Comparative Analysis of Agricultural Labour Productivity and the Associated
Changes in the Sector of Production in Relation to Development Issues from
2000 to 2010 in Four Countries
Introduction
In 21st Century, labour market has become more competitive in every
sector of production. Along with the rise of technology that has played
important role in so many aspects such as economic activities, employers
preferably look for competent labour that are skilled and well trained one.
Not only in mining and manufacturing, but also in agriculture sector,
nowadays labours are forced to be able to work with the technological
advances. Besides the technological assets, some of the important inputs
are transportation (for the distribution) and environmental needs (water,
fertilizers, fertile lands).
Good inputs are essentially needed in the stage of production.
However, the better figure if there are more output with the less input.
Neoclassical economist, Ricardo, proves this: "innovation allowed a single
worker to produce more output per unit of time, which led to an increase in
wages and living standards".[1]
That is one of the illustrations if the labour productivity increased
together with technological intervention. However, when there is a
reduction in labour productivity along with the rise of unit labour cost,
it is going to be a problem as since there are only little profits. Indeed,
there might be a shortcoming for the profits but it does not always trouble
the economy. Taking a comment from CNBC's discussion on Productivity,
Jobless Claims & Unit Labour Costs, a guest provides a very good comment
that could enlighten my point. She argues that the notion of lower labour
productivity in accordance with the increase of wages is not necessarily
bad for the economy. It depends how it is distributed. When there is lack
of inflation, it is translating into higher salaries and higher purchasing
power for people, which is not necessarily bad.[2]
In accordance with that, not only technology, but also some factors
could increase labour productivity. Welfare services and employee welfare
could determine the labour productivity. To gain labour productivity, it is
essential to employers to equip their labours not only with machineries and
new technologies, but also by services for example insurances, additional
wages for overtime working hours, and compensation. Thus, the labours will
be highly motivated and it might increase the labour productivity.
In this essay I am going to analyse the labour productivity in
agriculture sector in four chosen countries: India, Indonesia, Philippines,
and Thailand. This essay is constructed into two sections. The first
section is about an explanation of labour productivity and its calculation
along with further data analysis from four examined countries from 2000 to
2010 period. Section two is about the discussion whether welfare could
boost labour productivity or not, or the other way around.
1. Labour Productivity
There are some aims in measuring productivity. Quoting from OECD report,
five objectives of productivity measurement include technology, efficiency,
real cost savings, benchmarking production processes, and living standards.
[3] Talking about the labour productivity in agriculture, it is interesting
to look at the role of technology in productivity, whether it helps
increasing the production stage or not.
Secondly, efficiency is another point of view to be observed. Full
efficiency is defined where a production process has achieved the maximum
amount of output that is physically achievable with current technology, and
given a fixed amount of inputs (Diewert and Lawrence, 1999).[4] I rise up
two divisions from efficiency itself. Those are labour efficiency and
technological (machineries) efficiency. The difference between both of them
is by maximizing or eliminating the workers in labour efficiency and
machineries in technological one.
Looking at the living standards could be placed as the third interesting
point. Productivity is the key indicator of long-run living standards. For
emerging countries, creating productive jobs for a growing labour force is
paramount in the struggle to eradicate poverty and improve living
standards.[5] However, there is an obstacle behind a growing labour force.
It is impossible to put all of the total population to be fitted as labour.
There have always been minimum ages and educational standards in order to
apply for a job.
Furthermore, the idea of lowering poverty does not necessarily translate
the decrease of unemployment rate. Another thought has been stressed.
Apparently, some of the economists do not quite satisfied when there is a
fall in unemployment rate. The reason behind this issue is due to how it is
calculated. Taking from Bloomberg Business Week, it is explained that:
The unemployment is calculated by adding up all the people who tell the
government surveyors that they cannot find work and dividing it by all the
people in the labour force-those either employed or actively looking.[6]
Thus, if people stop looking for a job, they are no longer counting as
unemployed. As a consequence, there is a drop in the unemployment rate.
