Measuring Employment and Job Quality in Agrifood Systems

IFPRI researchers estimate that the agrifood sector makes up almost one-sixth of the global economy and one third of global employment. In low-income countries, the sector’s value-added share is still more than 40% and its employment share about 67%. These measures of the agrifood sector account for the resources used in food processing, food services, agricultural input production, and processing agricultural output like cotton into non-agricultural outputs like clothing. This is vitally important because economic development dramatically increases the importance of off-farm agriculture-related activities. The comprehensive database created by the study further shows, as economies develop, the share of employment in off-farm agrifood activities increases, while also the quality of that employment, in terms of required skills and level of remuneration, improves with the integration and modernization of agrifood value chains. These are important insights for strategies and pathways aiming to improve food security, reducing poverty and achieving more inclusive economic growth.
Here we summarize some of the key findings of the study and provide access to the related data.

What’s new?

Previous attempts at estimating the economic size of the agrifood sector and its contribution to employment have used either activity-based orinput–output approaches. The activity approach begins by estimating value added in readily identifiable agrifood activities, such as agriculture, food processing, and food services and sometimes in direct production of inputs. S

 

The new IFPRI study uses input-output approaches to extend these measures, first  by comprehensively capturing backward linkages through production of agricultural inputs and forward linkages from transforming agriculture-based products into nonfood products, such as cotton into clothing or grain into biofuels. Second, it links production data to employment and wage data to estimate the jobs and incomes directly and indirectly generated by the agrifood sector, disaggregated by gender and skill level.

One sixth of the global economy builds on the agrifood sector

The above figure shows the different outcomes obtained using the activity and input approaches. It shows that:

• Agriculture alone contributes about 4 percent to the global economy.
• Food processing accounts for almost 3 percent, while food services such as restaurants add a little over 2 percent.
• Adding input-output based backward and forward linkages to both food and non-food activities, the contribution grows to 15.2% or almost one sixth of the global economy.

Agriculture’s share in the agrifood system declines with income growth

The figure below highlights how the agrifood system shifts focus from farm-based activities in LICs to manufacturing and services in higher-income countries :

• The share of primary agriculture (AFF) within the agrifood system itself falls sharply with income, from 29 percent in low-income (LICs) to 2 percent in high-income countries (HICs).
• The declines in the shares of other components of agrifood are much less dramatic than for primary agriculture. As a consequence, the overall share of agrifood remains almost 11 percent even in the high income economies.
• Within the agrifood sector, the role of input-supplying activities increases dramatically, accounting for 37 percent of agrifood GDP in the high-income countries, up from 15 percent in the lowest-income group. .
• A final point to note is that the economic fulcrum of the agrifood system shifts from on-farm, or primary, production-based activities in LICs to activities that are increasingly nonfarm, or manufacturing- and services-based, in lower-middle-income countries (LMICs), upper-middle-income countries (UMICs) and HICs.

Off-farm agrifood employment becomes more important with economic development

The composition of the agrifood system labor force changes dramatically with overall economic development. The above figure illustrates:

• There is a substantial exit of workers from the agrifood sector as economic growth proceeds.
• Within this broad trend are also changes in the composition of the agrifood labor force itself.
  
  • This is seen in the sharp decline in the share of unskilled workers (in the total labor force) employed in agrifood activities as incomes rise, for both male and female workers.
  • Unskilled female workers transition out at a relatively faster pace at lower levels of development (from LIC to LMIC), while unskilled males transition more rapidly between the LMIC and UMIC stages.
  • At the same time, the shares of skilled workers rise consistently with rising incomes.
  • While the overall shares of skilled labor remain relatively small compared to the exit of unskilled labor—indicating a net decline in overall agrifood employment—some interesting patterns emerge in the rising skilled worker trends. As incomes rise, the increase in skilled female workers is slow initially (from LIC to LMIC) but accelerates sharply between the LMIC and UMIC stages, before slowing again. The increase in skilled male workers in the agrifood system is progressively faster, with the largest increase occurring between UMIC and HIC.

Job quality improves with the development of the agrifood system, while gender gaps become smaller

A key finding of the analysis is that nonfarm parts of the agrifood sector provide much better-paid jobs, especially for female workers.

• Across all sources of employment—including on-farm jobs where the few skilled workers are concentrated, skilled workers command a significant wage premium over unskilled workers.
• Non-farm activities, both food- and nonfood-related, pay considerably higher average wages than the agrifood system and notably higher than primary agriculture.
• The gender gap in wage payments is largest in the farm sector, where men earn 45% higher wages than women.
• For skilled farm workers, the premium is lower but still sizeable at 25%.
• When including food processing and food services the wage gap is considerably smaller for both skilled and unskilled workers.
• Gender disparities are also narrower in the backward linkage activities which provide inputs to agrifood and in the forward linkage activities which transform agrifood outputs like cotton and timber into nonfood products.

These findings suggest that facilitating off-farm agrifood employment opportunities helps create better-paid jobs for both skilled and unskilled workers, but especially for female workers in both categories.

Summary

This new study shows that the agrifood sector is a global powerhouse, making up nearly one-sixth of the world's economy and employing one-third of its workforce. While we often think only of farming, this comprehensive measure includes "backward linkages" like seed and fertilizer production, and "forward linkages" such as turning cotton into clothing. As countries grow wealthier, the sector shifts from labor-intensive farming to high-tech food services and manufacturing. This transition is good news for workers: it creates better-paying jobs for both men and women, increases the demand for skilled labor, and helps close the gender wage gap.