Rural Labour Markets Under MGNREGS

Why in News?

The proposed Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission Gramin (VB-G RAM G) Bill seeks to replace the MGNREGS and introduces a 60-day suspension of rural employment works during peak sowing and harvesting seasons, to be notified in advance by States.

The move is justified on the grounds that MGNREGS allegedly creates shortages of agricultural labour during peak farm operations—a concern raised periodically by farmers and policymakers, including former Union Agriculture Ministers.

However, recent wage and labour market data challenge this narrative, raising important questions about rural employment, wage dynamics, and the real causes of farm labour shortages.

Background and Context

Since its launch in 2006, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has acted as a rights-based social security programme, guaranteeing 100 days of wage employment to rural households.

Its objectives include:

• Providing income support during distress,
• Creating durable rural assets,
• Reducing distress migration, and
• Strengthening labour bargaining power.

Over the years, critics have argued that MGNREGS diverts labour away from farms, especially during agricultural peak seasons. The VB-G RAM G Bill marks the first formal legislative attempt to structurally align rural employment guarantees with agricultural cycles.

Rural Wages under MGNREGS: What the Data Reveal

MGNREGS is often credited with tightening rural labour markets and improving workers’ bargaining power. However, this has not translated into sustained real wage growth.

Key Findings from Labour Bureau Data

• Based on 25 rural occupations across 20 States, all-India nominal rural wage growth ranged between 3.6% and 6.4% annually over the last decade.
• In four out of ten years (2015–16, 2019–20, 2021–22, 2022–23), wage growth lagged behind CPI inflation, implying a decline in real wages.
• Real wage growth exceeded 1% only once, in 2017–18.
• Agricultural wages outperformed non-farm rural wages in 8 out of 10 years, contradicting claims of farm labour being hollowed out by public works.

Key Insight

Even agricultural wages have largely stagnated in real terms, indicating that MGNREGS has not triggered an inflationary wage spiral.

Why Has Rural Wage Growth Remained Modest?

1. Surge in Female Labour Force Participation

A critical but often overlooked factor is the sharp rise in women’s workforce participation.

• Rural Female LFPR increased from 24.6% (2017–18) to 47.6% (2023–24).
• This near-doubling of female participation significantly expanded rural labour supply, exerting downward pressure on wages.

LFPR measures the proportion of the population (15+ years) that is working or actively seeking work.

2. Role of Welfare Infrastructure

The Economic Survey 2023–24 attributes rising female participation to welfare schemes that reduced unpaid care burdens:

• Ujjwala Yojana (LPG access),
• Har Ghar Jal (tap water),
• Saubhagya (electricity),
• Swachh Bharat Mission (sanitation).

By freeing time previously spent on household chores, these schemes enabled women to enter paid work—expanding labour supply rather than shrinking it.

Questioning the Farm Labour Shortage Narrative

The data weakens the argument that MGNREGS is the primary driver of farm labour shortages:

• Rising female participation may have offset labour drawn into MGNREGS.
• Agricultural wages keeping pace with inflation suggest no acute scarcity-driven wage spike.
• Seasonal shortages do exist, but generalising them nationwide lacks empirical backing.

Thus, imposing blanket employment suspensions during peak seasons may be policy overreach without granular evidence.

Alternative Causes of Farm Labour Shortages

1. Low Farm Wages

• Agricultural wages often remain lower than MGNREGS wages and non-farm alternatives, reducing farm work’s attractiveness.

2. Harsh Working Conditions

• Farm labour involves physically strenuous tasks, exposure to heat, and health risks.
• MGNREGS work is perceived as less exploitative and more regulated.

3. Rural–Urban Migration

• Migration for construction, services, and informal urban jobs predates NREGS and remains a structural driver of labour scarcity.

4. Increased Bargaining Power

• MGNREGS provides a fallback employment option, allowing workers to negotiate higher wages or better conditions, which farmers often interpret as “shortage”.

Policy Implications and Way Forward

• Synchronisation, not suspension: Temporary alignment of MGNREGS works with agricultural calendars must be evidence-based and region-specific.
• Farm-linked MGNREGS activities: Allowing certain MGNREGS works on private farms (soil conservation, irrigation, post-harvest assets) could reduce conflict.
• Improve farm wages and conditions: Long-term labour availability depends on making agriculture economically viable.
• Address structural issues: Mechanisation, crop diversification, and value-chain reforms are crucial.