Asia's rural pay rise

11 Oct, 2014 01:00 AM
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As low labour costs cease to be a domestic advantage, opportunity emerges for other countries

WAGES for rural workers are rising in parts of Asia, with implications for how agriculture is conducted there, and for food imports and manufacturing.

As wages rise, reports Overseas Development Institute (ODI), a London-based think-tank on development issues, local food production becomes more expensive, opening up opportunities for other countries to supply food.

Other implications are that agricultural workers, who tend to have very low incomes, will be lifted out of extreme proverty; and that the flow-on effects in economies like China will drive some parts of the manufacturing sector to other parts of Asia or Africa.

“The tag of 'workshop of the world' has shifted from one place to another over the last 250 years since the industrial revolution began,” ODI research fellow Steve Wiggins told Fairfax.

“It would be odd to imagine that China has inherited that title for all time. There are plenty of Chinese who would correct me and say 'sweatshop of the world', then add that they cannot wait to see China advance along the Korean path of creating a knowledge economy and moving the sweatshops offshore.”

Economic growth centred on urban areas has drained Chinese agriculture of about 80 million workers over the past 20 years. Consequently, rural workers have become more valued - although in first-world terms, that’s not saying much.

In 1998, the average daily wage for a rural worker across five Chinese provinces was US$3.02. By 1997, it was $7.18, a 137 per cent rise. Female workers enjoyed a 139pc rise, to $5.51 a day.

Across most of the Asian countries that ODI surveyed, daily wages were less than US$5 a day. Only in certain sectors in Malaysia and Korea were they more than $10 a day, a rate at which Asian workers can be considered “comfortably out of poverty”.

As the ODI report, Rural Wages in Asia put it, at $5 per day, “if a worker were employed for six days a week, year round – a strong assumption, when so much rural work is seasonal – then annual wage earnings would be $1,560”.

Even if the wages rises per person are modest, across China’s 480 million rural workers, in a nation of rapidly-rising affluence in general, these shifts could have momentous effects, ODI suggests.

One is the inevitable rising cost of food production, leading to rising food prices on one hand, and greater use of technology on farms on another.

Dr Wiggins said it might also lead to larger farms, although this trend hasn’t yet been observed. One reason might be that even though members of a farming family have gone to a city to earn better wages, their land still represents security that they are reluctant to part with.

As workers become more secure in their off-farm earnings, Dr Wiggins expects this to change. “After all, trying to make a living off a one hectare plot is a hard life: not many would choose this if they had an alternative.”

As low labour costs cease to be a domestic advantage, opportunity emerges for other countries to supply food, albeit against political constraints.

“As costs of production rise in Asia, then increasingly the regional preference for self-sufficiency in staples will come under scrutiny,” Dr Wiggins said.

“Whether any of the really big countries will ditch this is anybody's guess. Japan has stuck to its guns on rice with fierce determination; its consumers seemingly quite prepared to pay miles over the odds for local rice.

“But we know that when it comes to some other products, with vegetable oils and animal feed prominent, Asia has given up on any pretence that these can be produced at home: hence the massive flows of soybeans from South America to China and other Asian countries.”

Dr Wiggins said the debate about imports is underway in countries like India, but the result is hard to forecast, “pitting as it does increasingly confident farm lobbies against frustrated consumers, and set within received wisdoms that still make large-scale staple food imports unthinkable”.

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FarmOnline
Matthew Cawood

Matthew Cawood

is the national science and environment writer for Fairfax Agricultural Media

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Recognise but gouge them (the growers) and maximise returns to shareholders! If growers fall
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All Labours fault. Yet water buy backs closed over subscribed. Surly the point of this story
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We have been through this before. Whole of life tracability is a nonsense based on fantasy.