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THE CHANGING ROLE OF NON-FARM ACTIVITIES

IN AGRICULTURAL HOUSEHOLDS IN INDONESIA:

SOME INSIGHTS FROM THE AGRICULTURAL

CENSUSES

Anne Booth

To cite this article: Anne Booth (2002) THE CHANGING ROLE OF NON-FARM ACTIVITIES IN AGRICULTURAL HOUSEHOLDS IN INDONESIA: SOME INSIGHTS FROM THE

AGRICULTURAL CENSUSES, Bulletin of Indonesian Economic Studies, 38:2, 179-200, DOI: 10.1080/000749102320145048

To link to this article: http://dx.doi.org/10.1080/000749102320145048

Published online: 17 Jun 2010.

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ISSN0007-4918print/ISSN1472-7234online/02/020179-22 ©2002Indonesia ProjectANU INTRODUCTION

The25yearsfrom1970to1995witnessed dramaticchangesintheroleofagricul -tureintheIndonesianeconomy.There wasamarkeddeclineintheproportion ofnationaloutput(GDP)accruingfrom theagricultural sector,andthepropor -tionofthelabourforceemployedinagri -culturealsofell.By1990,justunderhalf oftheemployedlabourforcewaswork -inginagriculture,accordingtothepopu -lationcensusofthatyear.Between1990 and1995theabsolutesizeoftheagricul -turallabourforcedeclined,andby1995 only44%oftheemployedlabourforce wasreportedintheintercensal popula -tionsurvey(Supas)as‘workinginagri -culture’.Thispercentagewaslowerfor thedenselypopulated inner islandsof JavaandBali,wheretheprocessofstruc -tural change and diversification away fromagriculturewasespeciallyrapid.If the absolute increase in the employed labourforcefrom1990to1995isdistrib

-utedbetweenurbanandruralareasand amongeconomicsectors,itisclearthat muchoftheriseinthenon-agricultural labourforceoccurredinurbanareas.In ruralareas,which accountedforabout one-thirdofthetotalincreaseinemploy -mentoverthesefiveyears,muchofthe growthoccurredinthetradeandservices sector (BPS 1992: tables 41.1–41.9; BPS 1996a:tables41.1–41.9).1

In 1995, the Supas reported that slightlyover50%ofallruralhouseholds in Indonesia(and almost 64% of rural householdsinJavaandBali)eitherdid not own agricultural land at all, or ownedlessthan0.25hectares.Itseems reasonabletoconcludethatmostofthese households would be earning at least partoftheirincomesfromnon-agricul -turalsources,andindeedtheSupasin -dicated that only 46% of households locatedinruralareas(ruralhouseholds constitute 65%ofallhouseholds) gave

THE

CHANGING

ROLE

OF

NON

-

FARM

ACTIVITIES

IN

AGRICULTURAL

HOUSEHOLDS

IN

INDONESIA:

SOME

INSIGHTS

FROM

THE

AGRICULTURAL

CENSUSES

AnneBooth

SchoolofOrientalandAfricanStudies(SOAS),UniversityofLondon

Theliteratureonoff-farmsourcesofincomeinruralareasofdevelopingcountries

continuestogrow.Thispaperusesdatafromthehouseholdincomesurveys car

-riedoutaspartofthe1983and1993agricultural censusestoexploreaspectsofthe

changingroleofoff-farmincome sourcesforagricultural householdsindifferent

partsofIndonesia.Thepaper examinesvariationsintheratioofoff-farmtototal

agricultural household incomeby holdingsize,by totalhouseholdincomeclass

and by province.Italsoexamines thelinkages between on-farmand off-farm

incomegrowth.Comparisons aremadewithfindingsfromotherpartsofAsiaand

elsewhereinthe developing world.

TABLE1 HouseholdIncomeSourcesandOwnershipofAgricultural Land,1995 (%ofhouseholds)

Urban Rural Urban+Rural

Indonesia Java–Bali Indonesia Java–Bali

Income source

Non-agricultural 29.4 17.8 47.2 52.5

Agricultural 2.1 30.1 32.2 24.9

Mixed

Mainly agricultural 0.9 8.6 9.5 9.9

Mainly non-agricultural 2.6 8.5 11.1 12.7

Total 35.0 65.0 100.0 100.0

Agriculturalland owned

None 89.1 37.3 44.3

Lessthan0.25hectares 3.7 13.2 19.5

Source:BPS(1996a):tables59.1–59.3,60.1–2. theirsoleincomesourcein1995asagri -culture(table 1).Onthe otherhand,of the73%ofruralhouseholdsthatearned atleastpartoftheirincomefromagricul -ture,themajorityreportedthatagriculture waseitherthesoleorthemainsourceof theirincome.Clearlyitwouldbewrong toarguethattheagriculturalsector,even beforethecrisisof1997,wasnotanim -portant sourceof incomefor the great majorityofruralhouseholdsinIndone -sia,especiallyoutsideJavaandBali.2

Evenso,theevidencefromtheearly partofthe1990sshowsthatagriculture wasinsteadydecline,bothasasourceof employmentandasasourceofhouse -holdincome.Thisindeediswhatwould be expected given the rapid economic growthIndonesiaexperiencedfrom1970 to1995.Butthesebroadtrendsprovoke anumberofquestions.Howhasthede -clineinagricultureasasourceofemploy -ment and household income varied acrossIndonesia’svastarea?Hasitbeen confinedonlytotherapidlyindustrial -isingregions?Howhasthedeclinevar -iedbyhouseholdincomegroupandby household asset status? Have richer

households(definedintermsbothofsize ofoperatedholdingandoftotalhouse -holdincome)beenabletodiversifytheir sources of income more rapidly than poorerhouseholds?Theanswerstothese questionshaveimportantimplicationsfor understandingchangesinthedistribution ofincomeinruralareassincethe1970s. Afurthersetofquestionsrelatestohow theIndonesianexperiencecompareswith thatofotherrapidlyindustrialisingparts ofAsia.Howdothetrendsdiscernedin economies such as Taiwan’s since the 1950scomparewithIndonesia’smorere -centexperience?

The purposeof this paper isto cast somelightonthesequestions,usingdata collectedinthetwosamplesurveysof agricultural household incomes con -ductedaspartofthe1983and1993agri -culturalcensuses.3_{Thefocusisthuson}

thesubsetofruralhouseholdsstillhav -ingatoeholdintheagricultural sector, inthesensethatatleastonefamilymem -ber isengaged inagricultural work.4 _I

begin with a discussion of what these surveys show about changes in the sourcesofagriculturalhouseholdincome

TABLE2 IncomeAccruingtoAgricultural HouseholdsbyIncomeSource,1984and1993 (Rp‘000p.a.,1993pricesa₎

Income 1984 1993 Increase

Source (%)

From agricultural holding 722 880 22

Foodcrops 382 399 5

Othercrops 182 264 45

Livestock 113 115 2

Fisheries 34 79 135

Forestry 12 23 94

Wagesandsalaries 328 387 18

Agricultural n.a 129

Non-agricultural n.a 258

Non-agriculturalactivities 144 189 31

Other 119 304 156

Total 1,313 1,760 34

a_{1984dataadjustedbythehouseholdconsumption componentoftheGDPdeflator.}

Sources:BPS(1987):table9;BPS(1995a):tables1–5. between1984and1993,bothatthena -tionallevelandbyprovince.

SOURCESOFAGRICULTURAL HOUSEHOLDINCOME

OVERTIMEANDSPACE

In1984theaverageannualagricultural household incomewasRp664,000(Rp 1,313,000in1993prices);nineyearslater ithadincreasedtoRp1,760,000(table2). Althoughthiswasasubstantialincrease inrealterms,thesenineyearsalsowit -nessedrapidgrowthinthenon-agricul -tural economy. Real growth in farm household incomes was rather slower thanrealgrowthintotalhouseholdex -pendituresas given inthenationalin -come statistics, indicating that farm incomesonaveragewerefallingbehind thoseinotherpartsoftheeconomy.This isindeedconfirmedbythedatafromthe Social Accounting Matrices (SAMs), which show thatallcategoriesof agri -culturalhouseholds(exceptthoseoper -atingverysmallholdings)experienced

somedeclineinincomesrelativetothe nationalaverage in the years 1985–93 (Booth2000:table7).Between1984and 1993,theproportionoftotalfarmhouse -holdincomethatcamefromoperatingthe farmholding(usahapertanian)fellfrom 55%to50%.Theproportionderivedfrom wagelabour(bothagriculturalandnon -agricultural) also fell, while that from othernon-agricultural activities stayed roughlyconstant.Themostrapidgrowth was in income derived from ‘other’ sources, which includedpensions and incomefromremittances(table2).

