do we tackle this urban unemployment problem?
The best way to do this is to look back in history, particularly to the time of the great depression in the year 1929. Now the great depression was an economic depression throughout the world but originated in the United States of America.
Because of the great depression, in only three years, urban unemployment rates went from virtually zero percent to 25%. Fifteen million Americans are said to have lost their jobs during the great depression. American president Franklin D Roosevelt ordered the public works administration to issue 7 billion us dollars to various construction companies. So why did he do this? He did this to make those construction companies start working on projects such as flyovers, multiple buildings such as hospitals, zoos, and you wouldn’t believe its swimming pools.
So why would an American president issue seven billion dollars to various construction companies to start working on projects such as swimming pools during an economic depression?
The answer is that because you have to construct all these projects, it would require employment. Many Americans would seek secure employment; thus, people will start purchasing commodities once again, and purchasing power would increase in America, which would kick in a virtuous cycle of growth.
So did this work as expected?
And the answer is yes! Because of this policy, nearly 8.5 million Americans went back to work. This policy was the application of an economic theory proposed by British economist John Maynard Keynes.
Keynes proposed that governments should increase their expenditure and decrease taxes to create demand to pull an economy out of depression. In light of India’s urban unemployment crisis, perhaps even India could implement a policy based on Keynes’s theory. We already do, but that is in rural India. Rural India implements a procedure which is known as MGNREGA, the Mahatma Gandhi National Rural Employment Guarantee Act.
By MGNREGA, any citizen in rural India can secure 100 days of manual or unskilled work as long as he or she demands it. As a result of the lockdown, many migrant workers had to leave cities and go back to the villages searching for employment. By MGNREGA, many of these migrant workers did a secure job.
However, it isn’t a rosy picture as we paint it to be. Only two out of three people who applied for jobs using MGNREGA got those jobs. This means that there is a gap between people applying for jobs and people securing jobs. What about the remaining people who haven’t been able to secure employment through MGNREGA? This number might increase as more migrant workers move towards their villages because of the lack of work in cities.
So the way to tackle this problem is to encourage more and more migrant workers to stay back in cities by offering them a similar employment guarantee program such as MGNREGA in rural areas.
Individual states in India are already doing this. Take, for instance, Orissa. Orissa recently offered a hundred crore package to help the urban low earn wages using labor-intensive projects such as constructing flyovers or bridges. Another example is the state of Himachal Pradesh.
Himachal Pradesh announced the Mukhya Mantri Shahiri Ajivika Guarantee Yojana to provide 120 days of unskilled labor to household members in urban local bodies. Now, these are just two examples of the many states that are implementing such a policy. If every state follows suit, we would soon be able to combat this urban unemployment crisis effectively. If this program gets a push from the central government, we will have something substantial to depend upon to fight this urban unemployment crisis.