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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,

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Presentation on theme: "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,"— Presentation transcript:

1 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

2 A.Dorward: May Summary & outline Preliminary 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

3 A.Dorward: May 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.

4 A.Dorward: May 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 2.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 incomes 4.increases in poverty incidence & severity increase unskilled labour supply into the market Contractions in labour force raise wages?

5 A.Dorward: May 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

6 A.Dorward: May 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

7 A.Dorward: May Maize price change impacts: production

8 A.Dorward: May Maize price change impacts: income

9 A.Dorward: May Maize price change impacts: calorific consumption

10 A.Dorward: May IRE Sick households: 40% labour loss & expenditure increase Morbidity/ mortality scenarios Household impacts Morbidity: 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 ScenarioHealthy households Sick households Bereaved households Base100%00 A90%10%0 B80%20%0 C70%20%10% D60%20%

11 A.Dorward: May Net income per capita

12 A.Dorward: May Cultivated area

13 A.Dorward: May Local maize area

14 A.Dorward: May Hybrid maize area

15 A.Dorward: May Farm labour, Nov-Jan

16 A.Dorward: May Unskilled labour hire out, Nov-Jan

17 A.Dorward: May Unskilled labour hire, Nov-Jan

18 A.Dorward: May Unskilled farm labour surplus, Nov-Jan

19 A.Dorward: May Wage impacts: alternative hypotheses Market labour demand falls, supply increases: wages fall? 1. poor affected households hire out more labour to meet urgent cash needsNO 2. 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 slightly 3. 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 ???

20 A.Dorward: May IRE results: only unskilled labour affected ScenarioABCD All households real income All98%97%94%91% Healthy100% Sick84% Bereaved 69% Poor male & female head households real income All98%96%93%89% Healthy100% Sick79% Bereaved 68% Fallow area195%291%367%443% Local maize area98%96%94%91% Hybrid area99%98%95%92% Tobacco area98%97%91%84% Skilled labour exports (value)101%102%103%104% Unskilled labour exports (value)98%96%89%82%

21 A.Dorward: May IRE : skilled & unskilled labour affected ABCD All households real income All98%96%91%87% Healthy100% Sick79% Bereaved 56% Poor male & female head households real income All98%96%93%89% Healthy100% Sick79% Bereaved 68% Fallow area195%291%367%443% Local maize area98%97%95%94% Hybrid area98%96%90%83% Tobacco area99%98% Skilled labour exports (value)94%88%74%59% Unskilled labour exports (value)103%105%107%109%

22 A.Dorward: May IRE : skilled & unskilled labour affected, 95% wage ScenarioABCD All households real income All97%95%91%86% Healthy99% Sick78% Bereaved 54% Poor male & female headed households real income All95%93%89%86% Healthy97% Sick75% Bereaved 65% Fallow area256%345%415%485% Local maize area96%94%93%92% Hybrid area90%89%83%77% Tobacco area108%106% 105% Skilled labour exports (value)95%90%75%61% Unskilled labour exports (value)90%92%95%97%

23 A.Dorward: May 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?

24 A.Dorward: May Further information Contact See: Dorward, A., I. Mwale, R.Tuseo. (2006 ) Labour market and wage impacts of HIV/AIDS in rural Malawi. Review of Agricultural Economics 28: Dorward AR and Mwale IM (2006) Labor Market and Wage Impacts of HIV/AIDS in Rural Malawi pp in Gillespie, S. (ed.) 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, Washington, D.C.: International Food Policy Research Institute (

25 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


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