By Engr Asim I. Osmani and Syed Haider Abbas Zaidi
The role of rural non-farm sector activities (RNFA) in economic growth and poverty reduction is documented. With time this sector has emerged as an engine of rural employment and income generation. The RNFA has assumed an important position.
According to M. Rosegrant and P. Hazell of the International Food Policy Research Institute (IFPRI), "from relatively a minor sector, often largely part-time and subsistence-oriented has become a motor of economic growth.
Its growth, has important implications for women and poor households as this offsets inequities arising in the agricultural sector". Sudha Narayanan and Ashok Gulati of the IFPRI have remarked: "On an average as much as 46 per cent of rural household income, in selected countries, comes from the non-farm sources. The proportion is close to 45 per cent in Africa and lower than 35 per cent in Asia. But in Pakistan, as revealed by household surveys, the share is reported to be 52-54 per cent of the total household income.
BAILING OUT PAKISTAN: The RNF activities and their correlates are now widely discussed in academic and policy planks. There is no dearth of data and deliberations. But of the available works, none appears to match the Basic Urban Rural Services and Training (Burst).
An NGO seminal results from repeated household survey carried out in 14 villages, in Sanghar, Mirpurkhas, Shikarpur, Gotkhi and Dadu, for 1999 and 2003. Some of the interesting observations of the survey are:
In 1999, 34 per cent of the earning members reported the RNFA as a primary, and 15 per cent as secondary occupation. By 2003, the share rose to 52 and 10 per cent, respectively.
The figures confirm that the RNFA has emerged as a primary source of employment in rural Pakistan. Surveys in other countries show that the sector accounts for 20-45 per cent of full-time employment. Admittedly, the share is on the higher side in Pakistan.
In 2003, a third of rural employment was generated in business enterprises and service sector activities. The proportion of workers in these activities rose by 60 per cent over the 1999- 2003 period.
The service sector activities are, by and large, full-time while business activities are mostly part-time occupation. However, rural towns and cities - and not the villages - were the sources of service sector employment. In Pakistan, 6 per cent of rural households reported one or more family members sending remittances on regular basis.
Change in the composition of rural employment shows increased occupational mobility from farm to non-farm activities. In Pakistan, the proportion of cultivators declined over the compared periods and the share of agricultural labourers reached almost half between 1999 and 2003. Interestingly, agricultural wage labour has become a part-time occupation. The trend seems to be the same in other countries also.
For example, in Asian countries such as China (a la Nrayanan and Gulati) part-time farming is widespread while in India and Thailand, urban centres are receptacles of seasonal labour from the countryside.
Needless to mention that mobility from farm to non-farm has been facilitated by the improvement in the communication system and the linkages that agricultural growth has generated over the years.
But the malleability of workers across occupation has been helped more by the improvement in the quality of education. For example, primary enrolment increased from 59 to 89 per cent over 1999-2003 period.
The secondary enrolment increased from 51 to 66 per cent. The proportion of adult workers with no formal schooling declined from 63 to 40 per cent and the average year of schooling increased from 3.1 to 4.3 years.
Cultivation of crops are now being carried out by those without formal education (landless and marginal households) and the relatively educated ones have been leaving land behind lured by lucrative opportunities.
In 1999, 44 per cent of workers from the functionally landless households (owning less than 0.2 ha) were engaged as agricultural wage labour but by 2003, the proportion dropped to 22 per cent.
But the proportion of functionally landless households increased as cultivators rose from about 13 to 18 per cent. As literate people are leaving land for eking out a better butter elsewhere, illiterate functionally landless households are entering into the tenancy market. The proportion of land under tenancy cultivation increased from 23 to 34 per cent and that of the tenant farmers from 44 to 55 per cent during 1999-2003 period.
But there is a difference. For large and medium farmers, the mobility meant an exit from farms and an entry into business or services with good education and credit-worthy capital.
Whereas for the landless, it meant from agricultural labour to cultivation or labour-based manual non-farm activities like rickshaw pulling, mechanics and wage labour. These phenomena of mobility and malleability of rural population could partly explain the allegation hovering around the shortage of agricultural labour in rural areas and the rise in wage rate.
