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Labour Productivity: The Key to Economic Development in Timor-Leste
Brett Inder and Katy Cornwell www.monashintimor.org
Funding: Australian GovernmentMonash University
The Population (Census 2015)
• Dependency Ratio (Children + Elderly) / Working-Age: 90%.
Indonesia 49%, Malaysia 45%, Cambodia 56%, Laos 63%, Vietnam 43%.
• Children: 39% of total population.
Others range from 23% (Vietnam) to 35% (Laos).
Fertility is Trending down!
Year Total Fertility Rate
2003 7.8
2010 5.7
2016 4.2Estimated lifetime average number of children per adult womanSource: DHS 2003, 2010, 2016
The Working Population (Census 2015)Total 388,952
Government 52,647State Owned Enterprise (Eg. TVTL, EDTL) 13,144Private Owned Business or Farm 18,752Self Employed Farmer 249,873Self Employed Non-Farmer 40,789Non-Governmental/Non-Profit Organizations 5,188Embassies and Bilateral Institutions 687United Nations and Specialised International Organizations 481Other 7,391
• More than 64% of working adults are Self Employed Farmers
• 95% of agricultural activity is subsistence agriculture.
64%
Occupational CategoriesMain Occupational Category
Timor-Leste IndonesiaProfessional 1.4% 6.5%Manager 3.2% 1.0%
Teacher 4.3%Associate Professional / Clerk 5.0% 5.2%Services, Sales 17.0% 24.1%Armed Forces, Police 1.7%Xefe 0.4%Farmer 59.9% 35.3%Crafts, Trades, Machinery 3.6% 27.3%Labourer 0.8%Driver 2.0%Not Classified 0.6% 0.6%
Rural-Urban Trends in the Future
• We have analysed Suku population trends for the Censuses 2004, 2010 and 2015.
• Then made projections to 2050.
• This highlights pattern of movement away from agriculture and migration to Urban areas.
Rural-Urban Trends in the Future
2015 2050
Population 1.18 million 2.45 million
% in Urban areas 33% 54%
Urban Dili Population 255,575 878,900
Aims
Multidimensional Poverty (MPI):Poverty Rate by District (DHS 2010)
National Rate: 68%
Implications• Transformation of the Agricultural sector is absolutely vital.
• But: improving agricultural productivity will not change the trend towards urbanisation. Actually it might accelerate it, as demand for rural labour declines.
• With population demographics, rapid growth of non-agricultural economic activities will also be needed.
• The private sector is currently very small in terms of its employment impact: the challenges are huge.
Addressing DisincentivesSystemic disincentives against improving agriculture?
• “Subsidies” on imported rice• High minimum wage • High pay rate for some government employment• social transfer programs• Exchange rate policy (prices of imported goods) • Traditional approaches to land “ownership” and wealth• Cultural expectations around gender roles • Traditional beliefs
Addressing Disincentives
There is one thing that will address most of these disincentives:
* To increase the return to effort *
In other words, to increase Labour Productivity.
Improving productivity means:
Producing more with the same level of inputs (effort, time, money, land, …)
Productivity improvements will lead to increased supply of labour and significantly increase production!
Productivity, Productivity, Productivity
Productivity, Productivity, Productivity
Expanding production without improving productivity is doomed to failIf it was worth the effort to produce this higher amount, farmers would already be doing it!
Without productivity improvements, most agricultural programs are uneconomicalDonor-funded programs must become economically viable to be sustained after funding ceases
1. Capital Investment“Labour saving” improvements / tools
2. Improving Labour skills and learningLocalized learning and productivity
Who is doing best in this crop / location?How can others learn from them?Where do the ‘best’ go to continue learning?
3. Specialisation
• Growing crops to suit the local environment• Building expert knowledge• Streamlining labour-intensive processes
Building Agricultural Productivity
Long term potential for productivity improvements is limited without larger farms.
• large sized land plots (100 times bigger!)• Utilising skilled and specialised labour • High level of mechanisation and other inputs (improved seeds, etc)
A transformation of this kind requires a number of major changes:• consolidating land• A much higher level of skills in the workforce• Sizeable capital investment in mechanisation• Access to new, larger markets
This kind of transformation has many implications!
Building Agricultural Productivity: Size matters
Improving Productivity in the Non-Agricultural Economy
Indirect Factors
• Better access to and use of LAND
• Higher levels of Business INVESTMENT in CAPITAL
• A more supportive BUSINESS ENVIRONMENTEnforcement of contractsFinancial servicesInfrastructure
• Greater CRITICAL MASS of businesses
• Developing INDUSTRY STRATEGIES
Improving Productivity in the Non-Agricultural Economy
Indirect Factors
• The Government Reform Agenda is making progress in many of these areas.
• But the list of reforms is long!
• A key criteria for prioritising needs to be on reducing costs and improving firm productivity.
Improving Productivity: People
• Leaders create business ideas & plans
• Managers implement a plan
• Supervisors oversee day-to-day
• Workers undertake routine, well-defined tasks
Improving Productivity: People
In a young economy, there is a big shortage of experienced Leaders, Managers and Supervisors
This is the major bottleneck (binding constraint) in the development of the modern economy and strong government.
Improving Productivity: Human Capital
Human Capital comprises:
• Knowledge and skills
• Values and Life skills
• Ability to learn
Growing Human Capital
• Quality Education at all levels. Invest!
• Skills Training. Best Practice
• Tacit Learning – Learning by doing. Experience
• An Enabling Environment – Good management
• Ongoing Improvement – A learning Mindset
Human Capital: The Next Generation
Education and Economic Growth:• Education makes a big difference• It takes time• Economic growth via human capital is sustained• Quality matters• Each level of education affects growth differently
“A one standard deviation higher cognitive skills of a country’s
workforce is associated with a two percentage point higher annual
economic growth”
Human Capital: The Next GenerationTimor-Leste Indonesia Thailand
Education spending as % of Government Budget
8% 20.5% 18.9%
Spending on Education per student
Primary $553 $1,462 $3,566
Secondary $526 $1,158 $2,753
School Enrolment Pre-primary (4 yos)
19% 58% 69%
Primary 123% 106% 103%
Secondary 76% 86% 91%
% Progression to Vocational Training
11.7% 41% 33.9%
Human Capital: The Adult Generation
• Ongoing formal education
• A learning culture in organisations
• Helping people grow in their work
The Learning Organisation
1. Learning as a core activity
2. Learning built into program design
3. Business development support is a priority
4. Creating challenging tasks
5. Internalising and codifying learning
SummaryAgriculture programs:• Focus on productivity• Economically viable interventions• Larger scale activities
Economic Development:• Reforms help, infrastructure helps, money helps
• But the real constraint is Human Capital: Education … Training … Experience … Management … Learning
