Lockdown Effect: How have MNREGA wages increased over the years?
Sai Krishna Muthyanolla
May 11, 2020
With thousands of migrant workers returning to their villages, the work under the MNREGA is expected to provide an important lifeline to crores of households. Here is a look at the wage increase under the scheme over the last 9 years.
Following PM Narendra Modi’s announcement of nationwide lockdown on 24 March 2020, the finance minister within two days, announced a ₹ 1.7 Lakh crores relief package under the Pradhan Mantri Gharib Kalyan Yojana. The increase in daily wage for Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGA) workers was also notified and that the increase of ₹20 per day would be applicable from 01 April 2020, providing an additional benefit of ₹ 2000 to each household, assuming they are provided full 100 days of work.
Around 13.62 crore families were expected to be benefitted with this announcement. However, there are many claims surrounding this announcement stating that BJP led government conveniently made the annual practice of wage revision into a relief measure announced in the light of COVID-19.
Wages under MNREGA are increased annually
MNREGA is a centrally sponsored scheme implemented on cost sharing basis between Central and State governments with the centre funding a large portion of the budget. Every year, the daily wage for MNREGA workers is revised by the Central Government on the basis of Consumer Price Index– Agricultural Labourers, in order to neutralize the effect of inflation. The new wage is applicable from 01 April, with the onset of new financial year, as has been the practice since 2012-13. This year, the revision was published in the official Gazette on 24 March 2020. The announcement regarding revised wages for unskilled labourers was announced as a part of the Gharib Kalyan Yojana as a part of relief measure on 26 March 2020, two days after the revision was notified.
The payment to the workers is made on piece rate basis, that is, determined by the amount of work done. The Schedule of Rates for each state is different, because of which the work output and wage calculation also vary from state to state.
The latest wage hike is the highest since 2015-16
The Finance Ministry announced that the daily wage under MNREGA was increased from ₹ 182 to ₹ 202, an increase of 11%. The increase is a result of higher CPI – AL in 2020 as compared with the previous years, which indicates an increase in inflation in rural India.
In 2020-21, the wage has been hiked by almost 10% on average across states, compared to 2019-20. This hike has been the highest since 2015-16. In 2013-14 and 2014-15, the wage hike was around 11%. Between 2015-16 and 2019-20, the wage hike was only in single digit percentage points between 2% and 6%. The average amount increased (₹ 20) in 2020-21 is the highest since 2012-13.
In a first, wages in all the states increased by more than ₹ 10
In the states, wages have been increased 6% to 15.5%.  In Maharashtra, and Dadra and Nagar Haveli, wages increased by more than 15%. A total of 17 states and union territories have recorded an increase in wages by more than 10%. Seven states, five of which are from north eastern region, have recorded a less than 7% increase. On the other hand, the increase in wage amount varies from ₹ 13 to ₹ 34 across states. The number of states and UTs under each category of wage increase by amount are listed in the table below. It has to be noted that in 2018-19 and 2019-20, 10 and 7 States/UTs did not see a wage increase respectively.
In the last 9 years, wage in Kerala increased by ₹127 while in Madhya Pradesh & Chhattisgarh saw an increase of only ₹58
In the 9-year period from 2012-13 to 2020-21, wages have increased by ₹ 90 at the national level, an increase of 63%. During this period,  Kerala recorded the greatest increase in terms of wage amount, by ₹ 127 (77%). Tamil Nadu and Puducherry witnessed an increase of ₹ 124, up by almost 94%. A total of 9 States/UTs have reported an increase of at least ₹ 100 during this period. West Bengal, Chhattisgarh, and Madhya Pradesh are the states with the least increase in wages since 2012-13 i.e. by 50% and below. The three states have also reported low increase even in terms of amount- by less than ₹ 70 in 9 years.
The wage hike in 19 states and UTs is less than ₹ 20
While announcing the wage hike, Finance Minister stated that the increase in wages would provide an additional benefit of ₹ 2000 to each wage seeker household. Not only does the additional benefit each household gets depend on the state, but also depends on the number of days they are provided employment. In the previous financial year of 2019-20, only a total of 28.16 Lakh households had an attendance of 100 days and 11.57 Lakh households had an attendance between 100-150 days, out of 14.26 crore households that had registered themselves under the scheme.  In other words, less than 3% of all the registered households got gainful employment of 100 or more days in 2019-20.
Wage Seekers who do not get employment are paid unemployment allowance
When a person who has registered under MGNREGA applies for work and does not get it within 15 days of raising the demand, he/she is entitled to a daily unemployment allowance. For the first 30 days of unemployment in a financial year, they will be paid 25% of the wage rate. For the rest of the financial year, they will be paid 50% of the wage rate. The fixing of rates for unemployment allowance and making necessary budgetary provision are within the purview of the state government.
Daily wage for unskilled agricultural labourers is almost 30% higher than wage for MNREGA workers
MNREGA wages are considerably lower compared to that of agricultural labourers. As far as MNREGA is concerned, Haryana offers the highest wage rate of ₹ 309 among all states, followed by Kerala with ₹ 291. The wage is less than ₹ 200 in five states- Bihar, Chhattisgarh, Madhya Pradesh, Jharkhand, and in some areas of Himachal Pradesh.
In contrast, as per the Labour Ministry’s latest order dated 8 May 2020, the Variable Dearness Allowances  (VDA) for unskilled agriculture labourers has been increased in the range of ₹62 to ₹67, which has raised their minimum wage rate to between ₹ 362 to ₹ 400 per day depending on region of employment.
Committee recommended use of CPI- Rural index to calculate wage revision
The NDA government had constituted a committee headed by a former Additional Secretary to the Ministry of Rural Development to study the appropriate index for revising MNREGA wages. The committee recommended the use of ‘CPI – Rural’ in place of ‘CPI- AL’, which is currently being used. However, the recommendation of the committee was under consideration of Finance Ministry as of January last year.
Demand for work under MNREGA expected to increase with migrants returning to their villages
Thousands of migrant workers are returning to their native villages because of the crisis caused by COVID-19. The lockdown restricted movement and economic activity, resulting in loss of work for the migrant workers. As more and more migrant workers return to their villages, it is expected that the demand for work in rural areas will substantially increase in the coming months. Thus, across India, it is expected that the number of persons dependent on the MNREGA, will increase manifold. As on 09 May 2020, there are over 27.3 crore persons who have registered themselves for employment under the scheme.
It has been reported that the Chief Minister of Chhattisgarh has written to the Rural Development Ministry asking the Centre to permit the government to pay MNREGA workers in the form of food-grains instead of cash. Meanwhile, the Jharkhand Chief Minister has reportedly said that they would be tweaking the guidelines of MNREGA in order to provide jobs to the migrant workers returning to the state.
Governments must take adequate measures to support the poor in rural areas
The law provides for additional employment, up to 50 days for those in areas affected by natural calamities and drought. This is one provision which the Central Government can invoke to help those who have been adversely affected by the lockdown. Labour intensive projects can be chalked out by governments to provide employment opportunities for more people.
As is evident from the data, the lockdown has had a significant effect on employment generation under the scheme in the month of April due to suspension of activities. This has been analysed by Factly in an earlier story. The Central Government, later, on 20 April 2020 allowed MNREGA activities to resume under the condition that necessary precautions such as social distancing and hygiene are strictly adhered to.
In the current financial year, MNREGS is expected to be an important lifeline for crores of households adversely affected by the COVID-19 crisis. The government has to substantially increase the budgetary support for the program, well over the current allocation if it has to meet the work demand of all these households.
Featured Image: Increase in MNREGA wages