Wecanalsoexaminebyprovincethe changesintotalincomeaccruingtofarm households,andinthepercentage de -rived fromthefarm holding.By1993, when, on average, 50% of total farm household incomewas being derived fromthefarmholdingitself,sevenprov -inceswerederivingless than50% and two(WestJavaand Yogyakarta)were derivinglessthan40%(table3).Atthe otherendoftheprovincialdistribution,

TABLE3 TotalAnnualFarmHouseholdIncomeandSharefromthe FarmHolding,byProvince,1984and1993

Provincea _{TotalFarmHouseholdIncome Sharefrom FarmHolding %of}

(Rp‘000) (%) All

Indonesia

1984 1993 1984 1993 Farm

Population

Nominal 1993 Aged

Pricesb _10+,1993

Bali 847 1,988 2,733 58.9 44.7 1.6

Riau 1,086 2,117 2,594 57.1 62.7 2.0

EKalimantan 702 1,483 2,439 61.3 54.4 1.0

Jambi 724 1,452 2,407 69.2 69.8 1.1

CKalimantan 853 1,775 2,123 60.4 58.6 1.4

SSumatra 878 1,450 2056 66.7 69.4 4.9

Aceh 791 1,412 1,987 60.3 60.0 2.9

SESulawesi 659 1,175 1,975 60.8 59.1 1.0

NSulawesi 907 1,454 1,956 56.3 46.1 1.7

WKalimantan 655 1,256 1,938 63.7 52.4 2.4

Yogyakarta 750 1,437 1,884 42.5 36.5 1.5

CSulawesi 836 1,722 1,879 57.5 52.4 1.4

NSumatra 735 1,556 1,871 55.2 55.8 4.7

SSulawesi 634 1,104 1,781 65.3 66.3 4.4

WSumatra 735 1,338 1,752 51.8 42.4 2.8

WJava 640 1,207 1,744 41.6 35.2 14.3

SKalimantan 574 1,027 1,714 50.0 45.4 2.1

Maluku 909 1,615 1,687 66.8 52.6 1.6

IrianJaya 770 958 1,653 73.8 63.0 1.7

CJava 609 1,195 1,635 50.4 40.7 14.1

Bengkulu 821 1,630 1,614 69.1 58.8 1.1

EastJava 593 1,140 1,585 58.0 51.3 18.4

NTB 523 1,041 1,578 62.7 52.0 1.8

NTT 621 1,189 1,573 72.6 61.2 3.7

ETimor 676 1,454 1,438 71.2 63.3 0.8

Lampung 590 1,149 1,418 63.1 57.8 5.7

Indonesia 664 1,313 1,760 55.0 50.0 100.0

Totalfarmhouseholdincome fromallsources

correlatedwithpercentageofincomefrom farmholding

1984 1993

r= 0.108 0.069

a_{Provincesarerankedbytotalfarmhouseholdincomein1993.}

b_{ThedeflatorusedisthehouseholdconsumptioncomponentoftheprovincialGDPdeflator,}

asestimatedfromtheprovincialincomeaccounts.

Sources:BPS(1987,1995a,1994,1995e).

farmhouseholdsineightprovinceswere stilldependingonthefarmholdingfor over60%oftheirincome,andinthreeof these(Jambi,SouthSumatraandSouth Sulawesi)theproportionhadincreased between1984and1993.

Neitherin1984norin1993wasthere anysignificantcorrelationbetweentotal farmhouseholdincomefromallsources byprovinceandtheproportionderived fromthefarmholding.Thereweresev -eral provinces (Jambi, Riau, South Sumatra) wheretotal farm household incomefromallsourceswaswellabove thenationalaverageandwheretherewas arelativelyhighdependenceonincome fromthefarmholding(table3).Butthere were others (Yogyakarta, Bali, North Sulawesi) where total farm household incomewasabovethenationalaverage andyetrelianceonincomefromthefarm holdingwasrelativelylow.Similarly,if welookattheprovinceswheretotalfarm household income waswellbelow the nationalaverage,some,suchasCentral Java,hadahighrelianceonoff-farmin -come while others, such as EastNusa TenggaraandthethenprovinceofEast Timor,derivedover60%oftheirtotalin -comefromtheholdingitself.Itispossible thatinaprovincesuchasJambi,mostfarm householdscanmakeareasonableliving

fromagricultureandfeellittle needtoseek extraincomeelsewhere,whileinaprov -incesuch as EastNusa Tenggara, farm householdswouldliketosupplementtheir relativelymeagreincomesfromthefarm holdingbuthavelittleopportunitytodo so.Ireturnbelowtothequestionofwhat determinesthese interprovincial differ -encesinrelianceonoff-farmincome.

SOURCESOFAGRICULTURAL HOUSEHOLDINCOMEBYHOLD

-INGSIZEANDINCOMECLASS

Whileincomefromthefarmholdingac -countsfora diminishing percentageof total farm household income inmany partsofIndonesia,inthemid1990sthe majorityofhouseholdsinvolvedinag -riculturalactivitiesstillclaimedthatag -ricult ure was the ‘main’ sourc e of household income. (This does not of coursemeanthatitaccountedforalarge partoftotalhouseholdincome,butsim -plythatitwasmoreimportantthanany othersinglesource.) In1984, 82%offarm householdsclaimedthatagriculturewas themainsourceoftheirincome;by1993 thispercentagehadfallenonlyslightly (table4).Inbothyears,therewasamarked tendencyfor the percentage of house -holdsreportingagricultureastheirmain activitytoincreasebyholdingsize.In

TABLE4 Agricultural HouseholdsbySizeofHoldingandMainIncomeSource,1984and1993

Sizeof Householdsby HouseholdswithMain

CultivatedHolding Holding Size Income from Agriculture

(ha) (%) (%)

1984 1993 1984 1993

Under0.1 8.5 7.0 62.6 56.4

0.1–0.249 16.4 18.4 69.7 66.5

0.25–0.49 21.3 22.3 79.8 75.5

0.50–0.99 24.1 22.4 87.0 83.1

1.00–2.49 23.4 24.2 90.5 89.5

over2.5 6.3 5.7 92.2 92.1

Indonesia 100.0 100.0 81.7 78.5

Sources:BPS(1987):tables5and7;BPS(1995a):table5.

1993, only about 56% of households cultivating less than 0.1 hectares re -ported that agriculture was the main sourceofhouseholdincome,compared withover90%ofthosecultivatingmore than2.5hectares.

Of those agricultural households whoreportedthatagriculturalactivities (including agricultural wageemploy -ment)werenotthemainsourceofhouse -holdincome,themajority(inboth1984 and1993)gavetradeandotherservices as the main source (table 5). In both years,fewerthan2%ofallagricultural householdsgaveremittances andother earnings astheirmainincomesource. Manufacturing(bothagriculturalpro -cessingandotherformsofmanufactur -ing)wasthemainsourceofincomeof only4%ofallagriculturalhouseholds in 1993. Inboth 1984 and 1993, there wasapronouncedinverserelationship betweenholdingsizeandthepercent -ageofhouseholdsreportingtradeand otherservicesectoractivityasthemain householdincomesource.In1993,this inverse relationship wasalso clear for

householdsreportingmanufacturing as themainincomesource.

Thepresenceofthisinverserelation -shipcouldbeusedtosupporttheview thatoff-farmactivitiesinmanufacturing and,especially,intheservicesectorhave hadanequalisingeffectonincomesac -cruingtoagriculturalhouseholds,inthe sensethatthosehouseholdswithfewer agriculturalassets(asproxiedbysizeof operated holding) are more reliant on theseactivities forthebulkof theirin -come.Thusitcouldbehypothesisedthat asset-pooragriculturalhouseholdscom -pensateforthelowearningpotentialin agriculture bygainingmostoftheirin -comefromotheractivities. Butthedata intables4and5 donot reallysupport such anargument.They donottell us whethertheasset-poorhouseholdsare infactearningsufficientfromtheiroff -farmactivitiestocompensateforthelow level of their farm holding incomes. Rather,theysimplyindicatethathouse -holds with smaller operated holdings tendtorelymoreonnon-farmactivities fortheir‘main’sourceofincome.

TABLE5 SourcesofNon-agriculturalIncomebyHoldingSize,1984and1993

Cultivated Householdswith HouseholdswithMainIncomefrom

Holding MainIncomefromNon

-Size agriculturalActivities Manufacturing Trade&Services Other

(ha) (%) (%) (%) (%)

1984 1993 1984 1993 1984 1993 1984 1993

Under0.1 37.4 43.6 5.7 8.3 27.7 31.3 4.1 4.0

0.1–0.249 30.3 33.5 5.9 6.9 22.3 24.4 2.1 2.2

0.25–0.49 20.3 24.5 3.5 4.5 14.9 18.6 2.0 1.4

0.50–0.99 13.0 16.9 1.9 3.0 9.9 13.0 1.3 1.0

1.00–2.49 9.5 10.5 1.5 1.8 6.8 8.1 1.2 0.7

Over2.5 7.8 7.9 1.9 1.3 5.1 6.2 0.9 0.5

Average 18.3 21.5 3.1 4.0 13.5 16.0 1.8 1.4

Sources:BPS(1987):table5:(1995a):table19.

TABLE6 Agricultural HouseholdIncomebyHoldingSize,1984

Sizeof Average Monthly On-farm Total %of

Cultivated Holding Incomeper Income per Income Total

Holding Size Household Hectare per Income

(ha) (ha) (Rp‘000) (Rp‘000) Hectare from

(Rp‘000) On-farm

Under0.1 0.04 45.9 718 1,148 63

0.1–0.24 0.17 39.6 162 233 70

0.25–0.49 0.34 43.5 102 128 80

0.50–0.74 0.58 50.9 75 88 86

0.75–0.99 0.83 54.2 59 65 90

1.00–1.49 1.14 63.3 50 56 90

1.50–1.99 1.64 71.4 40 44 92

2.00–2.49 2.11 79.9 35 38 92

2.50–2.99 2.64 87.4 31 33 94

3.00–3.49 3.10 95.4 28 31 91

3.50–4.49 3.85 111.6 27 29 92

Over4.50 6.85 171.9 23 25 91

Average 0.85 55.3 53 65 82

Source:BPS(1987).

