Welfare Schemes and the Myth of Mobility

Meritocracy appeals to all. It promises unbridled individual agency which in turn drives personal effort and societal progress. However, in actual practice, one’s efforts are rarely ever proportional to their outcomes. This article aims at analyzing whether this dysfunctionality is natural or manufactured.

The argument of natural dysfunctionality grants that under the economic regimes that meritocracy functions in tandem with, the predisposition to acquire merit is extremely disparate across different social groups. This is dangerous because it perpetuates inequalities by not allowing those at the bottom rungs to improve the circumstances they are born into, thus making the economic regimes unequitable ones that favor the privileged. As a corrective measure to this limitation of stunted social mobility, the state intervenes through welfare schemes. These schemes are intended to mitigate immediate economic hardship and create conditions for long-term development. This article analyzes how these welfare schemes sustain inequalities inadvertently by failing to facilitate upward mobility. 

Extensive records measuring the long-term impact of welfare schemes on its beneficiaries prove that structural change is a rare phenomenon in India. Normally over a decade-long period, 70% of households below the poverty line are likely to either remain so or constantly under the risk of slipping below it. On the other hand, 20% of non-poor households are likely to slip below the poverty line. Children of households falling in the poorest quintile have a mere 3% chance of ending up in a household in the highest quintile and a less than 10% chance for that of a median income household. In terms of occupation, sons of fathers employed in farming or unskilled labor have a 45% to 55% likelihood of being employed in the same occupation and only less than 10% of them are likely to proceed onto white-collar jobs. What’s most interesting is that while mobility rates have been subpar on one end of the spectrum, the other end has witnessed its most noteworthy rise. Indian billionaires’ share in India’s Gross Domestic Product has surged ten times to a whopping 15%, the highest in the world currently. Conversely, the share of the bottom 50% of the population has exactly halved over the past decade, standing at 4%.

Welfare schemes are often classified into two categories – those that provide private goods and those that provide public goods. Some examples of schemes targeting goods meant for private use are the Public Distribution System, Direct Benefit Transfer, Pradhan Mantri Ujjwala Yojana etc. Goods that are at everyone’s disposal and have the potential to benefit all equally are classified as public goods. Schemes such as the Sarva Shiksha Abhiyan, National Health Mission, Pradhan Mantri Gram Sadak Yojana etc. can be classified under it. Mobility can be intergenerational and intragenerational and is measured along a host of parameters – income, occupation, wealth, educational attainment, social status, geographical location, health etc. 

Let us compare and contrast macro data on tangible impact under the two kinds of welfare schemes along the parameters of income and occupation to see whether schemes providing public goods have a stronger impact on social mobility compared to those providing private goods. It will talk about Direct Benefit Transfer to elucidate on the first category, and Sarva Shiksha Abhiyan for the latter.

Direct Benefit Transfer transfers subsidies directly to beneficiaries to increase their purchasing power while also simultaneously reducing leakages through fraud and intermediaries. A publication under the World Bank reveals that DBT has led to a mere 5-10% increment in family savings. Households therefore continue to stay vulnerable to most kinds of economic turbulence.

The Sarva Shiksha Abhiyan was launched to increase access to elementary education. Since its inception, it has revamped the educational infrastructure, substantially increased enrolment rates and reduced dropout rates. It has led to a 97% increase in Gross Enrolment Ratio and has single-handedly reduced illiteracy by 60%. While its impact on mobility isn’t tangible, UNESCO has observed that early exposure prompts many (50%) to pursue secondary education, followed by higher education and finally specialization (20%). Overall, beneficiaries are 25% more likely to pursue higher education than their previous generation who were devoid of such benefits.

However, it has been observed for long that political parties have focused on the provision of short-term relief and private goods over long-term solutions like employment generation and the provision of public goods in their populist measures and in practice. This is because public goods are more diffuse in their effect and cannot be associated with a specific party’s efforts, whereas private goods provide immediate relief to voters and enhance the party’s appeal which is crucial for their survival in short election cycles.

The gap between policy design and market realities further hampers welfare schemes. India’s informal economy accounts for approximately 80% of the workforce, according to the NITI Aayog. This large informal sector limits the reach of private goods’ welfare schemes that rely on formal economic structures for job placements and social security benefits.

Lastly, the most potent impediment to the success of any welfare scheme is that of logistics – leakages and administrative inefficiencies. According to the National Institute of Public Finance and Policy (NIPFP) 40% of resources allocated under the Public Distribution System fail to reach their respective beneficiaries. 

It may be argued that the beneficiaries of most welfare schemes tend to overlap and therefore if access to public goods did in fact lead to greater mobility, it would’ve shown up in overall patterns. This, as seen earlier, is subpar. However, it’s crucial to note an important fact about the nature of these two types of schemes. Distribution of public goods is an extremely complex and subjective process and requires significantly more planning than that of private goods. It has inexhaustible potential to be optimized. The current frameworks of implementation have a long way to go. 

Upward mobility is also, of course, impacted by intersectionality. It is imperative to understand upward mobility not just in economic terms but also with respect to social dynamics as they often set the preconditions. The institution of caste for instance continues to shape India’s economic reality. It prevents individuals from improving their financial circumstances, which is a function of one’s caste – something that is rigidly determined at birth. Compared to Upper Caste groups and Other Backward Classes, Scheduled Castes and Scheduled Tribes are twice as likely to experience persistent poverty and have the highest percentages of population under the Poverty Line (45% and 31% respectively). This speaks to the inefficacy of welfare measures pursued through reservations. Muslims are more vulnerable to falling below the poverty line than any other religious group. A similar pattern can also be observed along the lines of gender and native regions. 

The current manifestation of welfare schemes serves well as safety nets in eliminating immediate risks, but doesn't lead to any discernible improvement in one’s living standards in terms of long-term income or occupational changes. This article derives that this dysfunctionality is often manufactured as a result of focus on short-term relief over sustainable, systemic change, logistical inefficiencies, and the incongruity between policy design and socio-economic realities. It is evident from the scarcity of data measuring the upward mobility of beneficiaries of welfare schemes that the theme of upward mobility is under-researched. It is undervalued as a metric for evaluating welfare schemes, and overlooked as a parameter while devising policies. There is therefore a pressing need for recalibrating the procedure for policy formulation by introducing the lens of upward mobility.