Choice of Law as a career - Understanding market forces and student behaviour

While engineering courses and medical sciences continue to hog the fancy of students in India, law has silently crept in as a strong third option for a professional career. Over the past two decades, the National Law Schools have sought to bring in a qualitative change in legal education and while their number is limited, they have spawned many private law schools, hence increasing supply. 

In undertaking market analysis, a definition of the relevant product and geographic market is important. What do students consider as substitutes? A wider market definition would incorporate all professional courses as students are likely to keep preferences ranked in accordance with what would give them the most satisfaction. The ranking of preferences in this manner is an inevitable outcome of the fact that the outcomes are probabilistic. NEET and JEE exams offer a probability of 0.2 for the general category students which means that a vast majority have to keep their preferences open. Post ranking their preferences, an understanding of constraints- cognitive capacity, affordability, and others will have to be considered to arrive at a final choice that will decide which entrance exams to prepare for. The final list may consist of courses that bear little relationship by means of the skills required. An interpretation of this nature would keep the market definition wide, but an inevitable outcome of supply-side constraints. A narrower definition would, however, include only NLU's and competing private law schools. A good way to define this market would be to survey a sample student set to uncover the various entrance exams they chose to prepare for.The Geographic market could be restricted to India. Although there is a small percentage that choose to do their postgraduate studies outside, these numbers are much lower for undergraduate LLB courses. Given that the price is much higher and the content of the course also varies from what is prescribed by the Bar Council of India (BCI),which is a factor if one wants to practice in India, we can safely exclude other countries from the geographic market definition. Of course, some do complete their undergraduation in UK and qualify for practicing in India by virtue of a 'bridge course', approved by the BCI, but then this is at an additional cost.

The below table provides data related to NLU's (disclaimer - the author is not responsible for any inaccuracies that may have crept in and the fees are a conservative, lower level, indication and may not be related to any particular institution). The data includes both LLB and LLM applicants.The number of aspirants has increased nearly seven-fold over the past fourteen years. Supply, however, has been more modest in its increase. 

But naturally, a competitive SS-DD market analysis cannot be undertaken for this market. Some observations - historically NLSIU (Bengaluru) has attracted a vast majority of first preferences and continues to do so although to a reduced extent and CLAT ranks are used by some other private law schools for their own admissions. So how would the short-run SS be shaped? How would the long-run SS curve react? Is it based on the cost of education? Do we even have a supply curve? Further what factors explain the demand pattern? The sharp increase between 2018 and 2019 is particularly intriguing.

Year	Number of applicants (LLB+LLM)	actual number who appeared for the test	Seats All 22 NLUs (Supply)	CLAT fees	approximate cost of education and living expenses pa	No. of NLU's
2008	11304	10773	1037	2000	63,770	13
2009	13588	12270	1102	2500		14
2010	17300	16500	1124	2500		15
2011	21353	20360	1200	2500	150000	16
2012	23885	23760	1428	3000		16
2013	27627	27627	1685	3000		17
2014	33491	31292	2151	4000		17
2015	37358	37358	2164	4000		18
2016	45040	42217	2384	4000		20
2017	47500	47108	2936	4000	198,700	21
2018	47750	41502	3139	4000		21
2019	69587	62832	3575	4000		21
2020	75251	59443	3724	4000	2,50,000	22
2021	70277	62076	4157	4000	2,80,000	22

Fighting Corruption - Need for Tech Based Solutions to Break Vicious Cycles

Prof.Dr.T.S.Somashekar[1]

The word ‘corruption free’ is an ideal which we aspire for but, a typical economist would say ‘inefficient’ to do so. Although it is what we would certainly want, fighting corruption entails resources and given scarcity of the same, what is opted for is an ‘efficient’ level of corruption. This sounds strange. In a simple sense it means that resources should be allocated for fighting corruption to the extent that the marginal benefit exceeds marginal costs of doing so. The marginal benefit is essentially the additional gain derived for every additional rupee spent on reducing corruption. The marginal benefit can be in terms of monetary gains such as increased GDP growth and nonmonetary benefits such as reduced inequality and efficient allocation of welfare benefits. The marginal cost would be the benefits sacrificed due to forgone benefits of alternate uses of such resources i.e., opportunity costs. Governments have various contesting demands for the limited resources. Fighting poverty, defense expenditure, maintaining law and order and, public administration, to name a few, are some of the compelling needs. These various needs have to be balanced in the budgeting process. Hence, in the present context, while we aspire for our dream of a corruption free India, we must at also accept that there are limits to what the tax payer money[2] can deliver. It is therefore, essential that institutional attempts to tackle corruption must itself be executed in an ‘efficient’ or cost minimising manner.  Fortunately present day innovations provide for ample solutions to minimize corruption with the limited resources at our disposal.