Datafromthereportonthe1984Sur -veyofAgricultural HouseholdIncomes (BPS1987) canbeusedtoderiveabreak -downofhouseholdincomebyholding size.Thisshowsacleartendencyforto -talincometoincreasewithholdingsize. Agricultural income on a per hectare basis was much higher in thesmaller holdingsizegroups,however(table6). Thisconfirmsthewellknownpropen -sityforsmallerholdingstobemorein -tensivelycultivated withhigher value crops,whichinturnreflectsthefactthat smaller holdings often contain better quality land.5 _{But even when this in}

-versesize–productivity effectwascom -bined with a tendency for the larger holdingstoearnmoreoftheirtotalin -comefromon-farmactivity,itwasstill thecasethatagriculturalhouseholdson largerholdingsearnedmoreonaverage fromallsources,bothonandoffthehold

-ing,thanhouseholdsoperatingsmaller holdings.

Thereportonthe1993SurveyofAgri -culturalHouseholdIncomes(BPS1995a) alsocontaineda breakdownofincome accruingtoagriculturalhouseholdsfrom differentsourcesbytotalhouseholdin -comeclass.Therewasnostrongevidence ofaninverserelationshipbetweenthein -comelevelandthepercentageofincome derivedfromnon-agriculturalsources— quitethereverseinfact.Withtheexcep -tionofthelowestandthehighestincome class,therewasasteadytendencyforthe percentageoftotalhouseholdincomede -rivedfromthefarmholding,andfromall agricultural activities including wage labour,tofallas householdincome in -creased(table7).Therewasasignificant degreeofpositivecorrelationbetweenin -comefromthefarmholding(bytotalin -comeclass)andthe proportionof total

income derived from non-agricultural sources(r=0.53).

Astotal agriculturalhousehold in -comefromallsourcesgrew,non-agri -cultural wage earnings and income fromself-employmentactivities(manu -facturing,tradeandotherservices)both accountedforagrowingpercentageof totalhouseholdincome(table8).There wassomesignofan‘invertedU’rela -tionshipfornon-agriculturalwagein -come,andofa‘U’relationship forother income(whichincludespensionsand

remittances), althoughotherincomeac -counted for more than 30% of total householdincomeonlyinthetopand bottomincome classes. Thesetwo in -come classes in turn accounted for a verysmallpercentageofallagricultural households(table7).

Thisapparentlyparadoxicalcombi -nation,ofarisingpercentageofon-farm to total income as holding size in -creasesandafallingpercentageofon -farm to total income as income size increases,hasin factbeen found ina

TABLE7 Agricultural HouseholdIncomebyAgricultural IncomeSource

andIncomeClass,1993

Income %Agricultural %ofTotalHouseholdIncome from

perMonth Householdsin

(Rp‘000) IncomeClass FarmHoldinga _{Agricultural Total}

(%) Wages Agricultural

Incomeb

Under20 2.0 48.3 (71.2) 7.4 62.5

20–24 1.4 55.6 (73.2) 10.5 73.3

25–29 2.1 53.3 (71.2) 11.5 72.2

30–39 5.2 54.4 (68.6) 13.0 74.4

40–49 6.2 54.1 (64.5) 13.9 74.4

50–74 17.0 54.2 (60.5) 14.2 74.3

75–99 15.6 54.1 (57.3) 13.1 72.3

100–149 21.5 54.2 (52.5) 10.7 69.8

150–199 11.2 52.3 (47.7) 8.3 64.1

200–299 9.7 48.5 (43.5) 5.8 57.1

300–399 3.8 45.1 (39.7) 3.4 50.6

400–499 1.8 44.2 (38.1) 2.7 49.0

500–749 1.6 44.1 (33.7) 2.1 47.9

750–899 0.4 39.7 (23.9) 1.4 42.4

Over900 0.7 46.7 (12.4) 0.4 48.0

Indonesia 100.0 50.0 (45.4) 7.4 60.7

a_{Figuresinbracketsshow the percentageoffarm holding incomethatisderivedfrom}

foodcropagriculture.

b_{Totalagricultural incomeisthesumofincomefromthefarmholding,agricultural wages}

and‘othersources’,notshownhere.Typicallythiswouldincludehiringoutofagricultural

equipmentandland.

Source:BPS(1995a):tables8–12.

numberofLatinAmericancasestudies (Reardon,BerdegueandEscobar2001: 404).Ontheonehanditseemsreason -able to expect that those agricultural households operating larger than av -erageholdingshavelessneedtoseek off-farmwork.Buthowcanweexplain the fact that the richer agricultural households(rankedbyincome,rather than by operated land holding) are more dependenton off-farm income thanthepoorerones?Thedirectionof causality is seen to be more complex whenweexaminerankingsbyincome size,and itappearsthatinIndonesia, as in a number of Latin American

economies,householdsthathaveman -agedtodiversifytheireconomicactivi -tiesawayfromagriculture,andespecially thosethathavemanagedtogainaccess to non-agricultural wage employment opportunities, havebeenthemostsuc -cessfulinincreasingtheirtotalincomes. Thesearesometimes,butbynomeans always, the households that control relativelylargeamountsofagricultural land.Butcontroloverotherassets,in -cludingeducatedlabour,permitshouse -holds to diversify successfully into non-agriculturalactivities,andisthus an im por tant deter minant of total householdincome.

TABLE8 Agricultural HouseholdIncomebyNon-agriculturalIncomeSourceandIncomeClass,

1993

(%oftotalagricultural householdincome)a

Incomeper Non- Manu- Trade Other Other All

Month Agricultural facturing Services Income Non

-(Rp‘000) Wages agricultural

Income

Under20 3.2 1.3 1.1 0.3 31.7 37.5

20–24 1.7 1.1 1.4 0.4 22.1 26.7

25–29 2.4 1.6 2.1 1.1 20.7 27.8

30–39 3.4 1.6 1.8 0.7 18.2 25.8

40–49 4.1 1.7 2.4 1.0 16.5 25.6

50–74 5.8 1.8 3.1 1.2 13.7 25.7

75–99 8.3 1.9 3.9 1.6 12.0 27.7

100–149 10.7 1.9 5.2 2.0 11.0 30.7

150–199 14.3 1.9 6.9 2.2 10.6 35.9

200–299 19.5 1.8 8.1 2.4 11.0 42.9

300–399 25.3 2.0 8.1 2.4 11.5 49.4

400–499 28.3 2.1 8.2 2.4 10.0 51.0

500–749 25.3 3.4 7.4 3.3 12.6 52.1

750–899 21.0 3.6 10.1 5.5 17.4 57.6

Over900 5.7 3.1 7.0 3.4 32.9 52.0

Average 14.6 2.1 6.3 2.3 13.4 39.3

a_{Manufacturing includesbothagro}

-processingandotherformsofmanufacturing. ‘Other

income’includespensionsandremittances, andsourcesnotelsewhereincluded.

Source:BPS(1995a):tables8–11.

INTERPROVINCIALVARIATIONIN AGRICULTURALHOUSEHOLD INCOME

Iturnnowfromexaminingvariationsin income across householdsby holding sizeand incomeclassto lookat varia -tions across provinces. There is clear supportfortheargumentthatprovinces wheretheaverageincomefromthefarm holdingwaslowrelativetothenational averagederived alargerproportion of theirincomefromoff-farmactivities. In both 1984 and 1993, the coefficient of variation ofagricultural household in -comesbyprovincefromallsourceswas much lowerthan thatfrom any ofthe components,indicatingthatthevariation betweenprovincesinon-farmearnings wastosomeextentcompensated forby incomefromothersources(table9).There wasalsoasignificantdegreeofnegative correlationbetweenincomederivedfrom theagriculturalholdingbyprovinceand thepercentageoftotalincomederived fromoff-farmsources.

