The income-earning capacity of sample households obviously depends on a number of factors. For example, land is the most important asset which plays an important role in influencing household income. It may be owned land or rented-in land. Likewise, income depends on the number of working members within a household as well as on non-land assets used in production. Again, land availability is not sufficient for income; soil type, topography, depth of flooding, use of modern seeds and improved farm management practices also affect income from land. Tenancy arrangement would raise income only when income derived from tenancy cultivation is higher than the opportunity costs of labour and working capital used in land under tenancy. The productive power of the family labour depends on education and training levels of the labour. Besides, development of infrastructure increases the price of produced output at household level, reduces input prices and helps market orientation.
Overtime, the contribution of irrigated land to affecting household income marginally increased but that of rain-fed land substantially decreased. Obviously, in tandem with increased dependence on mechanised, as opposed to nature-dependent farming, the swings in income of rural households have been reduced overtime. Noticeably also, despite a reduction in the number of agricultural workers in the household, the contribution of workers in affecting household income has increased. This means, productive power or productivity of agricultural labour went up over time. The contribution from non-agricultural workers almost doubled in recent times. By and large, the contribution of labour in household income now accounts for roughly half of total household income compared to only 25 per cent in earlier periods. The policy implication of this change points to the need for enhancing access to education, training and health for workers as these would raise their productivity. Besides that, employment generation also requires expansion of infrastructural facilities.
In changing household income, the contribution of schooling has marginally declined. Undoubtedly, it is a cause for concern as education to us is one of important determinants of household income. But we reckon, possibly the impact of education was felt the other way. The impact might have been through migrating members whose contribution increased four times. In other words, in educated households, the number of migrating members is large; so income is also higher. However, agricultural and non-agricultural capital of households has increased overtime and their contribution has also increased. And as argued before, remittance income increased its share as migrant members of the households increased over the years. The contribution of access to electricity is apparent from the fact that the access has increased its share from about 5.0 per cent to roughly 10 per cent overtime. It should also be mentioned that 4-5 per cent of the household income in rural areas flow from NGOs.
Finally, if we search for the most dominant determinant of household income, we find that it is the labour force which is contributing the most to household income. The second contribution comes from agricultural and non-agricultural capital putting in about one-fifth of income. The most powerful asset land accounts for about 20 per cent of the household income that once shared about one-thirds. This, perhaps, reminds us that rural livelihoods these days have growingly become dependent on non-land assets. However, human capital could add roughly 10 per cent and infrastructure another 7.0Â per cent of household income. Provisions for education and electricity thus have important roles to play in affecting rural income and livelihoods.
The degree of inequality in distribution of income is generally measured by the Gini coefficient. Clearly, it appears that, the bottom 40 per cent of households (representing the poorest segment) lost their income share between the 1980s and recent times by approximately 20 per cent. But, during the same period of time, the top 10 per cent (representing the richest segment) increased their share. In this case, income inequality - as reflected by the Gini-concentration ratio - easily and evidently rose tentatively from 0.434 to 0.447. However, in recent periods, the bottom 40 per cent regained some of their lost share, while the top 10 per cent lost some. This resulted in the fall of the Gini index. The same pattern prevailed in the case of total income. The question that may be asked is: why is there a downturn in income disparity in most recent periods?
We presume that in earlier periods, access to the assets and especially to non-land assets was mostly grabbed by the richest segment of the rural society. For example, this group first seized upon the advantages of modern technology in paddy production. But in later periods, poor farmers also have picked up. Besides, free primary education and stipends for girls in secondary level etc. also have increased opportunities for the poor. And finally, the spread of the tenancy market and tightness in labour market also appear to have gone to favour the poor.
What causes inequality in income? First, agriculture in general and paddy farming in particular, are an equalising factor. It may be due to the fact that, of late the rich have almost left farming and the poor replaced them. Second, among agriculture, non-rice crop and non-crop agriculture, to some extent, increase inequality. It is in the sense that these activities require some amount of capital in which the poor have relatively less access. Besides, high-value crops are now grown on commercial basis by large farms instead of the subsistence and home-based production of earlier periods. This has also created income disparity. Third, the largest inequaliser is the income from non-agricultural sources. The Gini coefficient is very large and the concentration is prominent in the case of business and trade and also in services and remittances. To reiterate, business, services or migration need a lot of money and education. Only the rural rich could so far access these opportunities and, thus, increase their income. On the other hand, the level of income from these pockets is very low for the poor in the absence of the access. It is possibly not surprising that, as such, the Gini index has depicted an upward trend. Therefore, to control income disparity, education, credit and training opportunities must be taken to the door-steps of the poor.
The writer is a former Professor of Economics at Jahangirnagar University.
abdulbayes@yahoo.com
What causes inequality in rural income?
Abdul Bayes | Published: November 12, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
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