Corruption can be simply stated as the misuse of power, by those in public offices, for personal gain.[3] Studies have shown corruption to adversely impact the rate of growth of an economy, growth of trade, development of infrastructure, investment, cause inflation and asset prices bubbles, distort the allocation of government resources, adversely impact the tax base and also increase inequality and poverty.[4] Dreher and Herzfeld calculate that an increase by one point on their corruption index causes a 0.13 fall in GDP growth rate. Corruption can take place in various ways. A public official- elected or appointed, can deny a resource or service which is legitimately claimed, delay the same or even misallocate it i.e., allocate a contract to a bidder who bribes rather than to the best bidder. Denying services or resources can be particularly devastating for the poor – for instance when the police refuse to play their role to protect the innocent or when public hospitals refuse care, unless bribed. Delaying can force a person to pay a bribe to speed-up the process. Misallocation can lead to suboptimal use of tax payer money and exclusion of an efficient firm.

Studies have viewed corruption as a principal agent problem. The principal (public) delegates responsibilities to the agent (public official). The inability of the principal to constantly supervise the functioning of the agent, enables the latter to behave in self-serving manner.[5] The lack of transparency leads to information asymmetry allowing the agent to abuse the property rights over government resources vested in them.[6] The key to tackling corruption is in altering the benefits to the parties to the transaction – the briber and the bribed or the corrupt official.[7] Both parties expect a benefit (which we will assume is certain) from the transaction and at the same time face an ‘expected cost’ - the product of the probability of being convicted multiplied by the penalty. The net of this can be defined as the ‘expected benefit’ of an act of corruption.[8] Any policy must aim to reduce this benefit and even reduce it to negative to deter such acts. This approach is based on the assumption that the actors are rational from an economic perspective. How have we fared so far? Transparency International’s latest survey places India at 81 out of 180 countries in the corruption perception index.[9] Red tape and corruption have also contributed to a low rank of 100 out of 190 countries, in the World Bank ‘ease of doing business’ ranking for India.[10]

The Prevention of corruption Act , 1988 (POCA), the principal legal instrument for fighting corruption, envisages a punishment of six months to five years of imprisonment and a fine for bribe taking or abetment. For criminal misconduct the sentence is higher at one to seven years and habitual offenders attract a higher minimum of two years. POCA, so far, has not proven to be a sufficient deterrent for the simple reason that the probability of conviction is extremely low.[11] At present the conviction rates vary across states with some reporting zero convictions and the highest not crossing 24 percentage.[12] Let’s not forget that this statistic deals only with ‘detected acts’ of alleged corruption and not numerous other ‘undetected acts’. The low probability of conviction from cases under review combined with the low probability of detection renders the expected cost of corruption low enough to give the official, almost always, a net benefit. Hence it is perfectly rational to indulge in such crime. There are other limitations of the POCA.[13] It requires prior sanction of an appropriate authority which is not always forthcoming. Further it neglects the supply side of corruption as it exempts the bribe giver.[14] The POCA Amendment Bill (2013) seeks to rectify some of these gaps by removing the exemption for the bribe giver and increasing the penalty.[15] This, in effect, increases the expected cost of corruption. While these are positives, the requirement of prior sanction for prosecution of former officers is debatable. Further there are limits to which we can increase punishment levels in a democratic society.

Besides amending POCA, there have been two significant measures undertaken in the recent past to stifle corruption. The first attempt was demonetisation. This was a shock and awe approach - a costly attempt to root out illegal wealth and create a sense of insecurity among the corrupt and tax evaders. Well-intentioned, but it cost the economy an estimated 1.96 million jobs and around 1.28 trillion rupees in GDP growth slowdown.[16] Unfortunately it barely scratched the surface of illegal wealth as almost 99 percentage of the demonetized notes were returned back.[17]  Given the large cost it is unlikely to be repeated and hence the corrupt are, very likely, back to their nefarious ways. The second development worthy of note is Aadhaar. Initially designed to deliver welfare benefits it has now emerged as a Trojan horse – with every service, private or public, being linked to it. An Aadhaar enabled ‘direct benefit transfer scheme’ (DBTS) was expected to eliminate corrupt intermediaries between recipients of welfare benefits and the government. It is estimated to have saved the government enormous amounts of money in terms of administration costs and in eliminated corruption.[18] Although a good step forward, the social cost in terms of privacy lost may be very high. Further corruption continues to persist as even the reduced intermediaries find innovative means to line their pockets while denying the poor of basic rations.[19] But, with modifications and time this can emerge as effective mechanism.