But inspite of the growing impor -tanceofoff-farmearningsintotalagri -cultural household income in many parts of Indonesia, the evidenceindi -catesthattheydonotfullycompensate forlowincomesfromfarmholdings,es -peciallyinthoserelativelyremoteand undevelopedprovinceswhereagricul -turalproductivityandincomeshavehis -torically been low. Itis instructive to comparethecomponentsofagricultural household incomes in four provinces whereonaveragethepercentageofto -talincomederivedfromtheholdingis muchhigherthanthenationalaverage (table3).Intwosuchprovinces,Jambi andSouthSumatra,itcouldbeargued that income from thefarm holding is quitehigh,andmanyfarmhouseholds donotfeelacutepressuretodevotemore householdlabourtoobtainingextrain -comefromoff-holdingsources,although itisalsolikelythatsuchincomeisdiffi -culttoobtain,especiallyforhouseholds livinginmoreremoteareas.InIrianJaya

TABLE9 CoefficientsofVariation:ComponentsofAgricultural HouseholdIncomebyProvince,

1984and1993a

1984 1993

Income fromfarm holding 22.82 27.16

Alloff-farm income 26.32 26.36

Income fromwages 34.38 32.71

Income fromself-employment 42.80 47.16

Income fromother sources 29.42 25.24

Income from all sources 17.82 18.13

%oftotalincomefromoff-farm

sourcesby provincecorrelated

withincome fromfarm holding –0.647* –0.766*

a_{Estimatedusingprovincialincomedata.}

*Significant at5%

Source:BPS(1987,1995a).

andEastTimor,averagehouseholdin -comefromthefarmholdingwasmuch lower in absolute terms than in most other provinces,and althoughincome fromvariousoff-holdingsourceswason average slightly higher than in Jambi and South Sumatra, it was not high enoughtocompensatefullyforlowin -comesfromthefarmholding(table10). Table11reportsonthesocialandeco -nomiccorrelatesofthepercentageofto -tal agric ult ur al ho us eho ld inco me derivedfromthefarmholdingin1993, estimated from provincialdata. There was a positive correlation with per capita GDP and with the headcount measureofpoverty,butneitherwassig -nificantatthe5%level.Moresignificant werethecorrelationswiththepopula -tiondensityandroaddensityvariables

(population per square kilometre and kilometresofsealedandgravelroadsper hundredsquarekilometresofarea),the proportionofruralhouseholdsnotown -ingland,andarangeoflabourforceand productivityvariables.Thenegativecor -relation with population density and withroad densityindicatesthat in the moredenselysettledprovinceswithbet -ter developed road networks, agricul -turalhouseholdsfounditeasiertoaccess off-farmincome.6Thenegativecorrelation withtheproportionofruralhouseholds notowninglandcouldbeinterpreted as evidenceofa‘pushfactor’towardsnon -agriculturalemployment,inthesensethat inthoseprovinceswhereahighpropor -tion of rural households do not own land,suchhouseholdsarecompelledto seek income from non-agricultural

TABLE10 SourcesofAverageAnnualAgricultural HouseholdIncomeforFourProvinces,1993

(Rp‘000)

Jambi South Irian East Indonesia

Sumatra Jaya Timor

Total farm

household income 2,407 2,056 1,653 1,438 1,760

Farm holding 1,681 1,426 1,042 910 880

Foodcrop 337 432 442 452 399

Treecrop 1,238 667 168 187 264

Agriculturallabour 215 123 19 8 129

Otheragricultural 44 56 63 47 60

Totalagricultural 1,940 1,605 1,124 965 1,069

Manufacturing 16 13 11 8 38

Trade 69 70 27 14 111

Other self-employment 36 37 26 9 51

Non-agriculturallabour 168 158 207 232 258

Othersources 178 173 258 210 233

Totalnon-agricultural 467 451 529 473 691

% of total income

from holding 70 69 63 63 50

Source:BPS(1995a):tables1–5.

activity.Ontheotherhanditcouldalso indicatethatinsomeprovinces(suchas WestJava)ruralhouseholds havesold landinordertoinvestinnon-agricultural enterprisesfromwhichtheyearnmostof theirincome.

Therewasasignificantpositivecorre -lationbetweenthepercentageoftotalin -comeearnedfromthefarmholdingand

the rate of growth of the agricultural labourforce,andanegativecorrelation withthenumberofagriculturallabourers asaproportionofthetotalagricultural labourforce.Theformersignisexpected, inthatthoseprovinceswherethegrowth oftheagriculturallabourforcehasbeen mostrapidarethosewhereoff-farmem -ploymentopportunities arelikelytobe

TABLE11 CorrelatesofAgricultural HouseholdDependencyonIncome

fromtheFarmHoldingbyProvince,1993a

Indonesia Excluding

(exceptJakarta) Java

GDPpercapita 0.006 –0.035

%ofGDPfromagriculture 0.182 –0.013

%ofGDPfrommanufacturing –0.294 –0.105

%ofGDPfromtrade –0.398* –0.347

Ruralpoverty(1996) 0.350 0.341

Populationdensity(1995) –0.624* –0.306

Roaddensity –0.566* –0.285

%ofhouseholdmemberswho

haveneverattendedschool –0.046 0.171

PercentagegrowthofALF(1986–94)b 0.525* 0.469*

Agricultural labourersas%ofALF(1995) –0.485* –0.318

VASAperagricultural workerc

–0.487* –0.415

VAFC/VASAd

–0.437* –0.229

VASAperhectare –0.577* –0.308

Averageholdingsize 0.657* 0.387

%ofruralhouseholds –0.553* –0.511*

notowningland

a_{Dependencyonfarmhouseholdincomeisproxiedbytheratioofon}

-farmincometototal

agricultural householdincomeasgivenintable3.Allcorrelation coefficientsareestimated

inlogs.The coefficients ofvariationhavebeenestimatedusingprovincialincomedata.

b_{ALF:agricultural labourforce.}

c_{VASA:valueaddedinsmallholder agriculture.}

d_{VAFC:valueaddedinfoodcropagriculture.}

*Significant atthe5%level.

Sources:Householdincomedataandeducationdata:BPS(1995a);averageholdingsize:

BPS(1995b);GDPdata:BPS(1997a);VASAandVAFC:BPS(1995c);roaddensityandpopu

-lationdensity:BPS(1997b);ruralpoverty1996:BPS(2000);agricultural labourforcedata:

BPS(1988,1995d);ruralhouseholdsnotowningland:BPS(1996a).

quitelimited.Inaddition,theprovinces wheretheagriculturallabourforcegrew rapidlyincludedseveralwheretherehas beensubstantialinmigration, dueinturn tothedevelopment ofnewagricultural landfortransmigrants.Thelatter(nega -tive) signindicates thatin those prov -inceswhereagricultural labourmarkets were well developed therewas a ten -dencyforahigherproportionoftotalin -come tobeearned offthefarm, which couldsuggestthatmarketsfornon-agri -culturallabour,andindeedfornon-agri -cultural goods andservices, werealso welldeveloped.

Moresurprisingwasthenegativecor -relationbetweentheproportionofhouse -hold income derived from the farm holdingandvalueaddedinsmallholder agriculture (VASA)perhectareandper

agriculturalworker.Inotherwords,the higherthevalueaddedperhectareand peragriculturalworker,thelowerthe proportionoftotalfarmholdingincome derivedfromagriculture. Theseresults mightindicatethatinthoseprovinces where agricultural productivity per hectareandperworkerwashigh,there wasagreaterabundanceofoff-farmin -comeearningopportunities,andthusa higherproportionofhouseholdincome derivedfromthesesources.Howeverthe results of an OLS regression analysis indicatethat,onceothervariablessuch aspovertyincidence,averageholding size and growth of the agricultural labourforcearecontrolledfor,thesigns onboththevalueaddedperhectareand thevalueaddedperworkervariablesbe -comepositiveandsignificant(table12).

TABLE12 Determinants ofAgricultural HouseholdDependencyonIncomefromthe

FarmHoldingbyProvince,1993:OLSRegressionsa

Equation1 Equation2

Ruralpovertyincidence(1996) 0.152 0.131

(2.682) (2.289)

Agricultural labourersas%ofALF –0.079 –0.079

(2.363) (2.24)

VASA peragricultural worker 0.261

(2.55)

VASAperhectare 0.332

(3.011)

PercentagegrowthofALF(1986–94) 0.133 0.388

(2.649) (3.431)

Areaperfarm 0.497 0.132

(3.823) (2.324)

AdjustedR2 _{0.665 0.633}

F 10.943 9.626

N(Residual) 25(20) 25(20)

SE 0.108 0.113

a_{Inboth equations thedependentvariableisthe percentageoftotalhousehold income}

derivedfromthefarmholdinginthatprovince;tratiosaregiveninbrackets.Allvariables

areinlogs.

Sources:Asfortable11.

EDUCATIONAND OFF-FARMEARNINGS

Thereappearstobelittlecorrelation by provincebetweenlackofaccesstoedu -cation(asproxiedbythepercentageof agriculturalhouseholdmembersover10 yearswhohaveneverattendedschool) andtheproportionoftotalhouseholdin -comeearnedonthefarm(table11).That isprobablytobeexpectedgiventhevery diversesourcesofoff-farmincomeindif -ferentpartsofthecountry,onlysomeof which demand skills such as literacy and numeracy that can be acquired throughformal education. But at the sametimethe1993surveyresultsmake itclear thatthe richer theagricultural household(intermsoftotalincomefrom allsources),thehighertheproportionof householdmembersinschool(table13).

Thismaypartlyreflectthedifferingage structure of households in different incomegroups,withthepooresthouse -holdscomprisinglargelyelderlymem -bers.Itmayalsoreflectatendencyfor moreaffluenthouseholdstotakecareof youngrelativesfromlesswell-offfami -lies,andtopayfortheireducation.There wasalsoatendencyforahigherpropor -tion ofthe less well-off householdsto report that they experienced financial difficultyinkeepinghouseholdmembers inschool,althoughevenamongthehigh -est income groupsa sizeableminority complainedaboutthefinancialburden ofeducationexpenses.

