Cash income

Cash income¹⁵⁹ in the study area is incurred mostly through a regular job, wage labor, cash crop sales¹⁶⁰, gifts, remittances from relatives employed abroad¹⁶¹ or in formal sectors and ceremonial exchange, whereas, income in kind includes animal products like milk, churned butter, natural addition in livestock number¹⁶² and farm produce like citrus, wheat, fodder, etc., as well as ceremonial exchanges in kind within family and clan members.

158 A number of empirical studies in developing countries, using various techniques, have pinpointed the contribution of different sources of income to total income inequality. Studies on Pakistan include those of KRUIJK 1986; MOHAMMAD/BADAR 1985; and ERCELAWN 1984. Studies on other developing countries include those of GLEWWE 1986; NUGENT/WALTHER 1982; PYATT/CHEN/FEI 1980; and FIELDS 1979.

159 IFPRI Rural Survey of Pakistan 1986/87 - 1988/89 (ADAMS, Jr and HE 1995:10) divides rural income into five kinds: 1) Non-farm income (wage and salaried jobs) ; 2) Agricultural income (net income from crop production); 3) Transfer income (internal and international remittances); 4) Livestock income; 5) Rental income (rents received from ownership of assets).

160 In calculating the agricultural income, the prices used for crops were those received by the farmer. For crops not sold, mean village prices were employed. The value of by-products of crops like straw from wheat, barley, and maize was calculated by using average village prices.

161 „ In Pakistan, as in other developing countries, remittances can have a profound effect on rural income distribution. In these countries, rural incomes tend to be lower than incomes earned in the urban sector. It is this disparity between rural and urban incomes that causes villagers to seek work elsewhere, either in cities or abroad. And it is this disparity in income levels that should be of concern to policymakers and others interested in equity issues“ (ADAMS, Jr and HE 1995:34).

A different viewpoint is given by HAMID/NABI/and NASIM (1990:108-109) „Since sugar-cane production (in an area near a sugar mill is several times as profitable as any other crop, (farmers) would like to have sugar mill established in their area and often press this demand through various channels. Therefore, the decision to locate a sugar mill (in rural Pakistan) is more likely to be taken on political rather than economic grounds.“

162 The empirical survey gathered detailed data on purchase and sales prices of animals, milk production (consumed at home and sold), egg production (consumed at home and sold), and bullock plowing. Data were collected on value of fodder (own and purchased) and hired labor. From these output and input data, net livestock income was calculated. For a similar calculation, see IFPRI Rural Survey of Pakistan 1986/87 -1988/89 (ADAMS, Jr and HE 1995:11).

Table 14: Cash income (farm and non-farm) of 12 case study households in 1991-92 Non-Farm Income /year (cash)163 Farm income /year (cash) Cases Regular All values in parentheses are the percentages of total income

1. Agricultural crop production is measured in two ways. Gross output is the value of a product reported by the farmer as its market value. Net output has been defined as gross output minus the costs of direct inputs, namely seeds, fertilizers, manure and pesticides and other expenditures such as equipment rental, irrigation water-rates and taxes, etc. The value of these direct inputs has been enumerated for each individual crop grown.

2. Churned butter

163 The definition of non-farm income used here is narrower than the definitions employed in many other studies. For example, CHIN (1979) includes rental income in non-farm income, while MALTON (1979) includes livestock income.

3. The definition of non-farm income used here is narrower than the definition employed in many other studies. For example, CHIN (1979) includes rental income in non-farm income, while MALTON (1979) includes livestock income.

Source: author’s own survey

Table 14 shows two major subcategories of cash income in twelve case study households -farm and non--farm - which are further divided into respective components. Non--farm income plays a very important role in almost all economic strata of the village. „The majority of the farming households has multiple sources of income to secure their existence. Not only small landowners with insufficient landholding, but large landowners also practice it without any compulsion“ (KUHNEN 1989b:3). Both categories are interdependent in the sense that income from off-farm employment contributes indirectly to the increase of farm income,¹⁶⁴ since not only is more money available to the household for consumption, but also for farm investments.¹⁶⁵ Non-farm cash income is mainly acquired from a regular job, agricultural labor, pension or labor abroad,¹⁶⁶ while farm income is usually an outcome of crop production and livestock.¹⁶⁷ Table 14 shows only four households, cases 2, 7, 9 and 10 earning non-farm incomes¹⁶⁸, which contribute just 2.4%, 24.2%, 17.9% and 27.6% of the total annual income respectively. ¹⁶⁹ Besides, all households are engaged in farm activities which provide a major share of the household’s actual income, in ten out of twelve households even more than 50%. The population’s involvement in non-farm income depends upon the age composition of the household members, size of landholding, cropping pattern and cropping intensity of the area, which is further elaborated in the next chapter as an important influencing factor. Non-farm income represents 41 percent of the total household income in the villages surveyed by KLENNERT (1988:433) in Faisalabad District, „The non-agricultural income gives a greater social security to marginal farm households in case the farm’s subsistence basis is destroyed, e.g., due to salinization/waterlogging of the farmland or the lessor claiming

164 See also, BADIEL (1992).

165 Cf. KLENNERT (1988:433).

166 IFPRI Rural Survey of Pakistan 1986/87 - 1988/89 (ADAMS, Jr and HE 1995:20) decomposes the sources of non-farm income into five sources: 1) Self-employment; 2) Unskilled labour; 3) Government employment; 4) Private sector; 5) Other.

167 In the past, the rural economy of the Third World was considered to be synonymous with agriculture.

According to this view, rural households receive the bulk of their income from the production of food and cash crops. There has been a growing recognition, in the past few years, that the rural non-farm sector, which includes such diverse activities as government, commerce, manufacturing, and services, also plays a vital role in the economies of many rural Third World households. This changed view is largely due to the results of rural budget surveys in a number of developing countries. Using different definitions of non-farm income, it was ascertained that non-farm income represents between 13 and 67 percent of the total rural household income. For example, in their review of 13 rural household budget surveys, von BRAUN and PANDYA-LORCH (1991) find that the share of non-farm income in the total rural income ranges from 13 percent in Brazil to 67 percent in Burkina Faso. For other estimates, see HAGGBLADE, HAZELL, and BROWN 1989.

168 A variety of income sources come into being when children also become productive. Mostly the father takes the responsibility of cultivation, in seasonal labour peak hours with the help of one or two sons. The sons usually take up non-farm jobs, usually migrate to the urban area or abroad, their wife and children, however, stay in the parental house, so that the family stays together and the earned income (in cash or in kind) flows back to the parental household. A variety in income sources imparts a secure existence to many households (LÖFFLER 1992:104).

169 Other studies in Pakistan (KLENNERT 1986:45) claim that the non-farm income ranges between 36 and 43 percent. These surveys report a specially high contribution of non-farm income to the total rural

household income in South Asian countries (like Pakistan), where unfavorable labor-to-land ratios severely limit income-earning opportunities in agriculture (ADAMS, Jr and HE 1995:10).

back the leased land which is necessary for keeping up the marginal farm“ (KLENNERT 1988:434).

Since only cash income is considered in Table 14, only those agricultural products are mentioned which contribute in cash. Among others, citrus contributes the largest share of the total cash income. Sugar-cane represents a secondary income and its products are a third good source of income.“ The higher proportion of income from livestock could be attributed to the better market for milk“ (BHATTI 1984:134).¹⁷⁰ Wheat and fodder, however, are cultivated only for domestic consumption or saving, and are only rarely sold.