Chapter IV. Rural Employment

Transcription

1 69 Chapter IV. Rural Employment The policies aimed at liberalizing agriculture under the conditions of insufficient investment and deteriorating productive infrastructure resulted in excess employment, low productivity, isolation of agriculture and the rural population from the rest of the economy, and widespread subsistence-level farming. Although employment rates of the rural population are high, total income from agriculture for most households is low, and underemployment determined by seasonality of agricultural activities is a serious problem. The prevailing rural economics are a result of survival strategies accompanying economic reforms. In the long run, an agriculture that is poor in investment and capital can hardly be sustainable and competitive, even in the internal markets. An increase in labor productivity in agriculture, and relevant labor shedding are prerequisites for transforming from subsistence farming to agricultural business. To maintain the high employment rates in villages, more nonagricultural jobs in rural settlements should become available. This would lead to better integration of the rural population in the economic life of the country and to diversification of the sources of their income. Also, labor mobility of the rural population should increase Output and Employment in Agriculture In Armenia, during , the number of people employed in agriculture and forestry increased from 289,000 to 507,600. (CIS STAT 1994; NSS 2005c; Like in many other countries in the region, transfer of a substantial percentage of the nonagricultural labor force to agricultural activities, following the collapse of collective and state farming, land privatization, and formation of the small rural farms, was for many households the main coping strategy for cushioning the blow of the transition. 33 This resulted in about a twofold increase of employment in agriculture, compared with the pre-reform period. 34 Such trends have also been caused by loss of employment in other activities in villages, and by out-migration from the cities in Armenia and from other Commonwealth of Independent State countries to rural areas. Table 4.1. Number of Farms and the Total Area of their Privatized Agricultural Lands Number of Farms, 1,000 Hectares (end-year data) Agricultural Land Area of Farms, 1,000 Hectares Average Agricultural Land Area per Farm, Hectares Armenia has implemented one of the most comprehensive land reform programs in the Former Soviet Union states. Land reform was initiated in 1991, and by mid-1994, most of the agricultural land had been privatized (see World Bank 1995a). 34 A drop in agricultural employment and a corresponding increase in labor productivity in 2002 compared with 2001 (from 570,000 to 500,800 for employment, and from 57.9 percent to 68.5 percent for productivity, measured as an index in which 1990 = 100) is explained by revisions in employment estimates based on the 2001 population census data. The 1990 data also include employment in fishery.

2 70 Agricultural Value Added, of GDP Source: National Statistical Service and authors calculations. Over the last 15 years the output dynamics in agriculture were less volatile, and the drop in agricultural production was the smallest compared to other sectors of the economy. The lowest output was reported in 1993 when the volume of agricultural value added comprised about 84.3 percent of the 1990 level. The pre-transition level of total output in agriculture was already achieved in As of 2004, the total agricultural output accounted for 142 percent of the 1990 level. On the other hand, adjustments in labor income from agriculture were more dramatic. As of 1994, income from agricultural activities, in real terms, comprised about 5 percent of the 1990 level; by 2004, labor income still remained relatively low at 31 percent of income in 1990 although they have increased about sixfold compared to 1994 (Figure 4.1). Figure 4.1. Dynamics of Value Added, Employment, Labor Income, and Productivity in Agriculture, (1990 = 100) Labor productivity Value added in agriculture Employment Labor incomes Source: National Statistical Service and authors calculations. In 1994, labor productivity in agriculture was only 51 percent of the 1990 level, and in 2004 it was only 81 percent of the 1990 level. These developments, while helping to keep agriculture afloat and making it the largest economic sector in the Armenian economy, in terms of the number of people employed, resulted in an increase of labor intensity and a corresponding decrease of capital intensity (in terms of both fixed assets and working capital), but led to a sharp drop in productivity in the early 1990s. Also, a significant part of agricultural activities is subsistence farming, resulting in a dramatic decline of the levels of commercialization and monetization of agricultural production of