The primary objective of any method must be the elimination of information gaps and reduction to a minimum the need for contact between welfare recipients, service providers, bidders etc., and the government official. The present day technology provides much scope for anonymous electronic applications and surveillance of the entire process. A bidder can submit her application through an electronic portal or even a mobile app in a format that has all specifications clearly mentioned. Evaluations of the bids and final allocations can then be disclosed on a platform for the public to view. Similarly most public documents which do not need secrecy can similarly be digitized and put online. This enhances transparency and public scrutiny. All files/applications can be digitized and secured by block chain technologies. This can deal a blow to bureaucrats attempting to manipulate details or slow down files for speed-money. A vigilance official or a departmental head, with guided parameters, can then maintain a close scrutiny on the position of files and the time taken for disposal of pending work. An applicant can similarly be given a code to view the progress and complain online, if necessary. Implementation of field work can be assessed by public or users giving their feedback through apps. In other words – make it easy to provide and assess data. With digitization massive amounts of ‘big data’ can be generated. This in turn can be mined for detecting deviant behavior.[20]

Corruption in India is a vicious cycle that is propagated by costly elections and paid bureaucrat postings. Bringing in a performance based evaluation of government employees and making relevant portions of these reports available on a public platform can provide scrutiny for posting and transfer decisions. Again technology can prevent manipulation of assessments. Such assessment mechanisms must be based on clear goals and a transparent evaluation mechanism. It should provide for fixing responsibility and rewarding performance. Decisions which have no rational basis i.e., would not have been the outcome in normal circumstances, must attract investigation of all relevant officials, elected or otherwise, by the vigilance commission. Since electronic files have digital signatures, it will be impossible to escape responsibility or merely implicate lower rung or worse, innocent officials. Technology can enhance the probability of detection of crimes of corruption to very high levels thereby reducing the present positive benefits to zero or negative levels. This will be a strong mechanism to break the vicious cycle as costly elections and postings will no longer be viable as one cannot hope to recoup their ‘investments’.  Of course one must be aware that in a country like India, digitisation could exclude those who are less familiar with the use of technology. These are not impossible issues to be solved and can be tackled on specific feedback.

One can also learn from research in ‘behavioural economics’ or even the famous ‘nudge theory’ of Thaler and Sunstein.[21] This approach calls for gently encouraging people to perform desirable acts through positive reinforcement.[22] For instance, publicising high performing officers, informing officials of their average file disposal time and rating offices on the basis transparency levels can provide a positive impact.

To sum up - make it easy to be non-corrupt by incorporating binding solutions that make deviance a non-option.

---

[1] Professor of Economics, Director- Centre for Competition and Regulation, National Law School of India University, Nagarbhavi, Bengaluru.

[2] The author initially considered using the word ‘government’ but on second thoughts settled for ‘tax payer money’ as the government is both the enforcer and the subject of anticorruption instruments.

[3] OECD Glossaries, [2008], “Corruption”, A Glossary of International Standards in Criminal Law, OECD Publishing; See also the definition of corruption as provided in Section 7 , The Prevention of Corruption Act (1988), Government of India

[4] See for instance : Mauro, P. (1995). Corruption and Growth. The Quarterly Journal of Economics, 110(3), 681-712. Retrieved from http://www.jstor.org/stable/2946696; PH Mo. (2001). Corruption and Economic Growth. Journal of comparative economics 29 (1), 66-79 ; Dreher, Axel and Herzfeld, Thomas. (June 2005). The Economic Costs of Corruption: A Survey and New Evidence. Available at SSRN: https://ssrn.com/abstract=734184 or http://dx.doi.org/10.2139/ssrn.734184 ;  Bardhan, P. (1997). Corruption and Development: A Review of Issues. Journal of Economic Literature, 35(3), 1320-1346. Retrieved from http://www.jstor.org/stable/2729979

[5] Shleifer, A., & Vishny, R. (1993). Corruption. The Quarterly Journal of Economics, 108(3), 599-617. Retrieved from http://www.jstor.org/stable/2118402

[6] Krueger, in an early study of corruption, points out that pervasive government controls over the economy, particularly in international trade, leads to ‘competitive rent seeking’ resulting in the economy operating below its potential. Krueger, A. (1974). The Political Economy of the Rent-Seeking Society. The American Economic Review, 64(3), 291-303. Retrieved from http://www.jstor.org/stable/1808883

[7] Corruption includes activities other than bribe taking such as misusing public resources for one’s own self.