Evidencefromotherpartsoftheworld suggeststhataccesstoeducationisacru -cial determinant of an agricultural household’s ability to diversify its

TABLE13 Agricultural HouseholdswithMembersinSchoolbyIncomeClass,1993

(%)

Incomeper Agricultural Agricultural

Month Households Householdswith

(Rp‘000) with Members MembersinSchool

inSchool andExperiencing

FinancialDifficulty

Under20 35.6 48.0

20–24 38.3 49.0

25–29 38.4 47.6

30–39 41.6 40.7

40–49 45.6 40.4

50–74 50.1 37.8

75–99 54.7 35.8

100–149 59.1 34.9

150–199 62.7 35.5

200–299 66.0 34.9

300–399 70.1 34.2

400–499 73.4 33.5

500–749 74.8 31.6

750–899 70.7 34.5

Over900 72.5 28.5

Average 56.1 36.3

Source:BPS(1995a):table40.

sourcesofincomeovertime,andespe -cially of its ability tomove household membersintomorelucrativenon-agricul -tural wageemployment. Intheirsum -maryofanumberofLatinAmericancase studies,Reardon,BerdegueandEscobar (2001:405)pointoutthat

… a l l t h e s tu d i e s s h o w e d v e r y

strongly thateducation determines

parti cipation and success in RNF

[rur al nonfarm ] employme nt and

incomes.Moreeducationtendedto

mean morenonfarmwageemploy

-m en t in h igh-pr od uctiv ity , we ll

-pa yin g jobs . T he m or e e d ucate d

tend to avoid farm wage employ

-mentandgravitatetowardnonfarm

wageemploymentandonlysecond

-arily to nonfarm self-employment,

as the returns to labor in general

followthatrankingaccordingtothe

countrystudies.

Thedatareviewedabove,andes -pec ia lly the 1993 evid ence on the distribution of agricultural ho use -holdincomebyincomegroup,show that agricultural hous eholds in the higher incomegroups rely mor eon non-agriculturalwageearningsthan dothoseinthelowerincomegroups. It couldbehypothesisedthatthisre -flects the factthathouseholdsin the higher income groups have a larger numberofbettereducatedmembers. Studies in other parts of Southeast Asiahavestressedtheim portanceof secondary and tertiary education in facilitating the employment of farm household members in non-agricul -turalwork.InthecontextofthePhil -ippines, Estudillo andOtsuka (1999: 520)havearguedthat,giventhatrich households find itmucheasier than pooreronestoinvestinthehigheredu -cationoftheirchildren,thereisobvi -ous potential for inequality in farm household incomes to increase over time.Thisisalsolikelytobethecase inIndonesia.

LINKAGERATIOS

Overthelasttwodecades,muchresearch hasbeencarriedoutinmanypartsofthe worldthatexaminesthenatureoflink -agesbetweentheagricultural andnon -agriculturalsectorsofruraleconomies.7

Thereseemstobelittledoubtthatinter -actionsbetweendifferentsectorsofthe ruraleconomyhavevariedgreatlyboth betweencountriesandovertime.Some authorshavepositedan‘Asianexample’ inwhichthecombinationofa‘relatively egalitariandistribution ofincome,well -functioningfactormarkets,andastrong emphasisoneducationalexpansion’has producedrapidgrowthofnon-agricul -turalemploymentinruralareas,benefit -ing most rural households(Deininger andOlinto2001:464).Thisbenignout -comeisthencontrastedwiththemuch lessegalitarian outcomesthathaveoc -curredinmanypartsofAfricaandLatin America.However,theso-called‘Asian’ resultseemstobebasedontherecenthis -tory of just one country, Taiwan, and thereis growingevidencethattheTai -waneseexperienceisfarfromtypicalof Asiancountries,letaloneotherpartsof thedevelopingworld.8

Ranis, Stewart and Angeles-Reyes (1990)andRanisandStewart(1993)have investigated differences inurban–rural linkagesbetween the Philippines and Taiwan.Theyhavearguedthatthemore skeweddistributionoflandandincome in thePhilippines, combined with the morecapital-intensive,urban-biasedna -tureoftheindustrialisation process,has ledtoamuchslowergrowthofnon-agri -culturalemploymentandincomesinru -ral areas in the Philippines than in Taiwan. This inturn has meant that a given amount of agriculturalincome growth hascreated fewernon-agricul -turalemploymentopportunitiesinrural areasinthePhilippinesthaninTaiwan. Thustheratioofgrowthinnon-agricul -turalincomestogrowthinagricultural

incomeshas beenmuchlowerinrural areasinthePhilippines; infactoverthe twodecadesfrom1965to1985Ranisand Stewart(1993:table14)estimatethatru -ralnon-agriculturalincomesgrewmore slowlythanagriculturalincomes.

The agricultural household income surveysinIndonesiacanbeusedtoesti -matelinkageratiosovertheyearsfrom 1984to1993.ForIndonesiaasawhole, thegrowthintheoff-farmincomeofagri -culturalhouseholdswasonlyabout24% fasterthanthegrowthinincomefromthe agriculturalholdings(table14).Aswould beexpected,theaverageforthecountry asawholemaskedconsiderableinterpro -vincialvariation.9 _{In the fiveprovinces}

wheretheproportionoftotalagricultural householdincomederivedfromthefarm holdingwaslowestin1993,thelinkage ratioswerehigherthanthenationalaver

-age.ButeveninBalithelinkageratio,al -thoughhigherthantheaverageforIndo -nesia,wasfarbelowthatfoundinTaiwan between 1962 and 1972. The evidence suggests thatIndonesia, like Thailand, wasan‘intermediatecase’betweenTai -wanontheonehandandthePhilippines ontheother. Fasteroverallratesofeco -nomicgrowthoverthe1980sandthefirst partof the 1990s in both Thailand and Indonesiathan inthe Philippinesmust haveplayedanimportantroleingenerat -ingfastergrowthinoff-farmearningop -portunities,eveniftheresultwashardly asimpressiveasthatinTaiwan.

CONCLUSIONS

Theevidencereviewedaboveshowsthat the off-farm and non-agricultural in -comesofagricultural householdsgrew rapidlyinIndonesiaovertheyearsfrom

TABLE14 LinkageRatiosandthePercentageofTotalFarmIncomeAccruingfrom

Off-farmEmployment

Country Linkage PerCapita PercentageofFarmIncome

andPeriod Ratioa _{GDP fromOff}

-farmSources

(Initial Initial Final

Year)b _{Year Year}

Taiwan(1962–80) 3.55 1,364 25 60

Philippines (1965–85) 0.94 1,248 45 56

Taiwan(1962–72) 2.99 1,364 40 60

Thailand(1971/72–1982/83) 1.38 1,507 46 59

Indonesia (1984–93) 1.24 1,602 45 50

Bali 1.70 41 55

WestSumatra 1.60 48 58

Central Java 1.54 50 59

Yogyakarta 1.35 58 64

WestJava 1.34 58 65

a_Growthinoff

-farmincomesovertheperiodshown,dividedbygrowthinfarmincomes.

b_{ICP(International Comparisons Project)dollarsin1985prices,adjustedforchangesinthe}

termsoftrade.DatatakenfromPennWorldTables(version5.6).

Sources:Taiwan(1962–80)andthePhilippines, RanisandStewart(1993):tables9and14;

Taiwan(1962–72),Ho(1986):table4.2;Thailand,Onchan(1990):table2.13;Indonesia,BPS

(1987,1995a).

1984to1993,andthatby1993incomes fromalloff-holdingsourcesaccounted for50%ofthetotalincomesofagricul -turalhouseholds. Thisinitselfishardly surprising: a large body of literature demonstrates that agricultural house -holdsthroughoutAsia,AfricaandLatin Americaarederivingsignificantandin -creasing shares of their total incomes from off-holding activities.10 Indeed it hasbeenarguedthatruralhouseholds ‘increasingly cometo resembleminia -turehighlydiversified conglomerates, manyofthemwithafootholdintheur -ban sector’ (Cain and McNicoll 1988: 105).Whilethisistruetoanincreasing extentofatleastsomepartsofIndone -sia,weshouldnotoverlookthefactthat thegreatmajorityofthosehouseholds classifiedasagriculturalstillclaimthat agriculture istheir‘main’sourceofin -come. Notwithstanding the extent to which income diversification is taking place,agricultureisstillthecoreactivity formanyruralhouseholds. Atthesame time,bythemid1990s,asignificantmi -norityofruralhouseholds(around27% accordingtotheSupas)hadnoinvolve -mentwithagriculture atall.