Burst further observes that participation in manual labour- based activities (transport, construction, cottage industry and wage labour) seems to be poverty-driven as shown by the negative association of participation with the size of land ownership, non-land fixed assets and the level of education workers.
The most important factor influencing participation in the service sector is education while the major determinants of participation in business activities are accumulation of non-land assets.
PUSH OR PULL: What drives rural households to participate in the RNF activities? Are push factors at work or pull factors dominant? Sudha Narayanan and Ashok Gulati note, drawing upon several studies, that they have different implications as far as the welfare is concerned.
"Studies in Africa and Latin America suggest that although rural non-farm income and employment are important for both, in Africa they tend to be driven more by push factors and in Latin America it is more on account of pull factors."
En passant, one needs to note that agricultural stagnation pushes people out of agriculture while better opportunities elsewhere (e.g., the RNFA) pull people towards dynamic activities with lure of a better livelihood.
One of the indicators of the strengths of the RNFA is the productivity. If labour productivity in the RNFA were lower than the agricultural wage rate, it would support the hypothesis of "push factors" behind the expansion of the RNFA. Higher productivity, on the other hand, would indicate a pull factor.
The estimates of labour productivity from a resurvey shows that productivity is 10 to 40 per cent higher than the agricultural wage rate for non-farm activities that need very little of human and physical capital, and skill.
These are, for example, construction work, rickshaw pulling,etc. In service and business enterprises, the average labour productivity was found to be two to 3.5 times higher than the agricultural wage rate. The labour productivity was however lower for functionally landless households than for large and medium land owners.
Thus, the resource poor are at the lower end of the ladder of business and services than the rich presumably due to the lack of capital and education. Any way, the evidences support the hypothesis of pull factors.
This is quite contrast to what we observed in the decades before when people used to be pushed out of agriculture and grab low productive employment outside agriculture.
The phenomenon, perhaps, also tends to suggest that Pakistan's agriculture no longer saddles with the lingering unlimited supply of labour where marginal productivity of labour is zero or negative.
INCOME DISTRIBUTION: The Burst also dealt with the issue of income and its distribution across income scale. In agriculture, land is the predominant source of income and hence inequality since land is not equally distributed and a large army of landless labourers exist.
The eminent researcher observed that the share of agricultural income to total household income came down from 58 per cent in 1999 to 46 per cent in 2003. But that of non-agricultural income shot up from 42 to 54 per cent during the same period of time.
The growth in rural incomes over 1999-2003 was almost entirely on account of the non-agricultural sector. Disconcertingly, however, the income distribution in Pakistan is fairly unequal and has worsened over time.
For example, the income share of the bottom 40 per cent in per capita income scale declined from 17 to 14 per cent while that of the top 10 per cent increased from 32 to 35 per cent during the period under comparison.
The rural non-agricultural income is more unequally distributed than the agricultural income. In 2003, bottom 40 per cent in per capita income scale received 11 per cent of total non-agricultural income while top 10 per cent got 39 per cent.
Compared to 1999, the ninth deciles group and the middle 40 per cent have increased their share while the share of the bottom 40 and top 10 per cent declined marginally.
The findings further indicate that the most unequally distributed source of income is business followed by services and non-rice agriculture. Rice is income equaliser - thanks to the advent of the MVs - and rejects the earlier apprehensions of rice being more rewarding for the relatively rich.
The concentration of income for services and non-agricultural labour has declined over the period suggesting that relatively low-income households are being employed in these activities, albeit in lower productivity region.
MOBILITY AND MESSAGE: The message on income inequality in rural areas is clear. "The worsening of income inequality in rural areas is mainly on account of the increased share of income from business and services, which are more unequally distributed than the income from agriculture.
It is a challenge to policy makers to devise and implement programmes and policies that facilitate the distribution of non-farm employment in favour of the land-poor households." Development of infrastructure, institutions and innovative technology seem to be the call of the hour.
