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

A Tanzanian …

… farmer?

… unpaid family worker?

… wage worker?

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?

• ….

Spot the wage worker …

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!

Importance of gender, age, migration

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