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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
3A.Dorward: May 2008
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.
4A.Dorward: May 2008
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?
5A.Dorward: May 2008
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
6A.Dorward: May 2008
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
7A.Dorward: May 2008
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
8A.Dorward: May 2008
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
9A.Dorward: May 2008
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
10A.Dorward: May 2008
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%
11A.Dorward: May 2008
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
12A.Dorward: May 2008
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
Proportionate loss 1 adult labour & MK1600
ha/h
h
Large
Assets
Borrow
PoorM
PoorF
Employed
Remitted
Mean
13A.Dorward: May 2008
‘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
Proportionate loss 1 adult labour & MK1600
ha/h
h
Large
Assets
Borrow
PoorM
PoorF
Employed
Remitted
Mean
14A.Dorward: May 2008
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
Proportionate loss 1 adult labour & MK1600
ha/h
h
Large
Assets
Borrow
PoorM
PoorF
Employed
Remitted
Mean
15A.Dorward: May 2008
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
Proportionate loss 1 adult labour & MK1600
Hou
rs /
year
Large
Assets
Borrow
PoorM
PoorF
Employed
Remitted
Mean
16A.Dorward: May 2008
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
Proportionate loss 1 adult labour & MK1600
Hou
rs
Large
Assets
Borrow
PoorM
PoorF
Employed
Remitted
Mean
17A.Dorward: May 2008
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
Proportionate loss 1 adult labour & MK1600
Hou
rs /
year
Large
Assets
Borrow
PoorM
PoorF
Employed
Remitted
Mean
18A.Dorward: May 2008
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
Proportionate loss 1 adult labour & MK1600
Hou
rs /
year
Surplus
Hire in
Hire out
19A.Dorward: May 2008
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 ???
20A.Dorward: May 2008
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%
21A.Dorward: May 2008
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%
‘Bereaved’ 68% 68%
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%
22A.Dorward: May 2008
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%
‘Bereaved’ 65% 65%
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%
23A.Dorward: May 2008
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?
24A.Dorward: May 2008
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