This research provided new evidence that the rural poor are both willing and able to participate in paid labor, suggesting a high demand for employment programs.
Employment programs and financial services may be more effective when implemented together.
Anti-poverty programs that improve the mental and physical wellbeing of the poor may also improve their capacity to participate in the labor market. Holistic anti-poverty programs may have positive impacts that go beyond their immediate outcomes.
The Graduation from Ultra Poverty (GUP) project is a part of a set of evaluations that intends to determine whether the Targeting the Ultra Poor model, pioneered in Bangladesh, is effective in taking women and families out of poverty. The seventh Ultra Poor Graduation Pilot takes place in northern Ghana. IPA partnered with Presbyterian Agricultural Services (PAS), a local organisation with experience delivering a wide range of services relating to agriculture, health, and saving to implement the Graduation model.
As part of the GUP program, IPA set up an employment program that gives women the opportunity to sew fabric bags for pay. In Sub-Saharan Africa, gaps in the labour market mean households have fewer employment opportunities outside of farming, and hence lower incomes. Understanding how people make decisions to take on paid employment is the first step to understanding labour market imperfections and identifying policies that might fix them. Through the GUP employment program, researchers were able to investigate two categories of questions.
- First, if people did have access to paid labour, what factors would affect their decisions to participate or not?
- Second, why are labour markets in Sub-Saharan Africa so thin, and what roles might anti-poverty programs play in improving them? In particular, does poor nutrition and lack of access to savings affect people’s willingness and ability to participate in paid labor?
In March 2012, 120 ultra-poor communities (1,098 households)—including communities involved in GUP, communities involved in a savings-only program, and control communities—were randomly selected to receive the employment program. Half of the 120 selected communities were trained to produce a simple bag, and the other half were trained to produce a complex bag. Each month, communities randomly received either a high or low wage. We then used these variations to estimate how people respond to different wages and complexity, and to explore how anti-poverty programs and access to savings might affect participation and productivity in paid labour.
We reported two results:
- First, overall, the high wage does not significantly impact participation or the quantity of bags produced, suggesting that the ultra-poor are not responsive to changes in wage. However, the impact of the high wage is mediated by treatment: relative to control clients, clients with access to savings have higher participation when they are assigned the high wage. This might imply that access to financial services, and access to savings in particular, increases the value of wage labour.
- Second, overall, the complexity of the bag has a negative impact on the number of bags that participants produce. However, for clients with access to the full range of services (GUP), the impact of complexity on bags production is negligible.
The policy implication is that holistic anti-poverty programs like GUP may have impacts that go beyond immediate outcomes—they may also improve people’s ability to engage in complex tasks, and thereby make them both more productive potential participants in the labour market.