Based on OECD manual statistics report, there are two kinds of output for
the measurement variables; those are gross output and value added. [7] In
terms of productivity itself, there are some types of productivities. It
could be labour productivity and capital productivity, which are single
factor productivity measures. Another one is the combination between
multiple factor productivity (MFP), so-called capital-labour productivity.
The simplest model is labour productivity because it is readable and
could be simply measured. According to the OECD glossary statistical terms,
labour productivity is defined as output per unit of labour input. [8]
Moreover, labour inputs are variable. Labour productivity could be counted
by using total number of hours worked in employment or total employment in
persons as labour input variants.[9]
Another OECD report leads me to the point that the choice of labour
inputs could make some changes in the final calculation of labour
productivity. The report suggests that by using the total number of working
hours as since it is more accurate. Nowadays the pattern of working is not
necessarily only full time works. Some people do part time job, which is
one of the reason why a simple headcount of employed persons can hide
changes in average hours worked.[10] However, because of the limit of the
data, I am using the alternative for this essay, which is total number of
employment as my calculation's variable.
The data that I am going to use for my analysis are including every
sector' growth of output and employment share (in order to know the
comparison between one to other sectors). Secondly are GDP output constant
prices for agricultural products, total number of employment, and exchange
rate for the purpose of assessing labour productivity itself. The third
part is household final consumption expenditure, inflation rate, health
expenditure, education enrolment on tertiary level, and workers'
remittances and compensation of employees, in order to know the employment
and welfare improvement. In order to simplify, the third part is being
provided in the section 2.
a. India
1. Growth of Output (%) in India
Overall, the agriculture output is fluctuated significantly for the
whole 10 years. From the chart, it could be seen that agriculture growth
output is the lowest growth, compared to the industry and services' output
growth. Even if it is compared to GDP growth, agriculture output growth is
still below GDP line in total except in year 2001 and 2003.
The least percentage of agriculture production leads to a question:
Does the small scale of agriculture output define the lowest number of
agriculture labours? Now it is important to have a look at the employment
data for further analysis.
"Year "
"Year "2000 "2001 "2002 "2003 "2004 "
"Country " " " " " "
"India "124213.133" " " " "
" "9 " " " " "
"Indonesia"1181.34005"1208.81253"1237.62037"1270.88936"1326.21593"
" "1 "7 "6 "3 "1 "
"Philippin"2131.80093"2087.67599"2129.15247"2202.64360"2263.21156"
"es "3 "5 "1 "4 "1 "
"Thailand "2430.49398"2423.67787"2482.70084"2605.23005"2654.47997"
" "5 " "2 "4 "7 "
"Year "2005 "2006 "2007 "2008 "2009 "2010 "
"Country " " " " " " "
"India "146347.7262 " " " " " "
"Indonesia"1371.376225 "1391.23380"1405.14483"1441.02143"1414.92911" "
" " "4 "7 "7 "4 " "
"Philippin"2295.184744 "2358.56811"2425.20517"2477.27641"2524.95535" "
"es " "9 "6 "9 "1 " "
"Thailand "2799.376953 "2742.64273"2738.19809"2794.85519"2699.15254" "
" " " "6 "8 "7 " "
14. Household Final Consumption Expenditure (agriculture household)[25]
Based on the data, it could be seen that India has the largest buying
power than from others. The result of this goes together with the labour
productivity. It might be predicted that the agricultural labour costs in
India is the highest among others too. It might be predicted if India has
low inflation, it is resulted that India has high wages in agriculture
sector.
15. Inflation Rate
It might be agreed that agricultural labours in India have high
income from 2000 to 2005 because of the stable inflation. The bad news is
due to heightened inflation rate from 2005 onwards.
Indeed, India performs well during the first half decade. However, in
this case, Thailand has better achievement because the labour productivity
is categorized as the lowest, however from the consumption expenditure
point of view, every agricultural household has high buying powers. It is
proven as well by the low rate of inflation from 2000 to 2010.
I might put Philippines at the third place. The argument is that it
has quite the same purchasing power, but the inflation rate is
approximately 50% higher than Thailand. So the wages is definitely lower
than Thailand and India.
At last, Indonesia has substandard performance in agriculture sector.