[8] Becker, G. (1968). Crime and Punishment: An Economic Approach. Journal of Political Economy, 76(2), 169-217. Retrieved from http://www.jstor.org/stable/1830482

[9] https://www.transparency.org/news/feature/corruption_perceptions_index_2017#regional

[10] World Bank , Doing Business 2018, Reforming to Create Jobs, Page 4 , Available at :  http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB2018-Full-Report.pdf  Last visited March 25, 2018

[11] C V Ananth, CVC blames vacancies in CBI courts for pendency of cases , Available at http://www.thehindu.com/news/cities/Coimbatore/cvc-blames-vacancies-in-cbi-courts-for-pendency-of-cases/article8235474.ece Last visited March 25, 2018

[12] Gaurav Vivek Bhatnagar, Six Indian States Have Not Convicted Anyone for Corruption in 15 Years, Says Report , The Wire, Available at : https://thewire.in/politics/corruption-india-conviction, Last visited March 25, 2018

[13] For a discussion of the legal instruments see A Comparative View of Anti-Corruption Laws of India , Nishit Desai Associates , June 2016, Available at : http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/A_Comparative_View_of_Anti-Corruption_Laws_of_India.pdf

[14] Section 24 , Prevention of Corruption Act, 1988

[15] There are several discussions on this. See for instance : http://www.prsindia.org/billtrack/the-prevention-of-corruption-amendment-bill-2013-2865/ ; Sebastian P.T , Five Steps to Transparency , Business Today , December 12, 2012, Available at : https://www.businesstoday.in/magazine/columns/sebastian-p.t.-on-corruption-in-india/story/190374.html Last visited March 27, 2018

[16] Mahesh Vyas, Transformations cost jobs , CMIE,  Available at https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2017-10-17%2009:33:46&msec=963  Last visited March 25, 2018

Mahesh Vyas , Transaction cost of demonetisation estimated at Rs.1.28 trillion , Available at https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2016-11-21%2015:12:31&msec=360 , Last visited March 25, 2018

[17] Of course most of the illegal wealth was never held in the form of cash and therefore not touched by demonetisation. See authors blog : T.S.Somashekar, Demonetisation – Assessing the Payoffs, December 7, 2016 https://drive.google.com/file/d/0B3-DvcoJWKMBeGFhSnVyVmlRRG8/view

Manojit Saha , 99% of demonetised notes returned, says RBI report , The Hindu , August 21, 2017, Available at : http://www.thehindu.com/business/Economy/only-12-of-demonetised-1000-notes-did-not-return-rbi/article19590311.ece Last visited March 27 , 2018.

[18] https://dbtbharat.gov.in/

[19] Vidhi Doshi, Aadhaar Was Supposed To End Welfare Corruption, But Neediest May Be Hit Hardest, The Washington Post , March 26, 2018 Available at : https://www.washingtonpost.com/world/asia_pacific/indias-vast-biometric-program-was-supposed-to-end-corruption-but-the-neediest-may-be-hit-hardest/2018/03/24/bb212a86-289c-11e8-a227-fd2b009466bc_story.html?utm_term=.b8e7b1886ed2  , Last visited March 27, 2018

[20] Lauren Silveira,  4 technologies helping us to fight corruption, World Economic Forum, April 18 , 2016 , Available at https://www.weforum.org/agenda/2016/04/4-technologies-helping-us-to-fight-corruption/ Last visited March 27, 2018

[21] Richard H. Thaler , Cass R. Sunstein, Nudge: Improving Decisions about Health, Wealth, and Happiness, Yale University Press, 2008

[22] Policymakers Around the World are Embracing Behavioural Science, The Economist , May 18, 2017

