Getting money to the people

65

The program that can reach workers rapidly is through the use of the voter list

The lockdown of the economy has left millions of people without a source of income. People in the informal sector find that the income they were earning, day by day, has suddenly dropped and they have no alternative source.

Normally, the informal sector has a great deal of flexibility and workers are able to move around as necessary. But the arrival of the coronavirus pitched most of the population into unemployment with no way to manage enough income for survival.

In addition, many workers in formal manufacturing establishments lost their employment, most dramatically in the RMG sector where demand vanished in a very short time.

A fundamental task of the government is to provide temporary support to people displaced by these medical and economic forces. All understand that there is massive trouble coming unless sustenance can be provided.

This article examines one way to tackle this problem. This is the most important task facing the administration and requires cooperation and hard work by all concerned.

The magnitude of the problem

There are a number of ways to do this; all take considerable time to organize and implement. Standing government programs such as VGF have limited coverage and are difficult to expand rapidly. The first thing one needs is to determine the magnitude of the problem.

I have estimated how many people will need help based on the number of people in the informal sectors, combined with the industrial sector and rural-urban status of the workers.

Our estimate is that 25 million workers in the informal sector will need assistance and 3 million workers from the formal sector [excluding RMG and textiles who are provided through a separate program].

The table below sets out the estimated division of the labour force into informal/formal; urban/rural; and among three sectors — agriculture, industry, and services, adjusted for growth of the labour force, changing growth of urbanization, and growth of sectors. These estimates are preliminary, indicating the current situation of the labour force, but indicate my best estimates of the situation in 2020.

 

Informal

Formal

Total

U

R

U

R

U

R

AGR

1

23

0

0

1

23

Ind

2

5

8

1

10

6

Ser

5

16

3

2

8

18

Tot

8

44

11

3

19

47

Sourece: Labour Force Survey 2017/18

The total labour force is taken at 66 million people; or 2.5 people in the population per worker. The informal sector is estimated at 52 million or 79%. This is lower than most estimates; we have adjusted for the increases in the modern manufacturing sector over the past five years.

We assume that the workers in the agricultural sector are provided for and will have food. Most of the informal sector workers in industry and services will need assistance. In the industrial sector, we estimate about two million formal workers will need assistance, along with one million in the formal service sector.

There is no possibility of reaching such a large number of people in April and May, if lists of people have to be developed.

The one program that can reach 20 million workers rapidly is through the use of the voter list. We propose paying everyone on the voter list of 90 million people a stipend of Tk6,000 each. This would empower the population with the purchasing power that would get people through the next three months.

This comes to Tk54,000 crore or $6.4 billion dollars or 2% of the GDP. It can be repeated if the slowing of the virus takes longer. Together with the Tk5,000 crore export worker program, this comes to Tk59,000 crore or $6.9 billion. A family would be receiving on the average Tk3,700 per month.

Would this be inflationary?

No. Other income sources have shrunk. Food production will be maintained if there is demand. Present problems are caused by a lack of demand and, to a lesser extent, transport problems.

Transport can be solved by authorization for trucks moving agricultural goods, food, and agricultural inputs to travel around Bangladesh. The cash distribution will solve the demand problems.

How do we do this?

What is suggested here is a program to indicate what might be done. This is a massive undertaking and requires very strong determination and cooperation. 

We outline one way to do this. Distribution should start in urban areas with the intent to complete three weeks; one week for Dhaka and two weeks for the remaining division capitals.

I suggest numbers for Dhaka North and South. There are 6.45 million people on the voter lists in Dhaka North and South. There are 1,331 voting areas, or about 4,840 people per voting area on average.

I propose that one tries to do 220 voting areas per day for six days; each voting area taking one day. The small banks would do four areas per day; the large banks eight areas. The distribution would take place at the voter area.

In each voting area, there would be a team of 90-100 bank employees. These would cover 24 distribution tables and supervisors. Three people work at each distribution table [2 work and one rests]. Each table has a target of 200 persons to serve during the day. The tables are half for women and half for men [The voter lists are about 50-50].

A line is formed at each distribution table with spacing of 2 metres between people in the line. A person presents his ID card, which is checked in the EC’s machines to verify the person is indeed the true holder of the ID card. The person is handed an envelope with Tk6,000, a receipt is signed with the ID card number, and the person leaves.

In addition to the team of bankers, there would be an audit of 150 officers and soldiers to maintain order, assist with the verification of identity, and guard the cash. The bank would start with Tk3 crore cash, so appropriate security is needed.

The mayor and the local MP should hang around these distribution points.

This is very demanding work for the bank staff and perhaps some financial incentive would be appropriate. The bank should be paid for this work, perhaps 2% of the amount that is handed out.

This is an enormous challenge requiring a major effort by banks and the army. This is what it takes to reach most of the population. The details of this program must be worked out but the above numbers set the parameters of what must be achieved.

A few observations

One objection is the rich will get money also. The PM should ask them not to take the money. Many will not want to stand in line. This problem will largely solve itself.

The police should be wandering around to prevent people from being mugged as they depart the area. 

There are proposals to expand provisions of food to individuals through some sort of distribution system. There are three reasons that this is insufficient.

Firstly, to organize a program to reach so many people is impossible to complete quickly. Local government units do not have the time to prepare and organize the lists of people to be reached. At present, less than one million people are covered. 

Secondly, A Sen’s research suggests that providing food is an inefficient way to support people in difficulty. He generally favours some sort of work program.

That is not feasible under the current condition, but the principle remains the same. With money, people can buy what they want and use the funds as is best for them.

Finally, food distribution programs are more exposed to corruption than cash programs, which are also easier to control. 

Forrest Cookson is an American economist.