Off-farmearningsinthetwoincome surveys arebrokendownintoagricul -turalwages,otherincomefromagricul -tural activities (such as hiring out equipment),non-agriculturalwages,and varioustypesofself-employmentactivi -tiesinmanufacturingandservices.Inad -dition,manyhouseholdsreceiveincome from remittances. In 1993, wages and salary earningswerethelargest single sourceofoff-farmearnings,andnon -agriculturalwageearningsweregreater thanthosefromagriculture.Thereisevi -denceofan inverted ‘U’relationship, inthatbothagriculturalandnon-agri -cultural wages account for a higher proportionoftotalagriculturalhouse -hold incomes for the middle income groups. Butitis alsoclearthatdepen

-dence on non-agricultural wages and salariesismoreskewedtowardstheup -perincomegroups.Whenallsourcesof non-agricultural income are added to -gether,theresultisasteadyincreaseby incomegroupintheproportionoftotal income derived from non-agricultural activities, withtheexceptionofthevery lowest and the very highest income groups. In this sense Indonesiawould appeartocontradictwhatReardonetal. (2000:271) termthe‘conventionalwis -dom’thatthereisastrongnegativerela -tionship between the non-agricultural share and total household income, al -though, asthese authors demonstrate, evidencefromanumberofothercoun -triesorregionsalsotendstorefutethe conventionalwisdom.11

Overtheyears,numerousauthorshave pointedoutthatruralhouseholdstryto takealonger-termviewofincomesecurity than‘merelytakingadvantageofcurrently available incomeearning opportunities’ (Ellis2000:296).Investmentinavarietyof incomeyieldingassetsisobviouslyofcru -cialimportancetoruralhouseholdsseek -ingtosecuretheirincomeoverthelonger term. Traditionally, households with somesurpluswouldinvestinacquiring extraland,inimprovingthequalityofex -isting land, in purchasing agricultural implementsandvehiclesforownuseand forhire,and inpurchasing livestock or goldandjewellery.Overthepasttwode -cades,investmentintheeducationofchil -drenandotherfamilymembershasalso become a very importantpart of rural household asset diversification (Ellis 2000: 296–7). Increasingly many rural householdsappreciatethataccesstothe more lucrative and secure non-agricul -turaloccupationsrequireseducation,and investmentineducationoffamilymem -bersisthusviewedasanevenmoreim -portantpartofthehouseholdinvestment strategythantheacquisition oflandor equipment.

Althoughchangesinenrolmentlev -elssincethe1970sshowthatmanyrural householdsnowappreciatethevalueof educationalinvestment,therearesignifi -cantup-frontcostsassociatedwithedu -cation in Indonesia, especially at the secondary and tertiary levels (Booth 2000: 93).Thus it is the more affluent householdsthatcanaffordtokeeptheir childreninschoollongenoughtogain theentry-levelqualificationsneededfor thebetterpaidandmoresecurejobsin manufacturing andthemodernservice sector.Overtimeitislikelythattheeffect of growing access to non-agricultural wageemploymentwillaggravateincome inequalitiesinmanypartsofruralIndo -nesia,asindeedappearstobethecasein other parts of the world.12 _Reardon,

BerdegueandEscobar(2001:404)report thatbothownershipoflandandaccess toeducationpositionhouseholdmem -berstoundertakewell-paidnon-agricul -turalactivityinmanypartsofCentraland SouthAmerica,andthatinsomecoun -triesthe‘educatedlandless’maybeearn -ing as much as households operating largeagricultural holdings.

Evenso,accesstooff-farmandnon -agricultural employmentpermitseven thepooresthouseholdstoincreasetheir totalincomeandalso,inmanycases,to reducetheinsecurityinherentinexclu -siverelianceonagriculture forincome. Thereislittledoubtthatincomediversi -fication is animportant reason forthe declineintheheadcountmeasureofpov -erty in many parts of rural Indonesia sincethe1970s.Tradeandotherservices have beenthe‘mainsourceofincome’ forasignificantnumberofthosehouse -holdscultivating verysmallamountsof agriculturalland.InmanypartsofIn -donesia,tradeandservicesprovideem -ploymentforlargenumbersofwomen workers.In1995,thetradesector pro -videdmoreemploymentthanmanufac -turingforbothmaleandfemaleworkers

inruralareas(BPS(1996a).IntheLatin American context, Reardon, Berdegue and Escobar(2001: 404) pointout that manynon-farmemploymentprogramsin ruralareasfocusonthemanufacturing sectorinspiteoftheevidencethattrade andotherservicesoffergreateropportu -nities.13_{Thispointalsoseemshighlyrel}

-evantinIndonesia.Giventheimportance ofruraltradeasasourceofemployment andincomeinmanypartsofthecoun -try,especiallyforland-poorhouseholds, itissurprisingthatsolittleresearchhas beencarriedoutinthissector.14

Thereisconsiderableregionalvariation intheextenttowhichagriculturalhouse -holdshavebeenable(orbeencompelled) todiversifytheirincomesawayfromex -clusive reliance on the farm holding. Whiletheproportionofon-farmtototal incomefellinsomeofthemoreisolated andagriculturally lessproductiveparts ofthecountrybetween1984and1993,it is clear from the 1993 data thatmany householdsinEastNusaTenggara,East TimorandIrianJayawereunablefullyto compensateforlowon-farmincomeby earningmorefromoff-farmemployment. ForIndonesiaasawhole,off-farmearn -ingsgrewmorerapidlythanon-farmin -comeover the nineyearsfrom 1984 to 1993,butthedifferenceingrowthrates wascertainlymuchsmallerthaninTai -wanduringthe1960sand1970s.Indeed ahigherproportionofagriculturalhouse -holdsinIndonesiawerewhollydepen -dentonfarmingfortheirincomein1993 thanwasthecaseinTaiwanin1960,even thoughpercapitaGDPwaslowerinTai -wanin1960thaninIndonesiathreede -cades later. Even in Java and Bali the proportionwashigher.Exploringtherea -sons for thesedifferencesis beyondthe scopeofthispaper,althoughtheyareprob -ablyrelatedbothtoTaiwan’sunusually egalitariandistributionoflandafterthere -formsofthe1950s,andtogreateraccessto educationtherethaninIndonesia.

NOTES

1 The employment data from the 1990

populationcensusreported aconsider

-ablenumberof employedworkers,es

-peciallyinruralareas,whosesectorof

employment was‘not stated’.If most

were infact employedin agriculture,

then the decline in the agricultural

labour force between 1990 and1995

wouldhavebeenmuchlarger.Ifonthe

otherhand,theseworkerswereearning

mostoftheirincomefromnon-agricul

-tural jobs,then the shareofthe rural

non-agricultural sectorin overallem

-ployment growth would have been

smallerthanthatreportedhere.

2 Since1997therehasbeenarapidgrowth

in the size of the agricultural labour

force,andalmostallthe newjobscre

-atedsince1997havebeenintheagricul

-turalsector.

3 Thesurveycarriedoutaspartofthe1983

agriculturalcensusinfacttookplacedur

-ingcalendaryear1984, whilethatfor

the1993 agricultural censuswas con

-ducted overcalendar year 1993. The

mainfindingsaresummarised inBPS

(1987)andBPS(1995a)respectively.

4 Anagricultural householdasdefinedin

the1983agriculturalcensusisonewhere

atleastonehouseholdmember carries

outagricultural activities, i.e.works in

foodcrops,treecrops,fisheries,livestock

orforestry.In1993this definitionwas

amendedto‘[households]whereatleast

onememberproducesagricultural out

-putwiththeaimofsaleorprofitorex

-change,at his or her own risk’ (BPS

1995b:xxviii).Thisdefinitionwasprob

-ably rathermore restrictive than that

usedinthe1995intercensal survey,with

theresultthatthenumberofhouseholds

reportedasderivingallorpartoftheir

incomefrom agriculture in1995(24.1

million)was considerably largerthan

the numberof agricultural households

reportedinthe1993agricultural census

(20.3 million).

5 SeeAbey,BoothandSundrum(1981)for

a discussionofthis point,drawing on

datafromthe1973Agricultural Census.

Inaddition,inIndonesiaaselsewhere,

theinversesize–productivity relation

-shiprestsonlowercostlabourtransac

-tionsinsmallerholdings(Lipton1993).

6 Thereismuch evidencefromvarious

parts of Central and South America

that these factors play an important

roleindeterminingaccesstooff-farm

employment at the household level;

see for example Corral and Reardon

(2001).

7 LanjouwandLanjouw(1995:19–23)and

Ellis(1998:19–23)providea discussion

of the literature.

8 Ho(1979),inanearlyexaminationofthe

Taiwanese successwithdecentralised

industrialisation, stressedthedifference

betweenTaiwanandSouthKorea.Inthe

lattercountry,alabourforcesurveycar

-riedout in1974 showedthat lessthan

30%oftotal employmentincommerce

andserviceswaslocatedinruralareas.

9 There are also variations by holding

size,asisclearfromtheSocialAccount

-ingMatrices(BPS1996b).According to

thesedata, non-farm incomeon hold

-ingsoveronehectaregrewtwiceasfast

asfarmincomeovertheyearsfrom1975

to 1993.The differenceingrowthrates

was much lessmarked forfarmscon

-trollinglessthan0.5hectares.

10 Theliterature onoff-farmemployment

isnowsubstantial.Oshima(1984)and

thepapers inShand (1986)reviewthe

evidence upto the early 1980sin the

contextofAsia.Saith (1992)drawson

work in both Asiaand otherparts of

the developingworld, asdo Lanjouw

and Lanjouw (1995)and FAO (1998).

Ellis(1998)givesacomprehensivesur

-vey,albeitwithafocusonsub-Saharan

Africa.There isalso a body oflitera

-tureforIndonesiabasedoncolonialsta

-tistical cen s us es an d sur v ey s th a t

demonstrates the importanceof non

-a g ricultur -a l e mploym e n t in r ur a l

householdsintheearlydecadesofthe

20th century in Java, especially for

women.White (1991)provides a dis

-cussionofthesesources.

