Rising Farm Wages in India – The ‘Pull’ and ‘Push’ Factors, written by Ashok Gulati, Surbhi Jain and Nidhi Satija of the Commission for Agricultural Costs and Prices (CACP), Ministry of Agriculture has been in news recently. This paper talks about MGNREGA contribution to farm and rural sector wages. 

         

Gist of Paper : 

• From the statistics on the what are factors behind growth of wages and analysis, this paper concludes that Growth in Wages is contributed more by Growth in GDP than MGNREGA
• Rather than spending 2 lac crores on MGNREGA scheme (which is running throughout India since 2008, started since 2006 in 200 most backward districts), investment in areas like rural-urban construction, agriculture growth will make rise in Real Wages through natural process of development.

Statistics :

• Growth in Real wages was 3.7 percent in 1990 and declined to 2.1 percent in 2000.
• From 2001-2007, wages declined by 1.8 percent every year and from 2008 onwards , wages increases by 6.8 percent every year (uptil 2012).
• Although MGNREGA increases wage expectations, but MGNREGA contributes  <10% of the total rural employment, so here lies the main problem that MGNREGA contribution to employment is very much less, but we are spending on it a lot. 
• According to 64th National Sample Survey about migration, 57 % of migration to urban areas come from rural areas, and 20 % of rural male population is in casual labor after migration.

Considering the above factors, the paper develops a statistical model of what really impacts farm wages. According to the model, 10% growth in construction sector contributes about 2.8 percent increase in farm wages. 10% overall growth(GDP) increase farm wages by 2.4 %. In its comparison, the increase of 10% in employment generated through MGNREGA, farm wages rises by just 0.3-0.5 percent.

Conclusion :

Here from the above analysis done, we can easily see that Growth is the main driver behind increase in farm wages. 2 Lac crores which we spent on MGNREGA can be used into infrastructure development or in other areas which lead to growth can impact farm wages more.