Beyond Farmers and
Micro-Entrepreneurs:
Why Rural Wage Labor MattersKey Findings from the USAID-LEO report “Wage Labor, Agriculture-Based Economies, and
Pathways out of Poverty: Taking Stock of the Evidence”
Bernd Mueller
May 14, 2015
Webinar hosted in collaboration with
Let’s start off with a simple poll:
Which of the below best describes the main group
of beneficiaries of your work?
a) Smallholder farmers
b) Micro-entrepreneurs
c) Medium to large-scale businesses
d) Agricultural workers
e) Non-agricultural workers
f) Unpaid family workers
g) Unemployed
h) Others
Market development approaches
3
Source: A Framework for Inclusive Market Systems
Development, USAID/LEO 2013
Often market development programs directly or indirectly address
• Farmers &
• Micro or small-scale businesses / entrepreneurship
… typically with the goal of reduced poverty!
Widely accepted facts
“Most of the world’s poorest people are subsistence
farmers” (The Guardian, 10 Oct 2014)
“The share of agricultural wage income is very low and its
importance […] did not increase over time because of the
thinness of agricultural wage labor markets” (Estudillo et al., background paper to WDR 2013)
Facts?
Specialized labor market surveys tell a different story:
Where is the disconnect?… some answers provided in LEO report
Source: Mueller 2012; 2015Source: Cramer et al. 2014
Outline
• Clarifying terminology … and why does it matter?
• Quality of labor statistics
• Describing the work of the poor
• Where to for rural labor markets?
• Which labor improvements have the largest impact?
• Conclusion and implications
Form of employment
The crucial distinction:
Ownership of the means of production(= capital, land, assets, tools, ….)
• Wage workers do not own the means of production
• Self-employed workers own the means of production
Why is this important?
Consider standard rural development tools:
• Input subsidies and irrigation?
• Micro-credits?
• Market access and fair(trade) prices?
• ….
Outline
• Clarifying terminology … and why does it matter?
• Quality of labor statistics
• Describing the work of the poor
• Where to for rural labor markets?
• Which labor improvements have the largest impact?
• Conclusion and implications
Quality of labor market data
Official national labor statistics Case study evidence
Tanzania11% of rural households include at least one
wage worker1
58% of households include at least one
wage worker6
Uganda 11% of women work for wages in agriculture244.8% of all women sampled work for
wages7
Ethiopia< 1% of rural women spent any time in wage
labor in the past 7 days3
45.8% of all women sampled work for
wages7
Nigeria3.8% of households participate in rural wage
employment543.6% of households participate in
agricultural wage labor8
Systematic underreporting of rural wage labor in national statistics.
(especially in SSA)
Sources: 1United Republic of Tanzania (2007), based on LFS; 2Uganda Bureau of Statistics (2012), based on DHS survey; 3EthiopianCentral Statistics Agency and World Bank (2013),
based on LSMS survey; 4WDI (2015), based on LFS; 5Valdés et al. (2009), based on RIGA database; 6Mueller (2012; 2015); 7Cramer et al. (2014); 8Babatunde (2013)
Reasons for low data quality
In particular survey design, aka:
• (not) asking the right questions to the right people in the right
way
• See the report for more detail
• One simple example for illustration:
Only in the Malawian questionnaire was the local term for
casual wage labor (“ganyu”) used.
Source: Valdés et al. 2009
Outline
• Clarifying terminology … and why does it matter?
• Quality of labor statistics
• Describing the work of the poor
• Where to for rural labor markets?
• Which labor improvements have the largest impact?
• Conclusion and implications
The work of the poor: diversification
• Rural livelihood diversification
– Participation in rural non-farm activities:
• Africa: 78%
• Asia: 83%
• Latin America: 82%
• Eastern Europe: 92% Source: Winters et al. 2009
• Diversity for survival? Diversity for accumulation?
• Self-employed non-farm economy important, but mostly
relevant for better-off households
Poorest households rely heavily on (casual) wage work
in agriculture and beyond
The work of the poor: wage labor!
• Examples:
– Seasonal agricultural work, forestry, processing
– Construction, mining, fisheries, small-scale manufacturing
– Domestic servants, home-based workers, catering
– …
• All sectors include both low and high earning jobs and very
different levels of working conditions
• Wage labor is important both for survival and accumulation
Context is key!
Wage labor snapshots: Sub-Saharan Africa
0
20
40
60
80
Q1 Q2 Q3 Q4
Rural wage employment in Nigeria
Participation in agricultural wage employment
Income share wage income
Source: own illustration based on Babatunde 2009
Ghana:
59% of cocoa workers are so-called
“by-day” workers.
A government survey describes
them as “living from hand to mouth”
Source: Ministry of Manpower, Youth &
Employment 2007
India:
China:
• Importance of rural-urban migration
• Wage employment is associated with rising prosperity
• Clear signs of structural transformation and greatly reduced rural
poverty
Wage labor snapshots: Asia
Source: own illustration based
on Lanjouw and Shariff 20040 20 40 60 80
Self-employment
Wage labor
Rural HH income sources, in %
Poorest quintile
Richest quintile
Outline
• Clarifying terminology … and why does it matter?
• Quality of labor statistics
• Describing the work of the poor
• Where to for rural labor markets?
• Which labor improvements have the largest impact?
• Conclusion and implications
Structural transformation
• Africa:
– 60% - 80% of labor force employed in agriculture
– contributing only 25% - 40% of GDP
– “growing rapidly, transforming slowly”?