Demonetisation - assessing the payoffs

Direct BenefIt Transfer Scheme

The Government of India during the UPA tenure introduced the Direct Benefits Transfer Scheme. In the words of the Planning Commission (now defunct)- "The purpose of Direct Benefits Transfer is to ensure that benefits go to individuals' bank accounts electronically, minimising tiers involved in fund flow thereby reducing delay in payment, ensuring accurate targeting of the beneficiary and curbing pilferage and duplication." ( See - http://www.dbtmis.planningcommission.nic.in/dbtentry/homepage.aspx)
One such subsidy for which DBT has been implemented is  LPGsubsidy. Details can be found at : http://petroleum.nic.in/dbt/#
While the objective of these subsidies is to reduce inequity and allow access to certain essential goods to the poor the earlier mechanism allowed too much of pilferage, administrative costs and , diversion. With DBT  the government is expected to save huge amounts and spend taxpayer money better. One estimate of the savings for the previous fiscal puts it as Rs.10,000 crore approx. See :
http://www.livemint.com/Industry/PGCreyRo9L9rCt3Vx3xyBO/DBTL-helps-govt-save-Rs10000-crore-as-illegal-LPG-consumpti.html
But some questions remain. Will the average beneficiary spend the transferred amount on LPG? How will the mechanism of buying at market price and receiving an income transfer affect individual consumption behaviour? Is it necessary for paternalistic intervention in consumption behaviour?

Children - inferior goods?

Inferior goods are goods whose consumption of or demand for drops with an increase in income levels in the market, other factors remaining unchanged. For instance during the 1990's demand for coarser cereals (a staple food of the poor) had dropped and picked up simultaneously for 'superior' cereals like rice and wheat. This prompted analysts to term 'coarse cereals' as inferior goods. The term 'inferior' does not necessarily mean that the product is inferior in quality. With a sustained campaign that focused on the 'superior' qualities of coarser cereals demand seems to have picked up with the richer people. Anecdotal evidence is available in the form of increasing varieties of ready food products made of coarser cereals which are essentially marketed to the 'better- off' category of people. the data for this needs to be checked though as some might attribute the increased demand and consequent higher prices due to greater demand for cattle feed!
A more interesting debate has been reopened recently with Bryan Caplan in his book " Selfish reasons to have more kids: Why being a great parent is less work and more fun than you think". Caplan argues that the cost of children would be less if parents didn't try to 'overinvest' in children. Such over-investing makes parents less happy and children more expensive according to Caplan. Reducing such investments on children would make them less expensive and hence demand for children should increase (a sort of substitution effect). Betsey Stevenson points out that a fall in price of children would have a substitution and income effect. The income effect as seen by data ( check the Freakanomics site for some interesting data - http://www.freakonomics.com/2011/06/10/the-rich-vs-poor-debate-are-kids-normal-or-inferior-goods/) is negative. People on an average tend to have fewer children as income levels have increased. Such data has to be controlled for other factors such as tastes and preferences to get a 'ceteris paribus', picture. The cross section (across countries) and time series data adjusted for inflation shows a strong negative correlation between per capita income levels and fertility rates (average number of children per woman). Does this mean that there is a substitute that is more preferred to children as incomes increase? Two important explanations for this trend is to be found in a) increasing opportunity costs and b) desire for higher standard of living. With increasing income levels the opportunity cost of having children increases. So there is a clear choice made here. But why not use the increased income levels to hire 'nannies' to take care of your larger number of children while you continue to work. This could reduce the opportunity cost and you could still have fun with more children. But then in a competitive world where demand is not independent parents try to ensure that their children have the best care , education , training etc all of which costs more ( over-investing) . Reduction of such investment is tough when you live in a comparative world where your utility is driven not just by your consumption but by how much you consume more than your neighbour.
More the children less the other comforts such as a nice house or a car etc. It looks like standard of living (as defined by more consumerist benefits) is a clear choice over children as income increases.