It seems that the labours in agriculture sector has not achieved the
welfare level. It is caused by labour's buying power that is not properly
adjusted with inflation rate. Following this, the number of labour
consumption expenditure is low whereas the inflation is quite high.
Consequently, it conducts to the illustration that the wages in agriculture
sector is quite small.
In addition to the labour welfare measurement, quoting from Reddy, it
is mentioned that the welfare measures like cheap food in canteens, free
medical and educational facilities etc. Indirectly increase the real income
of the workers. Hence they try to avoid industrial disputes, as far as
possible and do not go on strikes on flimsy grounds.[26] Sticking to that
argument, the data for health expenditure is also needed in terms of one of
the indicators for employment welfare.
16. Health Expenditure total (% of GDP)
From this chart, I still stick to previous rank that labour welfares
in India and Thailand are higher than in Indonesia and Philippines. This
data quite gives substance to Reddy's statement about welfare. Government
health expenditure could be one of labour productivity stimulators. The way
it is explained is that when there are more public health services, the
cost of health service might be cheaper. That is proven as well by the
inflation rate. Inflation itself indicates the increase in the general
level of prices.[27] So if it is looked from health services point of view,
India might be grouped as country that has good employment welfare, proven
that the highest of labour productivity in India resulted this argument.
Secondly, Thailand could be put in one group with India. The reason
is that the health expenditure, spent by government comes the second rank
after India. And the inflation rates are quite low for a decade.
Unfortunately the number of labour productivity is contrary to this
assumption because it remains low.
Meanwhile, Indonesia and Philippines are at the second group. In this
case, Philippines are an interesting country because it has different
employment share composition where there are more workers in service sector
than in agriculture and industry.
There might be case that income for other sectors (mining,
manufacturing, industry, and services) are higher than agriculture sector
in Philippines due to intelligence rate. For more explanation is on the
graph below.
17. Education Enrolment for tertiary level (%)
With the minimum information of the data set that is only available
from 2000 to 2003, yet still it could be seen the progression of education
enrolment. In Philippines, educated labours might prefer services and
industry sectors as their job field because they have skill and knowledge.
Looking at the employment welfare, agriculture labours in Philippines might
not be under welfare rate. Indeed the buying power is quite small but the
service expenditure by government is somehow subsidized well.
Intelligence as one of the labour welfare does not always indicate
the labour productivity. Relating to this, it is such a peculiar case for
Thailand because more people have higher education, but the labour
productivity is low. However it does not result the bad output. I am quite
sure that the other inputs help the agriculture production. Thus the
performance in growth output level is not too bad.
In order to increase labour productivity, employers should consider
some factors that could increase the motivation of the labours. This
includes wealth prosperity such as income; incentives for overtime working
hours, and compensations. Other aspect like social welfare needs is
importantly considered as well. In addition to this concrete action, it
would be better for the employers to give some appreciation to the workers
by giving some days off and reward if they could produce more than the
expected number of quantity.
So far, based on the World Bank website, Thailand has upper middle
income whereas others have lower middle income.[28]
18. Workers' remittances and compensation of employees (current US$)
Even though India has the same level of income with Indonesia and
Philippines, however there is a huge number of remittances and compensation
given for the labours. Additional money from remittances might be as
evidence that the labours' buying powers in India is the highest among
others. In contrast, Thailand has the lowest number of compensation, but it
does not mean that there is small employment welfare in Thailand because it
is still covered and balanced by the main income (referring to the World
Bank that Thailand is upper middle-income country).
At the same time, it is not surprising that Philippines has second
large number of workers' remittances and compensations. Like India, even
though Philippines is lower middle-income country, yet by having quite high
number of additional money, they could spend it for education as it is
proven that educational rate for tertiary level is second biggest after
Thailand while in Thailand, the number of people who attend tertiary
education level is significantly huge. This is such an evidence of Thailand
that has good welfare improvement.
Unfortunately, Indonesia does not really have good income for the
labours, especially to those who work in agriculture sector. Besides it has
small amount of remittances and compensation, Indonesia is also one of
lower middle-income country. Therefore there is only small total amount of
labour incomes. It is proven by the smallest amount of labours' purchasing
powers, the high inflation, and the small number of people who attend
tertiary level of education from 2000 to 2010.
