Introduction
India’s cities have long been seen as engines of economic growth and modern employment opportunities. However, in recent years, rapid urbanization without commensurate job creation has led to a stark paradox — increasing urban unemployment despite growing urban populations. The COVID-19 pandemic intensified this trend, exposing vulnerabilities in informal urban jobs and the lack of a social safety net for urban workers.
As a response, policymakers and economists have been debating the need for a robust Urban Employment Guarantee Scheme (UEGS), akin to the rural MGNREGA, to support urban livelihoods, especially for informal and migrant workers. This blog explores the rationale, design considerations, and feasibility of such a scheme.
Understanding Urban Unemployment in India
Urban unemployment differs from rural joblessness in both nature and impact. While rural areas suffer from underemployment and seasonal work, urban unemployment often reflects structural and cyclical issues.
Key Characteristics of Urban Unemployment
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Higher Educated Unemployment: Urban job seekers tend to have higher education levels, but there is a skills mismatch with market demand.
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Informality: Over 70% of urban workers are in the informal sector, lacking job security or benefits.
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Gender Disparity: Female labor force participation in urban India remains abysmally low, around 20%.
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Youth Bulge: Urban youth aged 15–29 have disproportionately higher unemployment rates.
Recent Data Insights
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Urban Unemployment Rate (April–June 2024): ~7.8% (Periodic Labour Force Survey - PLFS)
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Youth Unemployment Rate: ~17%
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Job loss during COVID-19: Over 10 million urban jobs vanished during lockdowns
These figures point to a growing disconnect between urban job seekers and job creation, exacerbated by automation, platform-based gig work, and insufficient MSME support.
What Is an Urban Employment Guarantee Scheme?
An Urban Employment Guarantee Scheme is a state or centrally sponsored initiative that guarantees a certain number of paid workdays per year to urban residents willing to work on community-based public projects.
It draws inspiration from MGNREGA, which provides 100 days of guaranteed wage employment in rural areas, but tailors the approach to suit urban demographics and challenges.
Objectives of the Urban Employment Scheme
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Provide temporary wage-based employment
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Enhance urban infrastructure and services
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Support vulnerable informal workers and migrants
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Empower urban local bodies (ULBs) with resources
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Promote skilling, apprenticeships, and transition to formal jobs
Why Is It Necessary?
1. Jobless Urban Growth
Despite cities contributing over 60% of GDP, they have not been able to generate proportionate employment, especially for the low-skilled and semi-skilled labor force.
2. Urban Informality and Vulnerability
A large section of urban workers — construction laborers, domestic workers, hawkers, gig workers — have no job security, and no fallback in case of crises.
3. Migrant Worker Crisis
The reverse migration during the pandemic exposed the absence of urban social safety nets. A national employment scheme could provide portable benefits and minimum livelihood security.
4. Strengthening Urban Governance
Employment schemes can strengthen the financial and administrative capacity of municipal bodies by enabling participatory, labor-intensive development work.
Examples of Urban Employment Schemes in India
1. Mahatma Gandhi City Employment Guarantee Scheme – Himachal Pradesh
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Guarantees 120 days of work in urban areas
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Implemented via ULBs
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Funded by state government
2. Mukhyamantri Shahri Rojgar Guarantee Yojana – Delhi
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Provides up to 200 days of wage employment
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Includes skill training and apprenticeship components
3. Yuva Swabhiman Yojana – Madhya Pradesh
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Offers 100 days of employment for urban youth from economically weaker sections
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Includes skill development support
These state-led programs have provided valuable pilots, but a pan-India scheme with central support could expand reach and impact.
Potential Design of a National Urban Employment Guarantee Scheme
Target Beneficiaries
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Unskilled and semi-skilled urban poor
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Migrant laborers, gig workers
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Women and youth seeking wage employment
Scope of Work
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Public works: road repair, water conservation, waste segregation
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Urban services: sanitation, tree plantation, public toilet maintenance
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Digital/data work: municipal surveys, e-governance assistance
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Skilling and apprenticeship-based activities
Funding Structure
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Shared funding between Centre and States (e.g., 75:25 or 90:10 for NE states)
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ULBs as implementing agencies with dedicated Urban Employment Cells
Technology & Transparency
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Use of real-time MIS systems, Aadhaar-based attendance, and direct benefit transfers to ensure transparency and efficiency.
Expected Benefits
Economic
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Acts as an automatic stabilizer in urban downturns
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Increases consumption demand and purchasing power
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Supports urban MSMEs by improving local infrastructure
Social
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Empowers vulnerable groups
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Reduces crime and distress migration
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Enhances urban resilience
Governance
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Strengthens municipal capacity
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Promotes citizen participation in urban development
Challenges and Criticisms
🔸 Fiscal Burden: Funding a national scheme could cost ₹60,000–₹80,000 crore/year, raising concerns of sustainability.
🔸 Urban Work Identification: Cities lack clear inventories of labor-intensive public work projects compared to rural areas.
🔸 Migration Incentives: Critics argue a guaranteed wage in cities may attract more rural migration, creating pressure on civic amenities.
🔸 Implementation Gaps: Urban local bodies often lack the capacity to implement large-scale programs efficiently.
Conclusion
India’s future is undeniably urban. Yet, for cities to remain dynamic hubs of opportunity, inclusive job creation is essential. The rising tide of urban unemployment — driven by informalization, migration, and economic shifts — calls for bold and structured state intervention.
A well-designed Urban Employment Guarantee Scheme can provide not just wage support but also dignity, skill enhancement, and community development. It can be transformative, especially if aligned with urban infrastructure needs, climate goals, and digital governance reforms.
It’s not just about employment — it’s about equity in India’s urban growth story.
Policymakers must therefore seriously consider piloting and scaling such a scheme, learning from both MGNREGA’s strengths and urban realities, to create a more just and sustainable urban future.