Regulating consumer behaviour

About two years back the Indian Ministry for Health and Family Welfare decided to have 'junk food' such as colas , carbonated drinks, pizza's, burgers/hot dogs, chips/fries etc from school and college canteens. It was pointed out that the consumption of such products led to diet related non-communicable diseases among the youth. The consumption and availability of tobacco products, on campuses , was also banned. Many consumer organizations are also for banning junk food advertisements that are targeted at children.
The basis for such a paternalistic type of regulation seems to be that children of school going age and also of colleges are not rational. Their consumption habits are based on a short term perspective and does not consider the long term implications such as obesity and other diseases which can possibly affect the quality of life and also the longevity of life. The consumption of junk food could also be addictive making it difficult for the child to break the habit. hence the government rationalizes that it is best to ban such products in places where children and college going youth frequent - the canteen.
Two issues need to be discussed at this stage. Firstly the assumption that the targeted consumers are not rational. It is well established that children are easily influenced by emotional advertisements. They are also not well placed to understand the implications of their consumption habits. Hence there is the necessity for regulation. Since parental regulation is not working you need the government to step in. But are parents not supposed to know the ills of such consumption habits? From discussions in the Indian media ,parents are faulted for using junk food as a 'hassle free' way of getting their children to eat! Working parents often find it easy to use packaged food which appeals to the taste buds of the young ones. This seems like a rational choice for parents!! They make a choice and since they are adults they should know better than their children about the possible dangers of junk food. Are parents trading off rationally or do they too suffer from ignorance and advertisement impact? Whichever way you read it, parents need some regulating and educating too!! In one case it is irrational behavior and in the other it is rational behavior that needs to be regulated.
But banning junk food from canteens may not prevent parents from sending it from home. Hence the need to alter parents behavior by educating them. Schools appear to be one step ahead - some have banned children from consuming junk food in school premises. This further constrains the choices for parents.
How do such bans work ? Are they effective enough in controlling consumption choices. A simple ban might serve to alter only the shape of the budget line but an awareness program and labeling of food products might alter even the indifference curve. Such alterations would determine the effectiveness of the government policy.
The next issue is whether only western junk food qualifies for banning. Are our local variants such as fried bondas or pakoras, chaats , samosas etc also junk food? Such food is also available in canteens and might just lead to a substitution effect.
What about college going youth? Are they also assumed to behave irrationally? Or is their choice a trade -off?The short term preferences for taste and economising on time might just prevail over the long term cost of poor health and drop in longevity. Would a ban have a similar impact on the budget line? Probably not as large as in the case of school going children who do not have too many options for purchasing. A college youth might just shift his purchase to a nearby outlet.

This option was available for tobacco consumption too. Probably realizing that strong addictive behavior needed stronger action tobacco sale was banned for 100 yards around educational institutions for youth below 18 years. See link http://www.hinduonnet.com/2009/06/30/stories/2009063060040400.htm
This has a catch - it depends on the effectiveness of enforcement. Given our stretched police force it is unlikely that they would spend too much time enforcing such laws. Their own rational behaviour would lead them to devote their scarce time for issues which have a higher marginal benefit (social or private ?). So , the effectiveness of such a ban might be weak. Here too a policy which alters preferences and not just costs through taxes and inconvenience effect may be important.
But, since the idea is to impact the budget line for junk food why not just have a higher tax? This again depends on demand elasticities. It is tough to implement a tax policy on the informal sector which provides 'desi - junk'.

Welfare schemes and backward bending labour supply curve

In an effort to have inclusive growth both the central and state governments have introduced several welfare schemes. The government of Tamil Nadu had introduced rice at Rs. 2 Per kg through the public distribution scheme, 2 acres of land free , a colour television, free LPG connection amongst others. The Andhra Pradesh and Karnataka governments are also in the process of launching similar schemes or have already done so. If this reaches the poor it has significant real income effects and people can consume more with the same given income.But , as in economics we are wont to say "everything hangs together", the effects of these schemes can have other types of undesirable repercussions.
If these schemes do reach the rural poor it might just work to prevent migration of labour from rural to urban areas or even other states in search for a job. Take for instance construction labour. The construction industry in Bangalore employs labour from different states such as Tamil Nadu, Orissa, West Bengal and Bihar. Lack of jobs forces these people out and labour moves from areas of surplus to areas of deficit. This process lowers wages in deficit areas and increases the same in surplus areas. This is not an entirely painless process.
With the introduction of welfare 'schemes' construction sites have complained of a drop in the supply of labour from the neighbouring states, particularly Tamil Nadu. Coming at a time when the construction activity has slowed down it may not be a big constraint as yet. But what is interesting is the drop in labour supply due to an increase in the real value of income. This appears to indicate a backward bending supply curve of labour where people are less willing to move out for work and higher income and are happy with smaller incomes that have now have greater purchase value. Is this a problem? If government schemes give an incentive to be less productive it is certainly a cause for worry. But with free land they might not sit unemployed , they might actually work on the land given. Or they might lease or sell it if self cultivation is unviable. The latter option could lead to an increase in disguised unpemployment .It is not sure as to what type of land and what conditions are attached to the distribution of land. Along with these welfare schemes it is important to create job opportunities and conditionalities such that they can be gradually phased out an not make them dependant on such measures.
Down the line the market will adjust to these circumstances with an increase in wages. This is good for the unorganised construction labour and might just attract the migrant labour again. This remains to be seen.