3 71 small farms, which are currently responsible for more than 95 percent of agricultural output. 35 Agricultural farms are taxed by a land tax and farmers are exempt from other taxes. 36 However, within the framework of Armenia s post-world Trade Organization accession obligations, the existing value-added tax exemptions for agricultural products should cease to exist as of January 1, The government is providing subsidies covering part of the cost of irrigation water supply. There is also a small and diminishing amount of grant-based provision of seeds, fertilizer, and fuel to farmers at subsidized prices. (See Annex Table 15). Strata Table 4.2. Employment-to- Ratio and Employment Status by Stratum, Percent Employmentto- Ratio (proportion of population aged 15+, that is employed), Total, Employed Aged 15+ Collective Enterprise Member Other Employment Status, Employee Employer Self- Selfemployeloyeemp- in in Family Nonfarm Farm Business Stratum Stratum Stratum Stratum Stratum Total The Rural Employment Survey 2005 confirms significantly higher rates of employment in rural areas compared to the general population. 37 The employmentto-population ratio of population aged 15 and older was 78.8 percent (Table 4.2 and 4.3). Gender differences in rural employment are somewhat less pronounced, but the 35 According to official data, in 2002, the level of commercialization of agricultural production was about 56 percent, whereas the level of monetization (that is, excluding barter trade and incomes in kind) was about half of the commercialization levels. According to the results of the Rural Employment Survey 2005, the level of commercialization is even lower. 36 In 2003, the land tax comprised 0.9 percent of total tax revenues of the Armenian consolidated budget, or 0.6 percent of agricultural value added. 37 The Rural Employment Survey was conducted during June July 2005 on a sample of 2,000 rural households, representative on the national level and by agro-economic zones. To ensure the heterogeneity of the sampled, proportionate stratified sampling was done, and 5 strata of population were designated according to the degree of vulnerability of the rural population with regard to agricultural production and marketing based on the following characteristics/indicators of the country s rural population: (a) altitude above sea level of the population s residence; (b) population residence distance from Yerevan; (c) population residence distance from the capital city of the district; (d) size (number of population) of the residential community; and (e) agro-zone of the residential community. The highest strata reflect the leastfavorable farming conditions. (See Annex Table 16).

4 72 employment rate for men is 9.1 percent higher than for women (83.7 percent for men compared to 74.6 percent for women). Survey data on employment by sector indicate that 81.2 percent of the employed in rural areas were working in the agricultural sector, and the predominant form of rural employment (80.5 percent of the total) was agricultural self-employment on privately owned lands. Overall, 63.5 percent of the population aged 15 and over at the time of the survey were self-employed in the agricultural sector. Only 1.4 percent of rural residents aged 15 and over was involved in non-farm selfemployment. Analysis of employment by age group also reveals some interesting patterns. Employment-to-population ratios are the smallest in age groups and 65 and older (61.6 percent and 64.3 percent, respectively). Employment in age groups and 65 and older is predominantly agricultural self-employment on private farms (90.8 percent and 95.6 percent, respectively). Notably, the employment rate of older workers, including at retirement age, is very high. In the prime age group of 35 54, employment is more differentiated. The share of the employed in this age group is the highest, at 93.8 percent, and agricultural self-employment accounts for around 66 percent of the total employed. Hired employees had relatively larger representation (25 percent of total employment at that age group), followed by non-farming self-employment (2.2 percent), and employers (0.4 percent) (Figure 4.2). Figure 4.2. Employment by Age Group, Percent of Employed including self-employed in family farm Due to the seasonal nature of agricultural production, secondary employment is an important characteristic of rural employment, and 15.7 percent of respondents aged 15 and older also had secondary employment. These were mainly people whose main employment was hired employment or non-farming self-employment. The majority of those with secondary employment (98.3 percent) consider agricultural self-employment in private farms as secondary. The remaining employment statuses have a very small

5 73 representation. Only 0.8 percent of those with secondary employment were involved in non-farming self-employment, and only 0.6 percent were hired workers, indicating that jobs other than in agriculture are very limited in rural areas. Rural employment is largely seasonal, temporary, or occasional. Nearly half of rural residents aged 15 and older are underemployed, due to involuntary factors such as the seasonal nature of farming, while around 33 percent of those currently employed would prefer to have full-time employment instead of their current work arrangements. (Annex Table 17). The unemployment rate in rural areas is low. Given that the survey was conducted inseason (during June July 2005), the unemployment rate of the population aged 15 and older was only 0.9 percent. The low unemployment rate arguably corresponds to the acknowledged (official) methodology for calculating rural employment, according to which working-age people owning usable agricultural land are considered employed. This approach, however, does not take into account the underemployment inherent in agricultural activities. Considering that the employed are mainly involved in the agricultural sector and their employment is seasonal, the unemployment rate was further recalculated through the use of the underemployment data, and the adjusted annual average unemployment rate in rural areas amounted to 14.1 percent. 38 The rate increases in parallel to the increase in vulnerability of surveyed households constituting 17.1 to 17.3 percent for the most-vulnerable strata, compared to 9.5 percent for the leastvulnerable strata. Table 4.3. Economic Activity and Unemployment by Age Group, June July 2005 Age Groups Employ- ment-to- Ratio, Non-employed, of Total Unemployed, of Total Economically Active (employed + unemployed), Economically Inactive, Unemployment Rate, Adjusted Unemployment Rate, Total In the 2001 population census, 100,800 rural unemployed were registered, or 16.9 percent of the economically active population aged 15 and older (NSS 2003).

