Employment in non-farm activities

With the passage of time, poor households in rural Bangladesh have increasingly been linked to rural non-farm activities (RNFA) for livelihoods. This is not surprising given their perceived fluctuations in earnings following swings in agricultural output levels. Thus, more often than not, poor households take to multiple occupations as a shield against fluctuations in household income. To drive home the point, a comparison of our observations pertaining to RNFA with those in other areas needs a mention. It could be observed that manufacturing and services such as weaving, pottery, food preparation and processing, domestic and personal services and unskilled non-farm wage labour etc. typically require low investment but account for a greater share of income for the rural poor households than their wealthier counterparts. The reverse, however, holds true for transport, commerce and upgraded manufacturing etc. where higher investments result in higher income for the wealthier households. In another finding on RNFA, Reardon et. al emphasised non-farm income for the poor as a means to help  household income firmed up and stabilise in drought years. In a similar vein, Walker and Ryan - in reference to several villages in the semi-arid tropics of India - found that non-agricultural self-employment and labour market earnings became increasingly important source of income during the 1980s by increasing mean income and dampening household income variability.
The estimates of the total number of days of employment in non-farm activities, over time, reveal an increase in the duration of employment for most of non-agricultural activities while the duration of employment for agricultural labour had been declining over time. Assuming 6 hours as full-time employment, it could be estimated that the degree of under-employment marginally declined from 30 per cent to 28 per cent. In this context, we can possibly invoke the 'push' and the 'pull' debate. Questions are raised whether the surplus labour and low productivity in agriculture are pushing labour towards relatively low productive RNFA or not. In this case, the rural non-farm sector may be identified as the 'employer of last resort'. But as evidences reveal, it is not only the landless, lacking employment in agriculture, who have stepped into rural non-farm activities but also the households with better resource positions have moved out of agriculture.
Estimates of labour productivity obtained from our survey shows that, productivity of RNFA is 40 to 50 per cent higher than the agricultural wage rate - even in non-farm activities that need very little physical and human capital, such as construction work, rickshaw pulling and shop keeping. In services and business enterprises, average labour productivity is observed to be 2 to 2.5 times higher than the agricultural wage rate. The labour productivity in business and service sector activities was, however, substantially lower for workers belonging to the functionally landless households than for those belonging to the medium and large landowning households. However, as it appears from our data, the resource-poor households are engaged in trade and services at the lower end of the productivity scale, presumably due to lack of access to capital and education.
Since the productivity of non-farm labour is higher than agricultural wage rate, the mobility of the poor workers from agriculture to the non-farm sector is contributing to an increase in productivity and earnings. In this case, possibly, we can hypothesise that there is evidently a 'pull' situation where the non-farm sector is luring the labour to relatively higher paid jobs. In other words, the observations from surveys lead to the impression that, as opposed to earlier years when labour was 'pushed out' of agriculture to embrace low-productive non-farm jobs, non-farm opportunities are in fact 'pulling' labour from agriculture in recent times. The observation is supported by the fact that the average productivity in off-farm and non-farm occupations has increased with the passage of time. And admittedly, the 'pull' situation has arisen out of surging agricultural growth itself.  In fact, agricultural growth generated demand and supply to create such a condition. It is, thus, established that in a society where agriculture remains stagnant, RNFA cannot grow fast. It is argued that a 10 per cent increase in agricultural GDP raises employment in the non-farm sector by 6 per cent. Therefore, we have to put our efforts relentlessly in increasing agricultural growth. Drawing upon data from selected Asian countries such as Bangladesh, India, Indonesia, Pakistan and Thailand, eminent economists Rosegrant and Hazell pointed to a positive relationship between agricultural income and non-farm share of total rural employment  where regional income multipliers range from 1.5 to 2.0. That is, for each dollar increase in agriculture's value added, there is an additional $0.5 to $1.0 increase in the value added of the non-farm sector. And, 67 to 80 per cent of this increment in value addition is due to household consumption-induced linkages.
It could be seen that the productivity of the poor segment - as compared to the solvent segment of the rural society - in business/trade and services is less than half. For example, a functionally landless labour earns $2.28/day and $2.02/day from business/trade and services, respectively. As opposed to this, the labour from solvent household appears to earn, respectively, $ 5 and $4. That means, the productivity of the poor is lower as they reside at the less productive end of the activities. It might be due to deterrence from inadequate or no access to education or credit that forces them to move around manual-based activities. In this case, the policy implication is to increase access to education and credit for this class of people.
The writer is a former
Professor of Economics at
Jahangirnagar University.
[email protected]