Is Workfare Cost-Effective against Poverty in a Poor Labor-Surplus Economy?
Workfare schemes impose work requirements on beneficiaries. This has seemed an attractive idea for self-targeting transfers to poor people. This incentive argument does not imply, however, that workfare is more cost-effective against poverty than e...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/10/18425307/workfare-cost-effective-against-poverty-poor-labor-surplus-economy http://hdl.handle.net/10986/16888 |
| Summary: | Workfare schemes impose work
requirements on beneficiaries. This has seemed an attractive
idea for self-targeting transfers to poor people. This
incentive argument does not imply, however, that workfare is
more cost-effective against poverty than even
poorly-targeted options, given hidden costs of
participation. In particular, even poor workfare
participants in a labor-surplus economy can be expected to
have some forgone income when they take up such a scheme. A
survey-based method is used to assess the cost-effectiveness
of India's Employment Guarantee Scheme in Bihar.
Participants are found to have forgone earnings, although
these fall well short of market wages on average. Factoring
in these hidden costs, the paper finds that for the same
budget, workfare has less impact on poverty than either a
basic-income scheme (providing the same transfer to all) or
uniform transfers based on the government's
below-poverty-line ration cards. For workfare to dominate
other options, it would have to work better in practice.
Reforms would need to reduce the substantial unmet demand
for work, close the gap between stipulated wages and wages
received, and ensure that workfare is productive -- that the
assets created are of value to poor people.
Cost-effectiveness would need to be reassessed at the
implied higher levels of funding. |
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