6 Landownership and Land Use In most rural households, 97.6 percent of the respondents had privately owned, leased, or other useable agricultural land. The remaining 2.4 percent of households were landless. The average rural household has 1.45 hectares (ha) of land, of which 1.3 ha is privately owned and 0.15 ha is leased. About 97 percent of households have privately owned land, while 10.5 percent of households leased land. The majority of households with leased lands (95 percent) also have privately owned lands. For the leastvulnerable strata (mainly Ararat valley), the average size of households lands is about four to five times smaller than that of the most-vulnerable strata. The average size of agricultural land per household increases in parallel to the increase in vulnerability ranking (correlation coefficient of 0.96; see Figure 4.3). Rural households cultivate on average 84 percent of their agricultural land, or 1.2 hectares. In the first three strata (least vulnerable), the average household cultivates on average 88 percent of its agricultural land, compared to 80 percent in the last two strata. Considering that the size of land per household is significantly smaller in the leastvulnerable strata, as a rule, small land plots are used more intensively. Households that do not entirely cultivate their land explain the underuse of land mainly by shortage of irrigation (21.2 percent), poor quality of land (14.2 percent), financial constraints (13.9 percent), and large distances between the agricultural plot and their residence (11.3 percent). 39 Figure 4.3. Average Size of Agricultural Land per Household, Hectares Strata 1 Strata 2 Strata 3 Strata 4 Strata 5 Average land area per household Privatly owend Leased A vast majority of households, 95.8 percent of the respondents, were involved in production of crops, and 64.9 percent in animal husbandry. The share of households involved in animal husbandry is larger among the most-vulnerable strata. Data on levels of marketability reveal that the average household sells for cash or barters 53.1 percent of 39 In the entire survey cluster, the shortage of irrigation water was mentioned as the cause of underuse of land by only five percent of households.

7 75 its crop production and consumes slightly less than half (46.9 percent) in the household itself. But levels of marketability of crops vary widely. Watermelon, melon, vegetables, and grape have the highest level of commerciality (on average 82 percent). Wheat, barley, and fodder crops produced are mainly used for own consumption in households and farms (average level of commerciality is 26.8 percent). Considering that the major part of the cultivated land in the most-vulnerable strata is allocated to those crops, it can be assumed that the average level of marketability of crops produced in these strata should be very low. Around 80 percent of farms involved in animal husbandry had produced some kind of animal products within the 12 months preceding the survey, the most widespread of which were milk and eggs, but the marketability of those products is very low Income from Agriculture Household total income from agriculture is, in general, low. The total monthly income of the average household from crop production amounted to around 22,000 drams, 46 percent of which was monetary income (Annex Table 18). The total monthly income from crop production per 1 hectare of land declines in parallel to the increase in vulnerability. In strata 1 and 2, it amounts to an average of 32,000 drams per hectare, compared to 13,000 drams in the two most-vulnerable strata. The average monthly income from livestock production per household (including own consumption in household/farm) was 15,300 drams (Annex Table 19). Table 4.4. The Average Monthly Income from Agricultural Activity (crop production, animal husbandry, processing) per Household, Drams Average Monthly Income from Agricultural Activity per Household (including own consumption in household) Income from Production Sold Of Which: Estimate of Own Consumption Average Monthly Income from Agricultural Activity per Hectare of Land Income from Production Sold as Share of Total Estimated Income, Stratum 1 30,897 15,905 14,992 50, Stratum 2 33,629 20,763 12,866 49, Stratum 3 40,714 13,622 27,092 31, Stratum 4 46,000 15,156 30,844 29, Stratum 5 80,632 23,947 56,684 31, Total 44,435 16,583 27,853 36, The average total monthly income per household (including consumption within the household) from crop production, animal husbandry, and processing of agricultural products amounts to around 45,000 drams per month. This is comparable to the average wage in the country of 43,400 drams per month in The major part of the output, or 62.7 percent, is directly consumed in the household and the farm to meet their own needs (see Table 4.4). The total income of the least-vulnerable strata is 2.6 times larger compared to the most-vulnerable strata. In the more-vulnerable strata, the major