11 White(1991:table10)contrastsdatafrom

Japanwiththosefromasurveyofover

1,000 agricultural householdsin rice

-growing areas of Java in 1981. The

Javanese data showed that thelarger

landholding householdsearnedmorein

absolutetermsfromoff-farm activities,

although such incomeaccounted for a

smallershareoftotalhouseholdincome

than was thecase for the households

controlling lessland.

12 Onedetailedfieldstudy carriedout in

WestJavafound,perhapssurprisingly,

that no relationship existed between

mean earnings from non-agricultural

labourandaccesstoland.Construction

work andbecak(trishaw)drivingwere

the twomost common sourcesof non

-agricultural wageemploymentpursued

by men,and earningsfrom thesewere

spread evenly by landholding class

(Pincus1996:69–70).

13 It isindeedstrikingthatseveralstud

-ies of off-farm employment in Asia

continuethisfocusonruralindustries,

inspiteoftheevidencethattheservice

sectorgeneratesmoreemploymentand

incom e (se e , for e xa m ple , M ukh o

-padhyayandLim1985;Islam1987;and

Hayami1998).Historicalevidencefrom

Japan and even Taiwanalsosuggests

that income from self-employment in

industrial activitieswas a verysmall

part of total farm household income

until th e 1960 s. In come from w age

la bour w a s m uch m or e im por ta n t

(Oshima1984:appendixtables1and2).

14 Animportantexceptionistheworkof

JenniferAlexander(seeAlexander1998

andtheliteraturecitedthere).Women

have been heavily involved in rural

tradingactivities inJavaatleastsince

theearlydecades ofthe20th century,

as White (1991) and Alexander and

Alexander (1991) have shown. This

trendhascontinuedintothe1990s.

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Agriculture’,BulletinofIndonesian Eco

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Alexander,Jennifer(1998),‘Women Trad

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-city,Gender and the Entrepreneurial

Spirit’,inRobertW.Hefner(ed.),Market

Cultures:Societyand MoralityintheNew AsianCapitalisms,WestviewPress,Boul

-derCO.

Alexander, Jennifer,and PaulAlexander

(1991),‘TradeandPettyCommodityPro

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Kebumen’, in Paul Alexander, Peter

BoomgaardandBen White(eds),Inthe

ShadowofAgriculture: Non-FarmActivities

intheJavaneseEconomy,PastandPresent,

RoyalTropicalInstitute,Amsterdam.

Booth,Anne (2000),‘PovertyandInequal

-ityintheSoehartoEra:AnAssessment’,

BulletinofIndonesianEconomicStudies36

(1):73–104.

BPS(1987),Sensus Pertanian 1983:Sampel

Pendapatan Petani,Seri I [Agricultural

Census1983:FarmerIncomeSampleSur

-vey,SeriesI],Jakarta,August.

BPS(1988),KeadaanAngkatanKerjadiIndone

-sia[LabourForceSituationinIndonesia]

1986,Jakarta.

BPS (1992), PendudukIndonesia:HasilSen

-susPenduduk1990 [Resultsofthe1990

PopulationCensus],SeriesS2,Jakarta.

BPS (1994),ProdukDomestikRegionalBruto

Propinsi-Propinsidi Indonesia, Menurut

Pengunaan,1983–1991[Provincial Gross

DomesticProductinIndonesiabyExpen

-diture,1983–1991],Jakarta,January.

BPS(1995a),SensusPertanian1993,SeriD1:

Pendapatan RumahtanggaPertanian dan IndikatorSosialEkonomi [1993 Agricul

-tural Census, Series D1: Agricultural

H ous e h old In com e a n d Socio-E co

-nomicIndicators],Jakarta.

BPS(1995b),SensusPertanian1993,SeriB1:

Sensus Sampel Rumahtangga Pertanian PenggunaLahan[1993Agricultural Cen

-sus,SeriesB1:SampleCensusofAgricul

-tural Households Cultivating Land],

SeriesI],Jakarta.

BPS(1995c),ProdukDomestikRegionalBruto

Propinsi-PropinsidiIndonesia,1988–1993

[Provincial Gross Regional Domestic

ProductinIndonesia,1988–1993],Jakarta,

February.

BPS(1995d),KeadaanAngkatanKerjadiIndo

-nesia1994[LabourForceSituationinIn

-donesia1994],Jakarta.

BPS(1995e),ProdukDomestikRegionalBruto

Propinsi-Propinsidi Indonesia, Menurut

1984

to

1993,

and

that

by

1993

incomes

from

all

off

-

holding

sources

accounted

for

50%

of

the

total

incomes

of

agricul

-tural

households.

This

in

itself

is

hardly

surprising:

a

large

body

of

literature

demonstrates

that

agricultural

house

-holds

throughout

Asia,

Africa

and

Latin

America

are

deriving

significant

and

in

-creasing

shares

of

their

total

incomes

from

off

-

holding

activities.

10

Indeed

it

has

been

argued

that

rural

households

‘increasingly

come

to

resemble

minia

-ture

highly

diversified

conglomerates,

many

of

them

with

a

foothold

in

the

ur

-ban

sector’

(Cain

and

McNicoll

1988:

105).

While

this

is

true

to

an

increasing

extent

of

at

least

some

parts

of

Indone

-sia,

we

should

not

overlook

the

fact

that

the

great

majority

of

those

households

classified

as

agricultural

still

claim

that

agriculture

is

their

‘main’

source

of

in

-come.

Notwithstanding

the

extent

to

which

income

diversification

is

taking

place,

agriculture

is

still

the

core

activity

for

many

rural

households.

At

the

same

time,

by

the

mid

1990s,

a

significant

mi

-nority

of

rural

households

(around

27%

according

to

the

Supas)

had

no

involve

-ment

with

agriculture

at

all.

Off

-

farm

earnings

in

the

two

income

surveys

are

broken

down

into

agricul

-tural

wages,

other

income

from

agricul

-tural

activities

(such

as

hiring

out

equipment),

non

-

agricultural

wages,

and

various

types

of

self

-

employment

activi

-ties

in

manufacturing

and

services.

In

ad

-dition,

many

households

receive

income

from

remittances.

In

1993,

wages

and

salary

earnings

were

the

largest

single

source

of

off

-

farm

earnings,

and

non

-agricultural

wage

earnings

were

greater

than

those

from

agriculture.

There

is

evi

-dence

of

an

inverted

‘U’

relationship,

in

that

both

agricultural

and

non

-

agri

-cultural

wages

account

for

a

higher

proportion

of

total

agricultural

house

-hold

incomes

for

the

middle

income

groups.

But

it

is

also

clear

that

depen

-dence

on

non

-

agricultural

wages

and

salaries

is

more

skewed

towards

the

up

-per

income

groups.

When

all

sources

of

non

-

agricultural

income

are

added

to

-gether,

the

result

is

a

steady

increase

by

income

group

in

the

proportion

of

total

income

derived

from

non

-

agricultural

activities,

with

the

exception

of

the

very

lowest

and

the

very

highest

income

groups.

In

this

sense

Indonesia

would

appear

to

contradict

what

Reardon

et

al.

(2000:

271)

term

the

‘conventional

wis

-dom’

that

there

is

a

strong

negative

rela

-tionship

between

the

non

-

agricultural

share

and

total

household

income,

al

-though,

as

these

authors

demonstrate,

evidence

from

a

number

of

other

coun

-tries

or

regions

also

tends

to

refute

the

conventional

wisdom.

11

Over

the

years,

numerous

authors

have

pointed

out

that

rural

households

try

to

take

a

longer

-

term

view

of

income

security

than

‘merely

taking

advantage

of

currently

available

income

earning

opportunities’

(Ellis

2000:

296).

Investment

in

a

variety

of

income

yielding

assets

is

obviously

of

cru

-cial

importance

to

rural

households

seek

-ing

to

secure

their

income

over

the

longer

term.

Traditionally,

households

with

some

surplus

would

invest

in

acquiring

extra

land,

in

improving

the

quality

of

ex

-isting

land,

in

purchasing

agricultural

implements

and

vehicles

for

own

use

and

for

hire,

and

in

purchasing

livestock

or

gold

and

jewellery.

Over

the

past

two

de

-cades,

investment

in

the

education

of

chil

-dren

and

other

family

members

has

also

become

a

very

important

part

of

rural

household

asset

diversification

(Ellis

2000:

296

–

7).

Increasingly

many

rural

households

appreciate

that

access

to

the

more

lucrative

and

secure

non

-

agricul

-tural

occupations

requires

education,

and

investment

in

education

of

family

mem

-bers

is

thus

viewed

as

an

even

more

im

-portant

part

of

the

household

investment

strategy

than

the

acquisition

of

land

or

equipment.

Although

changes

in

enrolment

lev

-els

since

the

1970s

show

that

many

rural

households

now

appreciate

the

value

of

educational

investment,

there

are

signifi

-cant

up

-

front

costs

associated

with

edu

-cation

in

Indonesia,

especially

at

the

secondary

and

tertiary

levels

(Booth

2000:

93).

Thus

it

is

the

more

affluent

households

that

can

afford

to

keep

their

children

in

school

long

enough

to

gain

the

entry

-

level

qualifications

needed

for

the

better

paid

and

more

secure

jobs

in

manufacturing

and

the

modern

service

sector.

