Key issues for a better measurement of income and employment

Berkeley Hill, University of London

Structure of paper

Introduction Accounting framework The household unit Classification of households as agricultural The definition of income Data sources Comments and discussion

Introduction

Need for information on household income of farm operators pointed out since 1960s (OECD and others)

Few countries have micro data, and little development in sources since 1960s

Rising awareness of this critical gap from mid-1980s (led to Eurostat’s IAHS project)

Most recently – Court of Auditors and OECD reports have highlighted need

Accounting framework

System of National Accounts (SNA) or micro-economic methodology?

SNA – established household sector sequence of accounts (including disposable income), consistency BUT only at sector level

Microeonomic – more policy-relevant results, distributional issues explored BUT less established methodology, more dependent on data sources

Accounting framework ctd.

Recent events Canberra Group report (2001) – micro-

economic methodology (not specifically for agriculture)

IWG-Agri (coordinated by UNECE) development of Handbook of Methodology for agricultural household income statistics – drawing on IAHS methodology, Canberra Group etc. to be published in 2005

The Household Unit 1

SNA definition A small group of persons who share the

same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food. [The criteria of the existence of family or emotional ties may be added].

SNA definition of household sector is broader than private households

Household unit 2

Most household surveys use the dwelling household concept

Dwelling household may contain people who do not pool income and expenditure

UNECE Handbook recommends the use of both the single budget household and the dwelling household concepts where possible

Agricultural households - 1

Several criteria of what makes a household an agricultural one

Income dependency and labour input are the two most commonly considered

Practicality may mean that a reference person system has to be used for classifying

Income instability in agriculture has to be recognised (classification using income averaging?)

Agricultural households - 2

Degrees of income dependency are found, from “broad” (with any income from agriculture) to various “narrow” groupings

Choice depends on policy circumstances but will affect results (numbers and income level)

Agricultural support suggests prime interest in households whose main income is from agriculture

UNECE Handbook recommends flexibility

Agricultural Household spectrum

HOUSEHOLDS - AGRICULTURAL

OTHER HOUSEHOLDS

REAL INSTITUTIONAL UNITS

Mixed income (Operating surplus) of agricultural LKAUs

Other income from independent and dependent activity, transfers etc.

CO

RP

OR

AT

ION

S

OT

HE

R

Entrepreneurial income from agricultural activity

Other EI

Kitchen gardens

Difference between “broad” and “narrow” in IAHS results Dk

1996)D

1983ELL1994

IRL1987

NED1988

FIN 1992

SWE 1992

No. agricultural households (x 1 000)

“broad” 64 613 615 207 136 139 94

“narrow” 21 353 398 85 87 73 54

“marginal” 43 260 217 122 49 65 41

Disposable income per household (index)

All households 100 100 100 100 100 100 100

Agricultural households

“broad” 101 110 114 105 210 124 81“narrow” 107 101 86 127 267 131 79

“marginal” 98 123 166 89 108 116 85

Agricultural households 3

Conventionally, only household with income from self-employment in agriculture are included (“broad” or “narrow” approaches)

The households of people working on large agricultural units in the new Member States are a statistical challenge

UNECE and Eurostat’s IAHS methodologies recommend that they are treated as a special optional “add-on”

Definition of income - 1

SNA definition contains items that are inappropriate for microeconomic use

Canberra Group provides a microeconomic definition that has some items for which data are very difficult

Canberra Group also recommends a more practical simplified list that omits some items important for use in agriculture

UNECE Handbook recommends a modified list

Definition of income 2

UNECE Handbook definition (see Fig 1) Net income from self employment Cash wages and salaries Property income received Social transfers received Other regular current inflows LESS current taxes on income and wealth

and non-discretionary social contributions = Net disposable income

Data sources

Microeconomic data of good quality is essential for reliable income estimates

Main sources – farm accounts surveys, tax data, household budget surveys

Each has advantages and drawbacks Some countries have no reliable sources,

some have several Integrated datasets are very useful (e.g.

income statistics registers in Denmark)

Comments and discussion

A harmonised methodology is being developed (using IAHS + Canberra Group)

Development of data sources is seen as the main limiting factor to providing informatio

Data source development will depend on statisticians convincing users (especially policymakers) of the worth of this information to improving decisions, and for them to provide resources