Urban Unemployment

The contraction of the economy raises concern on the employment situation as the shrinking sectors are those that create the maximum new jobs in India.

What are impacts of COVID-19 on the economy?

  1. GDP contraction- India’s economy shrank nearly 25 percent in last quarter, the most drastic fall in decades.

  2. Public administration- Government spending in the form of transfer payments was higher than spending on goods and services, which resulted in a negative growth number.

  3. Manufacturing and Services- The sector has been in the negative zone across the board due to the national lockdown since end of March.

    Industries which have been hit harder

  4. Travel or Entertainment — It will still be a gradual normalization process, and probably won’t rebound completely until a vaccine is available.

  5. Real estate — The present stress on home loans can hinder a revival in residential real estate.

  6. Vulnerable employment-The share of vulnerable employment is higher in India as compared to the world. It is characterized by inadequate earnings, low productivity and difficult conditions of work that undermine the basic rights of workers.

  7. GDP contraction and lack of demand in the economy has resulted in a significant dip in urban employment generation.

  8. In India, capital and labour are moving from low value-added activities in a sector to another sector, but not to higher value-added activities. This has lead to a situation where a large proportion of the jobs being created is of poor quality (and is expected to remain so).

What are the possible solutions in securing the livelihoods of workers in urban areas?

  • Generate more jobs-

o The focus on urban employment generation programmes should be in coordination with local governments.

o A major local initiative would be to design and implement employment-intensive investment policies.

o Private investments need to be facilitated by conducive contractual relations between labour and capital.

o Small and micro enterprises, the fulcrum of industrialization, need extra support to balance the interests between labour and capital as neither have collective bargaining powers.

o Needs to launch of an urban employment scheme oriented toward building large-scale medical, health and sanitation infrastructure in cities and towns across India.

  • To reduce vulnerabilities by proving decent wage and some form of job security-

o It is important that MGNREGA be expanded by both increasing the budgetary allocations and the guaranteed minimum number of days of work.

o Universal basic income- It is a government program in which every adult citizen receives a set amount of money on a regular basis. The goals of a basic income system are to improve poverty and replace other need-based social programs that possibly require greater official involvement.

  • Prioritize urban infrastructure-

o Infrastructure investments would spur employment, generate earnings and contribute to small enterprise formation.

o Construction of low-cost housing is another activity that can be carried out using labour-intensive methods, while yielding substantial collateral benefits for urban dwellers’.


Is there a need for an Urban Employment Guarantee Programme ?

o According to Periodic Labour Force Survey (PLFS) report of the National Sample Survey Office (NSSO), the unemployment problem is aggravated in India especially in cities and towns. More than half of the outlay goes to rural India.

o Economic impact of the lockdown has been largely an urban India impact.

o Nutcracker scenario for a host of businesses — demand destruction on a massive scale one hand, and lack of enough labour to restart production/operations

o As per the PLFS 2017-2018, open unemployment stands at a historic high of 6.1 per cent, and unemployment among educated youth has reached 20 per cent.

o Unemployment in urban areas at 7.8 per cent is higher than the unemployment rate in rural areas (5.3 per cent).

o Indian towns and cities continue to be plagued by the prevalence of low-wage, poor quality, informal work.

o PLFS data show that despite a rise in the prevalence of regular-salaried work, just over 50 per cent of the urban workforce remains either self-employed or in casual wage work.

o In the context of the present employment crises, it is worthwhile considering to introduce an employment guarantee programme in urban areas. The scheme, which is similar to MGNREGS, would provide minimum livelihood security to the poorest of the poor in the urban areas.

o Centrally funded programmes like the Smart Cities Mission and Jawaharlal Nehru National Urban Renewal Mission (JNNURM) have disproportionately focused on development of bigger towns and cities. Such programs help in the development of small cities and towns.

Benefits of an Urban Employment Guarantee Programme :

The proposed programme seeks to address the following key problems:
  • Employment guarantee schemes are generally self targeting and demand-driven. In a country like India with scarce income data, an employment guarantee programme circumvents the complicated process of identifying beneficiaries.

  • An employment guarantee has the potential to foster active citizenry. It enhances engagement in democratic decision-making through public meetings and public hearings. On the one hand, it would increase people’s political capacities in community building and on the other it strengthens local accountability.

  • The programme can generate a new set of ‘green jobs’ that can strengthen the capacity of ULBs as well as promote sustainable urban development.

  • Such a programme would give urban residents a statutory right to work and thereby ensure the right to life guaranteed under Article 21 of the Constitution.

  • It increases demand by raising incomes directly, and indirectly in the informal sector, by improving the fallback position of workers.

  • Address issue of Underemployment and low wages in the informal urban workforce

  • Check migration to large cities from small and medium towns

  • Such programme can bring in much-needed public investment in towns to improve the quality of urban infrastructure and services

  • Prevent ecological degradation of urban spaces

  • Employment guarantee enables people to contribute productively to the creation of useful public goods and services.