Over

time

it

is

likely

that

the

effect

of

growing

access

to

non

-

agricultural

wage

employment

will

aggravate

income

inequalities

in

many

parts

of

rural

Indo

-nesia,

as

indeed

appears

to

be

the

case

in

other

parts

of

the

world.

12

_Reardon,

Berdegue

and

Escobar

(2001:

404)

report

that

both

ownership

of

land

and

access

to

education

position

household

mem

-bers

to

undertake

well

-

paid

non

-

agricul

-tural

activity

in

many

parts

of

Central

and

South

America,

and

that

in

some

coun

-tries

the

‘educated

landless’

may

be

earn

-ing

as

much

as

households

operating

large

agricultural

holdings.

Even

so,

access

to

off

-

farm

and

non

-agricultural

employment

permits

even

the

poorest

households

to

increase

their

total

income

and

also,

in

many

cases,

to

reduce

the

insecurity

inherent

in

exclu

-sive

reliance

on

agriculture

for

income.

There

is

little

doubt

that

income

diversi

-fication

is

an

important

reason

for

the

decline

in

the

headcount

measure

of

pov

-erty

in

many

parts

of

rural

Indonesia

since

the

1970s.

Trade

and

other

services

have

been

the

‘main

source

of

income’

for

a

significant

number

of

those

house

-holds

cultivating

very

small

amounts

of

agricultural

land.

In

many

parts

of

In

-donesia,

trade

and

services

provide

em

-ployment

for

large

numbers

of

women

workers.

In

1995,

the

trade

sector

pro

-vided

more

employment

than

manufac

-turing

for

both

male

and

female

workers

in

rural

areas

(BPS

(1996a).

In

the

Latin

American

context,

Reardon,

Berdegue

and

Escobar

(2001:

404)

point

out

that

many

non

-

farm

employment

programs

in

rural

areas

focus

on

the

manufacturing

sector

in

spite

of

the

evidence

that

trade

and

other

services

offer

greater

opportu

-nities.

13

_This

_point

_also

_seems

_highly

_rel

-evant

in

Indonesia.

Given

the

importance

of

rural

trade

as

a

source

of

employment

and

income

in

many

parts

of

the

coun

-try,

especially

for

land

-

poor

households,

it

is

surprising

that

so

little

research

has

been

carried

out

in

this

sector.

14

There

is

considerable

regional

variation

in

the

extent

to

which

agricultural

house

-holds

have

been

able

(or

been

compelled)

to

diversify

their

incomes

away

from

ex

-clusive

reliance

on

the

farm

holding.

While

the

proportion

of

on

-

farm

to

total

income

fell

in

some

of

the

more

isolated

and

agriculturally

less

productive

parts

of

the

country

between

1984

and

1993,

it

is

clear

from

the

1993

data

that

many

households

in

East

Nusa

Tenggara,

East

Timor

and

Irian

Jaya

were

unable

fully

to

compensate

for

low

on

-

farm

income

by

earning

more

from

off

-

farm

employment.

For

Indonesia

as

a

whole,

off

-

farm

earn

-ings

grew

more

rapidly

than

on

-

farm

in

-come

over

the

nine

years

from

1984

to

1993,

but

the

difference

in

growth

rates

was

certainly

much

smaller

than

in

Tai

-wan

during

the

1960s

and

1970s.

Indeed

a

higher

proportion

of

agricultural

house

-holds

in

Indonesia

were

wholly

depen

-dent

on

farming

for

their

income

in

1993

than

was

the

case

in

Taiwan

in

1960,

even

though

per

capita

GDP

was

lower

in

Tai

-wan

in

1960

than

in

Indonesia

three

de

-cades

later.

Even

in

Java

and

Bali

the

proportion

was

higher.

Exploring

the

rea

-sons

for

these

differences

is

beyond

the

scope

of

this

paper,

although

they

are

prob

-ably

related

both

to

Taiwan’s

unusually

egalitarian

distribution

of

land

after

the

re

-forms

of

the

1950s,

and

to

greater

access

to

education

there

than

in

Indonesia.

NOTES

1 The employment data from the 1990 populationcensusreported a consider-ablenumberof employedworkers, es-peciallyinruralareas,whosesectorof employment was‘not stated’.If most were infact employedin agriculture, then the decline in the agricultural labour force between 1990 and1995 wouldhavebeenmuchlarger.Ifonthe otherhand,theseworkerswereearning mostoftheirincomefrom non-agricul-tural jobs,then the shareofthe rural non-agricultural sectorin overall em-ployment growth would have been smallerthanthatreportedhere. 2 Since1997therehasbeenarapidgrowth

in the size of the agricultural labour force,andalmostallthe newjobs cre-atedsince1997havebeeninthe agricul-turalsector.

3 Thesurveycarriedoutaspartofthe1983 agriculturalcensusinfacttookplace dur-ingcalendaryear1984, whilethatfor the1993 agricultural censuswas con-ducted overcalendar year 1993. The mainfindingsaresummarised inBPS (1987)andBPS(1995a)respectively. 4 Anagricultural householdasdefinedin

the1983agriculturalcensusisonewhere atleastonehouseholdmember carries outagricultural activities, i.e.works in foodcrops,treecrops,fisheries,livestock orforestry.In1993this definitionwas amendedto‘[households]whereatleast onememberproducesagricultural out -putwiththeaimofsaleorprofitor ex-change,at his or her own risk’ (BPS 1995b:xxviii).Thisdefinitionwas prob-ably rathermore restrictive than that usedinthe1995intercensal survey,with theresultthatthenumberofhouseholds reportedasderivingallorpartoftheir incomefrom agriculture in1995(24.1 million)was considerably largerthan the numberof agricultural households reportedinthe1993agricultural census (20.3 million).

5 SeeAbey,BoothandSundrum(1981)for a discussionofthis point,drawing on datafromthe1973Agricultural Census. Inaddition,inIndonesiaaselsewhere, theinversesize–productivity

relation-shiprestsonlowercostlabour transac-tionsinsmallerholdings(Lipton1993). 6 Thereismuch evidencefromvarious parts of Central and South America that these factors play an important roleindeterminingaccesstooff-farm employment at the household level; see for example Corral and Reardon (2001).

7 LanjouwandLanjouw(1995:19–23)and Ellis(1998:19–23)providea discussion of the literature.

8 Ho(1979),inanearlyexaminationofthe Taiwanese successwithdecentralised industrialisation, stressedthedifference betweenTaiwanandSouthKorea.Inthe lattercountry,alabourforcesurveycar -riedout in1974 showedthat lessthan 30%oftotal employmentincommerce andserviceswaslocatedinruralareas. 9 There are also variations by holding

size,asisclearfromtheSocialAccount -ingMatrices(BPS1996b).According to thesedata, non-farm incomeon hold-ingsoveronehectaregrewtwiceasfast asfarmincomeovertheyearsfrom1975 to 1993.The differenceingrowthrates was much lessmarked forfarms con-trollinglessthan0.5hectares.

10 Theliterature onoff-farmemployment isnowsubstantial.Oshima(1984)and thepapers inShand (1986)reviewthe evidence upto the early 1980sin the contextofAsia.Saith (1992)drawson work in both Asiaand otherparts of the developingworld, asdo Lanjouw and Lanjouw (1995)and FAO (1998). Ellis(1998)givesacomprehensive sur-vey,albeitwithafocusonsub-Saharan Africa.There isalso a body of litera-tureforIndonesiabasedoncolonial sta-tistical cen s us es an d sur v ey s th a t demonstrates the importanceof non-a g ricultur non-a l e mploym e n t in r ur a l householdsintheearlydecadesofthe 20th century in Java, especially for women.White (1991)provides a dis -cussionofthesesources.

11 White(1991:table10)contrastsdatafrom Japanwiththosefromasurveyofover 1,000 agricultural householdsin rice-growing areas of Java in 1981. The

Javanese data showed that thelarger landholding householdsearnedmorein absolutetermsfromoff-farm activities, although such incomeaccounted for a smallershareoftotalhouseholdincome than was thecase for the households controlling lessland.

12 Onedetailedfieldstudy carriedout in WestJavafound,perhapssurprisingly, that no relationship existed between mean earnings from non-agricultural labourandaccesstoland.Construction work andbecak(trishaw)drivingwere the twomost common sourcesof non-agricultural wageemploymentpursued by men,and earningsfrom thesewere spread evenly by landholding class (Pincus1996:69–70).

13 It isindeedstrikingthatseveral stud-ies of off-farm employment in Asia continuethisfocusonruralindustries,

inspiteoftheevidencethattheservice sectorgeneratesmoreemploymentand incom e (se e , for e xa m ple , M ukh o -padhyayandLim1985;Islam1987;and Hayami1998).Historicalevidencefrom Japan and even Taiwanalsosuggests that income from self-employment in industrial activitieswas a verysmall part of total farm household income until th e 1960 s. In come from w age la bour w a s m uch m or e im por ta n t (Oshima1984:appendixtables1and2). 14 Animportantexceptionistheworkof JenniferAlexander(seeAlexander1998 andtheliteraturecitedthere).Women have been heavily involved in rural tradingactivities inJavaatleastsince theearlydecades ofthe20th century, as White (1991) and Alexander and Alexander (1991) have shown. This trendhascontinuedintothe1990s. REFERENCES

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