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Public Works as a Safety Net
(Government of Rwanda 2009; World Bank 2009). In addition, the wage rate would adjust to control for price inflation, even if this implied fewer work slots (Sabates-Wheeler and Devereux 2011). Available evidence points to some difficulties in setting wages below prevailing market rates. An internal VUP comparison of local wage rates with public works program wages in 2009 found that in 14 of 30 sectors, wages were actually higher than the market rate by an average of about 10 percent. The analysis of VUP wage rates is based on data from sectors that reported data for the two periods (November 2009 and July 2010), reviewing project types and labor types and using casual labor in the community for comparison. Similarly, findings from an external assessment conducted during May–June 2010 revealed that about 63 percent of VUP beneficiary households reported their wage rate as higher than the market for similar non-VUP-supported jobs, especially in the Western and Northern Provinces (Kimetrica International Limited 2010). Despite these findings, it has generally been accepted that VUP’s market distortion effects may be overstated. In 2010, a review by the U.K. Department for International Development (DFID) noted that prevailing market wages tended to be unreasonably low because there is a far greater supply of labor than there is of demand. This conclusion helped support the continuation of local wage setting and to dispel notions that the public works program was negatively distorting the labor market. The review also found that allowing the public works program to exert higher pressure on daily wage rates would be a positive indirect benefit of the program. Notwithstanding the generally positive findings on wage setting, a key concern has emerged around possible inclusion errors—that is, ineligible households participating in public works projects. During 2008, 18,304 households participated in VUP public works. The number participating in January–June 2009 was similar, but increased significantly in 2009/10 to 61,335 households (which is around 21 percent of all households in the sectors). Almost half (49 percent) of the households participating in 2009/10 were headed by females. The VUP annual target is that at least 35 percent of eligible households participate in public works during the year. In 2009/10, 77 percent of eligible households participated; this was more than double the target. However, a sizable proportion of ineligible households also participated (36 percent of total public works households in 2009/10 were ineligible). Two factors need to be taken into account when considering the possibilities of inclusion error under the public works VUP. First, the timing and seasonality of the program matters. The seasonal nature of projects, delays