  • This is on a line similar to the highly successful programmes on urban livelihoods in China and some developed nations in the West.



  • The basic premise of a healthy rural to urban economic transformation is to transfer workers from low-skill and low-productivity professions to high-skill jobs. It would be extremely difficult for an urban employment guarantee scheme to ensure this.

  • Increase Migration from Rural to Urban areas: A potential problem with an employment guarantee programme for urban areas is that it may increase migration from rural areas.

  • Crowding out private sector employment can have other repercussions too, such as the Jharkhand scheme.

  • Identification of beneficiary: It would be difficult to prove domicile status as per state laws as well as identification of actual beneficiary.

  • Fund: Successful implementation of scheme require huge fund. This may create extra burden on state and centre

  • Different from MGNREGA: Urban unemployment is different from rural. In urban area unemployment is primarily among skilled and semi-skilled.

Brief history of urban employment schemes:
  • Swarna Jayanti Shahari Rozgar Yojana (SJSRY) launched in 1997 provided employment to the unemployed and underemployed urban poor through self-employment and wage employment.

  • The SJSRY was replaced by the National Urban Livelihoods Mission (NULM) in 2013. This programme, and its subsequent version, laid more emphasis on self-employment and entrepreneurship than on wage employment.

  • Yuva Swabhiman Yojana: The newly elected government in Madhya Pradesh recently announced a 100-day urban job guarantee scheme, the Yuva Swabhiman Yojana, which provides urban youth with varying educational qualifications with a wide set of job.

  • Ayyankali Urban Employment Guarantee Scheme (AUEGS): Since 2010, Kerala has been running a programme called the Ayyankali Urban Employment Guarantee Scheme (AUEGS) which guarantees 100 days of wage-employment to an urban household for manual work

  • Green New Deal: In the United States of America, ‘Green New Deal’ proposals provide for a ‘Green Job Guarantee’ which enshrines ‘a legal right that obligates the federal government to provide a job for anyone who asks for one and to pay them a liveable wage’.


Impact of migration in India:

  • Economic impact: Migrants contribute to the India’s gross domestic product (GDP). Their ambition and enthusiasm to improve their livelihood help in economic growth. Migration could affect the overall economy of the city through remittances.

  • Social impact: The tendency to live within own group and community is responsible for establishment of enclaves within cities. While diversity is healthy for a city, it can also pose a risk to social cohesion, cultures and traditions, and to a certain extent to the safety and security of residents. It can lead to social tension associated with xenophobia and discrimination.

  • Political impact: Transnationalism allows global connectedness. Transnational migrants have the capacity to transform cities into global centres through the impact they have on individuals, firms and other organizations via their worldwide connections. It also allow responsible government due to increased global awareness of rights.

  • Impact on urban infrastructure and services: Migrants move to cities, can put further pressure on the already stressed infrastructure. Migration affects the demands on urban infrastructure and services in both the place of origin and the place of destination. The rapid population growth results in difficulty to cope with insufficient infrastructure and the needs of all the people.

  • Education and employment: Soaring immigration directly affects the availability of places in primary schools, and lead to increase in class sizes and adding classrooms. Lack of such resources poses big issues for their governments, undermining efforts to keep class sizes down and to provide school places for all children.

  • Healthcare: The presence of infectious diseases in migrants causes concern for cities. Migrants with pre-existing health conditions can strain cities’ healthcare systems. Further poor slum conditions lead to health issues and epidemic like dengue in urban areas.

  • Transportation: One of migrants’ primary concerns is how to avail themselves of public transportation services. In developing cities, where a significant portion of migrants lives in slums, streets are not even wide enough to accommodate vehicles, including emergency vehicles.

  • Energy: Migration also affects energy consumption and CO2 emissions. It put stress on electricity and fuel demand.

  • Sanitation and waste: Migration can exacerbate the challenges of managing sewage in a city given the growth of the population, but the city cannot always meet the demand due to insufficient capacity.


Way Ahead:

The few steps involved in the rollout of such a programme are:

  • Passage of a National Urban Employment Guarantee Act — This Act will legally bind the state to provide a fixed number of days of work for all eligible people who apply under the programme, lay down the governance structure for administering the programme, and provide accountability mechanisms for its operation.

  • Creation of a Ministry of Employment – This programme be administered by a newly created Ministry of Employment under the Government of India. Such a Ministry will be responsible for all matters related to employment generation including the administration of MGNREGA.

  • Establishing functionaries for administering the programme — The Central and state governments have to hire, through an open process, a set of dedicated staff who are responsible for administering this programme as well as staff responsible for accountability measures under this programme.

  • Right to timely grievance redressal: proactive transparency and accountability structures such as mandatory periodic social audits and public hearing through a designated independent unit, as well as a mandatory grievance redressal architecture.

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