school of oriental & african studies

1

LABOUR MARKET AND WAGE IMPACTS OF HIV/AIDS IN RURAL

MALAWI

Andrew Dorward, Idrissa Mwale & Rosalba Tuseo

School of Oriental & African Studies

May 20, 2008, LIDC

2A.Dorward: May 2008

Summary & outlinePreliminary study of HIV/AIDS morbidity & mortality impacts on rural economies in Malawi, direct & indirect effects (through labour & non-tradable markets)

1. Core questions: impact of HIV/AIDS epidemic on wages? if it depresses labour demands more than it

contracts labour supply• lower wage rates damage livelihoods of all poor

households. • labour saving enterprises & technologies could

be disastrous for the healthy poor. 2. Household livelihood models investigate direct impacts

of HIV/AIDS morbidity and mortality. 3. Aggregate partial equilibrium informal rural economy

model investigates direct & indirect impacts of HIV/AIDS morbidity & mortality

4. Conclusions


Disaggregated analysis of impacts of HIV/AIDS

RURAL ECONOMY

EXTERNAL ENVIRONMENT

HIV/AIDS

Different impacts on different

households?

Different responses by

different households? Systemic

local market &

environment impacts etc?

Systemic impacts of HIV/AIDS not easy to study Wages & food prices particularly important, affect

households directly affected by HIV/AIDS the poor, even without any sick or deceased

members.


Wage impacts: alternative hypotheses

Market labour demand falls, supply increases: wages fall?1. poor affected households hire out more labour to

meet urgent cash needs2. reduced demand for unskilled on-farm labour

among less poor affected households • unable to finance labour hire from savings,

semi-skilled or skilled employment, remittances • reductions in family labour & capital shortages

cause shift out of labour demanding cash crops 3. non farm labour demand falls as local demand for

goods & services is reduced by depressed incomes4. increases in poverty incidence & severity increase

unskilled labour supply into the market

Contractions in labour force raise wages?


Methodology: Investigate direct and indirect impacts

Household typology Household livelihood models Aggregation of household models to partial

equilibrium ‘informal rural economy model’ HIV/AIDS morbidity & mortality scenarios Impacts

household welfare & activities wages


Non-Linear Programming Livelihood model 7 household types in major zone, standard model

structure, varying resource endowments Seasonality: in prices, labour, capital (cash,

maize), activity demands for labour/ inputs, (4 periods)

Resources: initial cash and maize, land, seasonal labour (skill classes)

Activities: various crops & technologies (subsistence, cash), unskilled & semi-skilled non-farm activities

Imperfect input & output markets/ transaction costs: price wedges

Risks: consumer & producer price risk LES calorie, cash & leisure consumption by period


Maize price change impacts: production

3.6a Maize production (indexed to base)

0.0

0.5

1.0

1.5

2.0

0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

Maize price proportion of base

Inde

x (k

g/hh

)

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


3.6e Real Net Income/ Capita Indexed to Base

0.8

0.9

1.0

1.1

1.2

1.3

0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5

Maize price as proportion of base

Ind

ex (

MK

/cap

)

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean

Maize price change impacts: income


3.6f Calories Consumption Indexed to Base

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

0.5 0.7 0.9 1.1 1.3 1.5Maize price as proportion of base

Ind

ex (

KC

als/

hh

)

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean

Maize price change impacts: calorific consumption


IRE

‘Sick’ households: 40% labour loss & expenditure increase

Morbidity/ mortality scenariosHousehold impactsMorbidity: varying % loss of 1 unskilled adult female or 1

skilled adult male labour & increase of 1600MK expenditure

Mortality: Loss of unskilled female or skilled male labour & consumption, MK800 pre-season cash reduction

IRE Scenario ‘Healthy’ household

s

‘Sick’ household

s

‘Bereaved’

households

Base 100% 0 0

A 90% 10% 0

B 80% 20% 0

C 70% 20% 10%

D 60% 20% 20%


Net income per capita

Net Income per capita

0

1000

2000

3000

4000

5000

6000

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1

Proportionate loss 1 adult labour & MK1600

MK

/cap

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


Cultivated area

Cultivated area (ha/hh)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


ha/h

h

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


‘Local’ maize area

Local Maize Area

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


ha/h

h

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


Hybrid maize area

Hybrid Maize Area

-0.10

0.10.20.3

0.40.5

0.60.70.8

0.91

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


ha/h

h

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


Farm labour, Nov-Jan

Farm Labour Nov-Jan

0

200

400

600

800

1000

1200

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


Hou

rs /

year

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


Unskilled labour hire out, Nov-Jan

Labour Hire Out Nov-Jan

-200

0

200

400

600

800

1000

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


Hou

rs

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


Unskilled labour hire, Nov-Jan

Labour Hire In, NovJan

0

100

200

300

400

500

600

700

800

900

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


Hou

rs /

year

Large

Assets

Borrow

PoorM

PoorF

Employed

Remitted

Mean


Unskilled farm labour surplus, Nov-Jan

Labour Surplus Nov-Jan

0

100

200

300

400

500

600

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1


Hou

rs /

year

Surplus

Hire in

Hire out


Wage impacts: alternative hypotheses

Market labour demand falls, supply increases: wages fall?1. poor affected households hire out more labour to meet

urgent cash needs NO2. reduced demand for unskilled on farm labour among less

poor affected households YES unable to finance labour hire from savings, semi-

skilled or skilled employment, remittances YES

reductions in family labour & capital shortages cause shift out of labour demanding cash crops YES

