Pull and push factors in non-farm occupations

In a recent research paper, eminent economist Mahabub Hossain has dealt with rural non-farm sector and labour productivity. Do non-farm activities provide relatively full-time employment?  Are these taken up basically to augment household incomes during slack seasons of agricultural activities? Both farmers and agricultural labour households may be engaged in multiple occupations to shield against seasonal fluctuations in employment and incomes.
Economists observed that in Africa, non-farm activities were a means for the poor to stabilise income during drought years. In the semi-arid tropics in India, non-agricultural self-employment not only became an increasingly important source of income but also was a means of dampening household income variability. An estimate of duration of employment during a year can shed some light on this issue.
The findings show that business, services, shop-keeping and transport operations are relatively full-time occupations while construction work and non-agricultural wage labour are relatively part-time occupations. Thus, the hypothesis that non-farm activities are undertaken for seasonal employment and income is valid only for a small fraction of non-farm activities. The comparison of the number of 1987 and 2000 and onwards indicate that the duration of employment has increased over-time, particularly for trade and business, shop keeping and transport operations.
The level of labour productivity is a good indicator of the strength of rural non-farm activities (RNFA). If labour productivity is lower than the agricultural wage rate, it would support the hypothesis of the operation of 'push' factors behind the expansion of RNFA.  Higher labour productivity, on the other hand, is an evidence of the existence of the 'pull' factors.
The estimates of labour productivity obtained from various surveys and re-surveys show that productivity is 10 to 40 per cent higher than the agricultural wage rate for non-farm activities that need very little physical and human capital, such as construction work and rickshaw pulling. In services and business enterprises, average labour productivity is two to 3.5 times higher than the agricultural wage rate. The labour productivity in business and service sector activities is, however, substantially lower for workers belonging to the functionally landless households than for those who belong to the medium and large landowning households. The findings indicate that the resource-poor households are engaged in business and service sector activities at the lower end of the productivity scale, presumably due to lack of access to capital and the low level of education.
The productivity of labour in non-farm occupations is higher than the agricultural wage rate, even for the land-poor households. The evidence thus supports the proposition of the existence of 'pull' factors, i.e., higher productivity and wage earnings in most non-farm activities are luring labour from relatively low productive, risky, and back-breaking farm activities. The average productivity in off-farm and non-farm occupations increased from US$1.43 per day in the 1980s to $2.28 in the late 1990s, an increase of 3.6 per cent per year. The productivity growth is lower for the functionally landless groups (2.2 per cent per year) and the highest for the middle land owning group (4.6 per cent).
The 'pull' factor may be due to the growth in agricultural productivity itself, which stimulates employment generation in the rural non-farm sector through agriculture's growth linkage effects. Drawing on data from selected Asian countries, some researchers observed a positive relationship between the level of agricultural income and the proportion of rural employment and income derived from non-farm activities. For each dollar increase in agricultural value added, an additional $0.5 to $1.0 income is generated in the non-farm sector.
Rural households do not keep records of their transactions and hence reliable estimation of income is problematic, especially by asking direct questions to the respondent. Rural people sometimes consider savings as income, and often self-consumption of the household produce is not considered as income.
The concept of income used here is comprehensive, including income received in kind and cash. Household consumption of self-produced crops, livestock, forestry and fishery products is included in income. The income from crop production activities is estimated as the value of the main product and the by-products net of the costs on account of seeds, fertilisers, pesticides, irrigation charge, payment to hired labour, and rental charge of animal labour and agricultural machinery.
The growth in rural incomes over 1987-2000 was almost entirely on account of the non-agricultural activities. The fastest growing economic activities were business and services, followed by non-rice agricultural activities. The income from rice production and agricultural wage-labour declined in absolute terms. The income from manual labour-based non-agricultural activities, increased at only 1.1 per cent per year. The share of non-agricultural activities in total household income grew from 42 per cent in 1987 to 54 per cent in 2000 and over 60 per cent in recent years.

The writer is a Professor of Economics at Jahangirnagar University.  [email protected]