Another factor that also important is packed in social-psychological
factor, which is included interpersonal cohesion factor, conflict factor,
psychological climate factor, work satisfaction factor, reciprocity factor,
factor of formal confidence and non-formal leader of the group, and labour
fluctuation factor.[29] Also, there is a need of social control in order to
make the labours to know their responsibilities.[30] Moreover it would be
better if the social control exercises very well in combating any
corruption form both from employers and employees whether it is material or
non-material corruption.
Conclusion
In the light of the above, India performs very well in labour
productivity, followed by Philippines, Thailand, and Indonesia. Indeed,
employment welfare improvement could be the indicator of high number of
labour productivity, for example in India. However, it does not always work
like that if it is glimpsed from Thailand as a case example where it seems
that there is a labour welfare in Thailand but in contrast labour
productivity in Thailand is grouped as one of the lowest instead of
Indonesia.
In fact, there are more other factors that play significant roles in
terms of increasing labour productivity. One of the examples is training
and coaching, [31] in order to have better quality and more skilled
labours. Another good factor is capital deepening[32] such as machineries
and traction for agriculture sector in order to be able to reach the
efficiency and allow workers to produce more number of outputs. Moreover
the needs of social control is important for the purpose of bringing the
ideal condition such as a good relation in between employees and employers,
responsibility awareness from labours, and free from material and non-
material corruption.
B I B L I O G R A P H I E S
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-----------------------
[1] (Saint-Paul, G. 2008: viii)
[2] CNBC on Productivity, Jobless Claims, and Unit Labour Costs
[3] (Measuring Productivity: measurement of aggregate and industry-level
productivity growth in OECD Manual. 2001. Page 11-12)
[4] (ibid. page 11)
[5] (Sparreboom, T, et. al. in Monitoring MDG Employment Indicators.2011
International Labour Organisation paper.page 14)
[6] Coy, P. 2011. The Unemployment Rate Drops, but Economists Aren't
Smiling in Global Economics. Bloomberg Business Week, December 12, 2011
[7] (Measuring Productivity: measurement of aggregate and industry-level
productivity growth in OECD Manual. 2001. Page 13)
[8] OECD Glossary Statistical Terms
[9] (Freeman, R, in OECD Statistics Directorate, Division of Structural
Economic Statistics. Page 15)
[10] (Freeman, R, in OECD Statistics Directorate, Division of Structural
Economic Statistics. Page 5)
[11] GDP is constant price in billion Rupees and number of employment in
thousand.
[12] In the section of "Investing in Food Security"
[13] Kumar, C. A, et. al. A case study of India: Water and Population
Dynamics in a Rural Area of Tumkur District, Karnataka State.
[14] GDP is constant price in trillion Rupiahs and number of employment in
thousand.
[15] (Boopen, S. in The Empirical Economics Letters, Vol. 5, No. 1, 2006.
Page 41)
[16] Indonesia: Market Development and Access Strategy 2011/2012 in
Department of Primary Industries.
[17] GDP is constant price in billion Pesos and number of employment in
thousand.
[18] (Briones, N. D. in Asian Journal of Agriculture and Development, Vol.
52 No. 1&2. Page 69)
[19] Philippines- Agriculture in Encyclopaedia of the Nations.
[20] Agricultural job is seasonal job. Therefore, people try to find the
fixed job.
[21] GDP is constant price in billion Baht and number of employment in
thousand.
[22] Poapongsakorn, N. in the section of "Part 2: The decline and recovery
of Thai agriculture: causes, responses, prospects and challenges"
[23] Exchange Rates (Units: National Currency per SDR)
[24] From online business dictionary
[25] In constant 2000 US$
[26] (Reddy, R. J. 2004: 6)
[27] (Bannock, G. et. al. 1998: 205)
[28] World Bank Country Data
[29] (Akhmetova, s. et. al. in Bilig, Ahmet Yesevi University Board of
Trustees, No. 31. Page 42)
[30] ibid.
[31] Productivity Growth: Factors that Increase Labour Productivity
[32] ibid.