Overall farm labour surplus falls slightly3. non farm labour demand falls as local demand for goods

& services is reduced by depressed incomes ???4. increases in poverty incidence & severity increase

unskilled labour supply into the market ???


IRE results: only unskilled labour affected

Scenario A B C DAll households’ real income

All 98% 97% 94% 91%

‘Healthy’100% 100% 100% 100%

‘Sick’ 84% 84% 84% 84%

‘Bereaved’ 69% 69%Poor male & female head households’ real income

All 98% 96% 93% 89%

‘Healthy’100% 100% 100% 100%

‘Sick’ 79% 79% 79% 79%

‘Bereaved’ 68% 68%

Fallow area195% 291% 367% 443%

Local maize area 98% 96% 94% 91%

Hybrid area 99% 98% 95% 92%

Tobacco area 98% 97% 91% 84%Skilled labour exports (value)

101% 102% 103% 104%

Unskilled labour exports (value) 98% 96% 89% 82%


IRE : skilled & unskilled labour affected

A B C DAll households’ real income

All 98% 96% 91% 87%‘Healthy’ 100% 100% 100% 100%‘Sick’ 79% 79% 79% 79%

‘Bereaved’ 56% 56%Poor male & female head households’ real income

All 98% 96% 93% 89%‘Healthy’ 100% 100% 100% 100%‘Sick’ 79% 79% 79% 79%


Fallow area 195% 291% 367% 443%Local maize area 98% 97% 95% 94%

Hybrid area 98% 96% 90% 83%

Tobacco area 99% 98% 98% 98%Skilled labour exports (value) 94% 88% 74% 59%Unskilled labour exports (value) 103% 105% 107% 109%


IRE : skilled & unskilled labour affected, 95% wage

Scenario A B C DAll households’ real income

All 97% 95% 91% 86%‘Healthy’ 99% 99% 99% 99%‘Sick’ 78% 78% 78% 78%

‘Bereaved’ 54% 54%Poor male & female headed households’ real income

All 95% 93% 89% 86%‘Healthy’ 97% 97% 97% 97%‘Sick’ 75% 75% 75% 75%


Fallow area256% 345% 415%

485%

Local maize area 96% 94% 93% 92%

Hybrid area 90% 89% 83% 77%

Tobacco area108% 106% 106%

105%

Skilled labour exports (value) 95% 90% 75% 61%Unskilled labour exports (value) 90% 92% 95% 97%


Discussion Hypotheses 2 & 3 supported: HIV/AIDS can lead to

1. reduced demand for unskilled on farm labour among less poor affected households as• unable to finance labour hire• shifting out of labour demanding cash crops

2. non farm labour demand falls as local demand for goods & services is reduced by depressed incomes

Overall loosening of labour market can cause wage falls • healthy poor suffer• increased inequity• labour saving technology impacts?• Food price impacts - & knock on effects ?

Validity of the model & scenarios? Further research? Immediate policy?

High risk factors & areas? Diversity? Policy responses?


Further information

Contact [email protected] See:

Dorward, A., I. Mwale, R.Tuseo. (2006 ) Labour market and wage impacts of HIV/AIDS in rural Malawi. Review of Agricultural Economics 28:429-439

Dorward AR and Mwale IM (2006) Labor Market and Wage Impacts of HIV/AIDS in Rural Malawi pp 75-96 in Gillespie, S. (ed.) 2006. AIDS, poverty, and hunger: Challenges and responses. Highlights of the International Conference on HIV/AIDS and Food and Nutrition Security, Durban, South Africa, April 14–16, 2005. Washington, D.C.: International Food Policy Research Institute (http://www.ifpri.org/pubs/books/oc50/oc50.pdf)

25

LABOUR MARKET AND WAGE IMPACTS OF HIV/AIDS IN RURAL

MALAWI

Andrew Dorward, Idrissa Mwale & Rosalba Tuseo

School of Oriental & African Studies

May 20, 2008, LIDC

school of oriental & african studies

Documents

labour market

labour hire

labour inputs

labour force

public investmentsa

farm labour demand

unskilled labour supply

wage impacts of hivaids