Academic journal article African Studies Quarterly

Determinants of Rural Labor Market Participation in Tanzania

Academic journal article African Studies Quarterly

Determinants of Rural Labor Market Participation in Tanzania

Article excerpt

Abstract: Participation in rural off-farm activities (outside a household's own farm) is one of the livelihood strategies among poor rural households in many developing countries. One component of off-farm activities accessible to the very poor is wage labor because it does not require any complementary physical capital. A household's ability to participate in the rural labor market depends on the characteristics of the household itself and the local labor markets conditions. This study examines the factors that determine the number of households supplying labor to a particular rural local labor market in rural areas of Tanzania and the share of labor income in total cash income. The study finds that education level, availability of land, and access to economic centers and credit are the most important factors in determining the number of households that participate in a particular rural local labor market and the share of labor income in total cash income.

MOTIVATION

Many studies show that participation in rural labor markets is an important strategy for poverty alleviation and food security in developing countries. (1) In Sub-Saharan Africa, rural households commonly depend on off-farm sources for 30-50 percent of their income. (2) Defined in terms of function, off-farm employment has two major components, namely wage employment and self-employment. (3) The component of rural off-farm employment, in which the poor can participate because it does not require any complementary physical capital, is wage labor (i.e. to supply their labor for wage in the rural labor markets). A corresponding Kiswahili saying goes: "mtaji wa maskini ni nguvu zake mwenyewe," which translates "the asset of the poor is his/her labor power." The report on Tanzania's Household Budget Survey (HBS) of 2000/01 shows that the poverty rate of the households that participated in the rural labor markets were slightly lower than those which did not. However, the most recent national Labor Force Survey (LFS) in Tanzania shows that only 11 percent of the poor households participated (supplied labor) in the rural labor markets in 2000/01. (4)

Studies elsewhere have shown that the capacity of households or individuals to participate in rural off-farm activities varies significantly across countries and within countries. In their analysis of 100 farm household studies, Reardon et al. in 2001 find that this variation is partly due to high entry barriers to certain rural off-farm activities, which makes certain activities accessible only to higher income groups. (5) The 'entry barrier' hypothesis is particularly important in the case of off-farm self-employment. For the poor rural wage labor supplier, however, the main problem is the availability of wage employment in areas close to his/her homestead. In other words, with high entry barriers in off-farm employment such as off-farm self-employment, very poor households have no other option but to participate in rural off-farm wage employment, which in turn is only possible if there is sufficient demand for their labor nearby.

Thus, concerning these very poor households an important policy question arises: what factors determine the total participation of individuals/households in the rural labor markets? Equally important is the question of factors that determine the share of labor income in total income. Few studies of rural labor markets in Africa focus on the nonfarm sector. although wage employment can be provided by both farm and non-farm sector. (6) Furthermore, these studies concentrate on the individual/household level. However, the proponents of the importance of "spatial targeting" for poverty reduction argue that most micro-policies first target particular areas/locations and then households located therein. (7) This paper answers the question of what determines the number of households in a village that participate in the rural labor market and the share of income derived from these markets (in the households total cash income) using a modified farm household model, aggregated to the village level. …

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