– Labor will be released from small-scale agriculture into other sectors
or occupations
Wage labor becomes more important, not less so!
Rural working population
1995 – 2012
Agricultural labor productivity
1995 – 2012
Source:
Wiggins and Keats, 2014
Migration
• Migration as a cornerstone for economic upward mobility
• Another example from Tanzania:
Pathways out of poverty are and
increasingly will be labor market based.
How to support this process?
Source: own illustration
based on Beegle et al.
2011
Outline
• Clarifying terminology … and why does it matter?
• Quality of labor statistics
• Describing the work of the poor
• Where to for rural labor markets?
• Which labor improvements have the largest impact?
• Conclusion and implications
Think like a rural wage worker …
What do you think is most likely the highest priority
for poor rural wage workers?
a) Job security (a more stable job)
b) Safer work (less dangerous)
c) More work (across seasons)
d) Shorter working hours
e) Better pay
f) Better social protection / insurance
g) Less discrimination
h) More labor rights (e.g. freedom of association)
‘Good’ and ‘bad’ jobs
• What is a ‘good’ and what is a ‘bad’ job?
• Difference lies in the relative context of poverty:
– Even relatively ‘bad’ jobs can have a positive impact,
e.g. for the most marginalised people
– For the most destitute, having any job can make the
difference for survival
• ‘Decent work for all’ as the ultimate goal, but pursued
gradually and with context awareness
The bottom line:
We must never promote worst jobs, e.g. work that is directly
harmful, forced labor, or worst forms of child labor.
The following micro factors are important to all workers:
Quantity of work and seasonal distribution of work
Increased wages / piece or task rates
Improved access to social protection (public and employer-based)
But beyond these, more nuance is needed
… and is provided in the report. (section V.B)
Micro-level labor improvements
“Pathway out of Poverty”
elementWhich micro level-labor market characteristics are most relevant for each element?
1) Addressing extreme
poverty
For stopping absolute destitution:
• Eliminate forced labor conditions and worst forms of child labor;
• reduce most severe OHS risks;
For reaching minimum welfare levels:
• reduce severe OHS risks;
• enhance (basic) technical skills;
2) Stopping impoverishment• Reduce OHS risks
• improve job security/predictability of work
3) Enabling / sustaining an
escape from poverty
• reduce OHS risks;
• improve job security/predictability of work
• enhance technical skills
• reduce excessive working hours (whilst maintaining overall income levels)
• address wage discrimination (especially for women and migrant workers);
• elimination/reduction of child labor (complemented by improvements in education, social protection etc.)
Macro-level labor improvements
• ‘Tightening’ labor markets
• Structure of sector / value chain / market system
– employment-intensive
– linkages between sectors / market systems
– high-value & scale matter:
• Education
Context is key
Source: World Bank 2012
Outline
• Clarifying terminology … and why does it matter?
• Quality of labor statistics
• Describing the work of the poor
• Where to for rural labor markets?
• Which labor improvements have the largest impact?
• Conclusion and implications
Why rural wage labor matters:
• Wage labor is underestimated and underacknowledged
• Over 40% of the agricultural workforce are wage workers
• Especially the poorest heavily depend on wage incomes …
… for survival and for pathways out of poverty
• Improvements in quantity and quality of jobs have huge
impact towards ending mass poverty
• Wage labor is becoming more important, not less so
Source: A Framework for Inclusive Market Systems Development,
USAID/LEO 2013
Implications: Labor and Market Systems
Implications for practitioners: An Initial Take
• Beyond farmers and entrepreneurs:
Poverty reduction, resilience, food security must
also be linked with wage incomes and jobs
• Actively include and, where appropriate, focus on
wage workers as key beneficiary group
• Be aware of consistent underreporting of wage
labor in most statistics
• Context is key: need for careful assessment
Implications for practitioners (cont’d)
• Focus on initiatives that increase quantity of work and
have a tightening effect on labor markets
• Choose systems, value chains, and type of enterprises
with large wage employment potential and impacts
• Consider labor linkages between market systems &
VCs
• Contribute to improving working conditions
• Specific efforts focused on women, youth and migrant
workers are needed
Report & Infographicavailable at:
microlinks.org/LEOwagelabor
Thank you
See you at the e-discussion on Tuesday!
http://bit.ly/ediscusswagework
What’s next?
Register for the e-discussion! http://bit.ly/ediscusswagework
Week 1 (19-22 May): Rural poverty and wage labour
Facilitator: Bernd Mueller with FAO’s Decent Rural Employment Team, LEO Advisor
Week 2 (26-29 May): Structural Transformation
Facilitator: Louise Fox, former Lead Economist for World Bank, Africa Region
Week 3 (2-5 June): Results measurement, theories of change and data quality
Facilitator: Ben Fowler, DCED Auditor, Co-Lead of LEO’s Systemic M&E Track,
Principal Consultant at MarketShare Associations
Panel of experts includes: Stephen O’Connell (USAID), Stuart Tibbs (DfID), Thom
Jayne (MSU), Merten Sievers (ILO), Matthias Herr (ILO), Jake Grover (USAID),
Melissa Patsalides (USAID), Carlos Oya (SOAS), Deborah Johnston (SOAS),
Bruce Byiers (ODI-ECDPM), and many others
What’s next?
• Register for the e-discussion: 19 May – 12 June:
http://bit.ly/ediscusswagework
• Download the full report: microlinks.org/LEOwagelabor
• Share the infographic: microlinks.org/library/rural-wage-
labor-infographic
• Connect on social media: #wageworkmatters
• Check out a blog: microlinks.org/market-systems-blog