RNF employment Peru Presentation

Rural Non Farm Employment – getting the jobs done: 

Rural Non Farm Employment – getting the jobs done Joachim von Braun Director General International Food Policy Research Institute Grupo de Análisis para el Desarrollo (GRADE) y Seminario Permanente de Investigación Agrícola (SEPIA) Lima, April 24th 2006

Overview: 

Overview Definition and conceptual issues Dimensions and change On linkages (of various types) Policy considerations

“Creating” Employment high on the global policy agenda 2005/6: 

“Creating” Employment high on the global policy agenda 2005/6 The 2005 World Summit: “Strong support for fair globalization and resolve to make the goals of full and productive employment and decent work for all” “Promoting women’s equal access to labor markets, sustainable employment and adequate labor protection” Davos 2006 World Economic Forum: Employment is one of the top themes

Unemployment ratesby region, 1995-2004 (%): 

Unemployment rates by region, 1995-2004 (%) Source: Tarantino 2003

But where, for whom, how to “create” employment?: 

But where, for whom, how to “create” employment? Urban ? Rural ? City? Town? Village? Women ? Men? Youth? Children? Services? Industries? Agriculture? Private ? Public actions ? Skills ? Education? Finance ? Credit ? Innovation ? Technology? Infrastructure ?

Definition of rural non farm employment: 

Definition of rural non farm employment Rural Non-Farm Employment (RNFE)? Defining by exclusion? “Non-farm” Mixing sectors and spatial geography “Rural” Its not a sector, but a “segment “ of the economy Operationally not helpful Alternative: “employment in services and industries in rural areas” (ESIRA)

General Characteristics of RNFE: 

General Characteristics of RNFE Surveys suggest: RNFE accounts for approx. 25% of full time rural employment in developing countries (global estimate =19%) RNFE is a diverse set of activities, services are 2-3 times more important than manufacturing RNF income share has increased over time Source: Haggblade, Hazell and Reardon 2005

General Characteristics of RNFE (Cont’d): 

General Characteristics of RNFE (Cont’d) Although most RNFE firms are small, large firms dominate many activities and often have strong market-chain links to small firms Much RNFE clusters in small towns and market centers to access markets and capture economies of scale and agglomeration; Much RNFE outputs are non-tradable and are consumed within their producing regions. Source: Haggblade, Hazell and Reardon 2005

Overview: 

Overview Definition and conceptual issues Dimensions and change On Linkages (of various types) Policy considerations

Big picture on population and employment 2005 – 2020 (Shares): 

Big picture on population and employment 2005 – 2020 (Shares) Source: author’s calculations based on Tarantino 2005, UN World Population Prospects and ILO Labor Statistics Database

Big Picture on global employment 2005 – 2020 (Billions): 

Big Picture on global employment 2005 – 2020 (Billions) Source: author’s calculations based on Tarantino 2005, UN World Population Prospects and ILO Labor Statistics Database

Facts about Rural Non Farm Employment in Latin America: 

Evidence from Latin America shows that: The great majority of RNF income in LAC is earned in the service sector and in wage employment. The share and level of RNF income rises with household incomes. The share of RNF income drops as landholdings increase. Landless tend to earn considerable non farm income and rely strongly on it. Sources: Reardon, Berdegué and Escobar 2001, Dirven 2004 and IDB/FAO/ECLAC/RIMISP 2004 Facts about Rural Non Farm Employment in Latin America

Rural Non Farm Employment in Latin America: 

Rural Non Farm Employment in Latin America Source: Reardon, Berdegué and Escobar 2001

Labor allocation of Peruvian rural households: 

Labor allocation of Peruvian rural households Source: Escobal 2001

How many farms in the world?: 

How many farms in the world? Source: Von Braun 2003, derived from national data and FAO World Agricultural Census, various years

Non farm share of rural income: 

Non farm share of rural income Source: Reardon et al. 1998

Rural Non Farm Income in Latin America: 

Rural Non Farm Income in Latin America Source: Reardon, Berdegué and Escobar 2001, Dirven 2004

Overview: 

Overview Definition and conceptual issues Dimensions and change On Linkages (of various types) Policy considerations

1. Agricultural growth linkages – powerful but changing: 

1. Agricultural growth linkages – powerful but changing Agriculture linkages: Production linkages - forward (outputs) Production linkages - backward (factor markets and inputs) Consumption linkages – household items, transportation, services [most powerful ones]

Regional income multipliers from agricultural growth: typical magnitudes: 

Regional income multipliers from agricultural growth: typical magnitudes Asia: 1.6 – 1.9 (each additional $1 of income generated in agriculture leads to another $ .6 to .9 of income in the local RNFE) Africa: 1.3 - 1.5 Latin America: 1.4 – 1.6 Source: Haggblade, Hazell and Reardon 2005

