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Undernutrition, poverty & NREGS by Raghbendra Jha, Raghav Gaiha & Manoj K Pandey
In the hue and cry over minimum wages under NREGS, battle lines have been drawn between those who favour central government hiking minimum wage rates to the state minimum, and others asserting that the two must be delinked.

While the former invoke 'a right to livelihood', the latter point to the NREGS being 'the employer of the last resort and the imperative of better targeting'. While these views have some merit, both sides seem to gloss over why benefits to the poor remain so low despite frequent wage hikes.

Our analysis, for example, shows that (net) transfer benefits under NREGS (net of opportunity cost of time)/ household income were barely over 7% in Maharashtra, about 10% in Rajasthan and under 17% in Andhra Pradesh. The roots of the malady lie in its design and implementation aberrations. Undernutrition is not just an effect of poverty but also its cause.

In an agrarian economy with surplus labour and efficiency wages, nutrition-poverty traps tend to exclude the undernourished from remunerative employment and perpetuate their poverty. Rationing of employment favours those with physical dexterity and stamina.

NSS and NCAER agricultural wage and employment data over 1993-94 to 2004-05 reveal a grim story of pervasiveness of nutritionpoverty traps that foreclose an easy exit from poverty. Does this reasoning apply to NREGS? Our research (including that with Shylashri Shankar of CPR, Delhi) confirms that the undernourished were less likely to participate in it, work for long spells and earn substantial amounts. These findings are based on a survey of about 500 households in Rajasthan in 2009-10.

As the work under this scheme is physically strenuous and (mostly) a piecerate system - analogous to efficiency wages - is used to determine wages, those endowed with greater stamina and dexterity have a clear advantage. Using the body mass index (BMI) as a nutritional criterion, the individuals are classified into underweight, normal and overweight.

Cross-classifying them by poverty status - acutely poor, moderately poor, moderately non-poor and others - the proportion of underweight fell while that of normal rose across these groups. More generally, the BMI rose with income/expenditure but at a diminishing rate.

Over 81% of the male and about 71% of the female participants in NREGS were normal while most of the remaining were underweight. Our analysis shows that the higher the NREGS wage relative to agricultural wage rate at the village level, the higher was the participation rate and correspondingly the share of normal participants. Two distortions showed up consistently: one was exclusion of the poor and, related to that, of the underweight /undernourished.

If these findings have general validity -similar findings of unsatisfactory targeting are obtained from surveys in Andhra Pradesh, Tamil Nadu, Maharashtra, and Madhya Pradesh -the NREG minimum of .100 per day is already much too high, relative to slack period market wage rate. Far too many poor and undernourished are 'crowded out'.

The number of days worked in a year was considerably higher among normal participants compared to the underweight. Not just the mean number of days worked was higher among the former but also significantly higher proportions worked for 50 days or more.

In a piece-rate system, the earnings are likely to be much higher for normal participants even if the days worked do not vary much. The mean earnings were, in fact, substantially higher (about Rs 3,100 per normal participant, compared with about Rs 2,700 per underweight participant).

Besides, the proportions of normal participants in the upper ranges of earnings (> Rs 5,200 per annum) were considerably higher. A policy insight is that to the extent that acutely poor overlap with the underweight, as they do, their prospects of climbing out of poverty are bleak.

While the piece-rate system allows flexibility to female participants, and is meant to ensure more productive employment, assessment of work is fraught with corruption and delays. Non-existent worksites and large-scale embezzlement of wages were rife in our surveys. Although a time-rate system has its own difficulties - especially high supervision costs - it is not self-evident that it would be necessarily far worse. Indeed, if supervision capacity exists, a more flexible mode of wage payments may work better.

The current debate on wage hikes seems misplaced, especially when the benefits to the poor and undernourished are so small. Legislating higher wages risks greater distortions. Whatever the verdict of the Andhra Pradesh High Court, careful attention to enhancing awareness of some components of NREGS (eg, wage payments ), proper maintenance of muster rolls, and social audits may do more to transform the lives of the poor than misguided social activism.


(Jha is Rajiv Gandhi Chair Professor, Australian National University (ANU); Gaiha is Professor of Public Policy, Faculty Of Management Studies, University of Delhi; and Pandey is Research Scholar, ANU)