Agricultural growth multipliers: 

Agricultural growth multipliers Consumption linkages dominate: typically account for 70 - 80% of the total multiplier Rural services and commerce account for the majority of rural nonfarm linkages Why are multipliers weaker in Africa? low use of purchased inputs more poorly developed rural towns and agro-industry higher transport costs

2. Challenging linkages to agro-processing and retail industry: 

2. Challenging linkages to agro-processing and retail industry Shrinking farms Growing food processors Even more growing retailers Rural-to-urban job exports? Rural industrialization? Rural urbanization?

Farm Size by World Regions: 

Farm Size by World Regions Source: Calculated from FAO World Agricultural Census, various years

Consolidation in retail and processing — Shrinking share of the bottom: 

Consolidation in retail and processing — Shrinking share of the bottom Expanding share of supermarkets and processing firms in food markets of developing countries Source: China – Hu et al 2005, India – Chengappa 2005, Euromonitor 2004, Argentina – Gutnam 2002, Indonesia – GAIN Report 2003, Guatemala – Reardon et al 2002

Slide25: 

The dynamics of linkages: Between farms and food industries Shrinking bottom Consolidation of retail & processing – FDI influence (China: 40% retail growth after FDI entry in 1992) Fragmentation in farming Expanding bottom: Increasing share of small holders Forward pyramid: Retailers/ processors Emerging mutual need for linkages Farmers pyramid Source: Gulati 2005

3. Services and industry – linkages: 

3. Services and industry – linkages Finance and credit Insurance services in rural areas (facilitating more risky employment) Infrastructure (transport, communications)

4. Human capital conditioned employment linkages: 

4. Human capital conditioned employment linkages Nutrition Health Education (and, for instance, child labor)

Overview: 

Overview Definition and conceptual issues Dimensions and change On Linkages (of various types) Policy considerations

What policy makers want …: 

What policy makers want … Policy makers - facing elections - want to “create” jobs “Pro-poor growth” is not enough for policy makers, if it does not include broad based job creation “pro-jobs” growth ? A challenge for sound development policy ! May be a threat to market oriented policies ?

The range of actions for rural employment: 

The range of actions for rural employment Broad based market oriented (growth) policies Investments in public goods for rural employment facilitation Labor market regulations Public employment (works) programs

High Diversity of policies & strategies to “create” employment to be expected…: 

High Diversity of policies & strategies to “create” employment to be expected… Approaches will be determined by Structural realities (assets; income levels) Political power of labor (urban, rural) Knowledge base for policy formulation and implementation Market functioning Initial conditions

What where? (1) Strategies in remote areas: 

What where? (1) Strategies in remote areas Emphasis on small scale agriculture that will fuel the diversification of the rural economy. Investments in: Roads Electricity and telecommunications at local levels Education and health Activation of financial and land markets

What where? (2) Strategies in agriculturally prosperous areas: 

What where? (2) Strategies in agriculturally prosperous areas Rural enterprises often involve overlapping institutional activities: Sub-contracting Sub-sectoral promotion Clustering Scope for Public Private Partnerships

Employment for poverty reduction: Linkages and program concerns: 

Employment for poverty reduction: Linkages and program concerns Source: Adapted from von Braun 1995 RESOURCES Capital Labor (Food-) cash Wages Organizations EMPLOYMENT PROGRAMS Program choices Implementation choices Employment Assets Household Income and Risk Insurance

Re-run of Public Employment Programs: a comeback? : 

Re-run of Public Employment Programs: a comeback? Not to be re-invented, but to be adapted Decentralization of gov. in the past 20 years can help better implementation now Role of community versus households in targeting (Africa) In need of innovations in program design (e.g combinations with conditional transfer programs?) Scope for experimentation and scaling up (the Chinese experience may matter for others)

Conclusions: so where, for whom, how to “create” employment?: 

Conclusions: so where, for whom, how to “create” employment? Urban ? Rural ? City? Town? Village? Women ? Men? Youth? Children? Services? Industries? Agriculture? Private- ? Public actions ? Skills ? Education? Finance ? Credit ? Innovation ? Technology? Infrastructure ?

Ways forward to expand non-farm rural employment: 

Ways forward to expand non-farm rural employment “Strategies” – but not general prescriptions New approaches for (public-private) partnerships Rural-urban linkages (ICT, infrastructure) Strengthened local government RNFE policy is knowledge intensive, filling the knowledge gaps requires multi-sector, spatial, and institutional data frameworks Sound research on “RNFE” … ESIRA