World Development Report 1984

youths, who are presumably able to draw on fam- high. The two principal reasons for this structural
ily support while seeking work commensurate transformation of the labor force are well known:
with their qualifications or expectations. Many * As incomes rise, people spend a smaller proothers
are underemployed: "invisible underem- portion on unprocessed agricultural produce and
ployment" (including part-time and low-produc- a larger proportion on industrial products and
tivity workers whose skills would permit higher services.
earnings if better jobs were available) is estimated * Increases in agricultural productivity-made
to range from 20 percent in Latin America to about possible by technological innovations and accumu-
40 percent in Africa. In urban areas of most poor lated investment-allow output to grow with a
countries, occupations that require little or no capi- constant or even declining farm labor force.
tal-handicraft production, hawking, and personal As average incomes increase in today's developservices
of all sorts-are highly visible areas of the ing countries, and as population growth rates
so-called informal sector. These occupations have slow, the number of workers in agriculture should
the advantage of using scarce financial capital effi- eventually decline. In some upper-middle-income
ciently, but the incomes they produce are often countries in Latin America, including Argentina,
extremely low. Chile, Uruguay, and Venezuela, already less than
20 percent of the labor force is employed in agricul-
STRUCTURAL TRANSFORMATION OF THE LABOR ture. But the transfer of labor out of agriculture has
FORCE. As shown in Chapter 4, both urban and proceeded much more slowly in much of lowrural
populations will increase rapidly into the next income South Asia and sub-Saharan Africa. There
century in the low-income countries of Asia and are two reasons: their high rates of growth of the
Africa. Thus, while the general concern with the total labor force and their low initial shares in modprovision
of productive employment for urban ern sector employment.
dwellers is well founded, many countries will also In 1980 the share of the labor force in agriculture
face the task of absorbing considerably more work- averaged 73 percent in low-income countries
ers into the rural economy. This double challenge (excluding China and India); in most countries of
differs from the historical experience of today's sub-Saharan Africa it was between 80 and 90 perindustrialized
countries. Their economic growth cent. During the 1970s the total labor force in these
was helped by a massive shift of labor from agri- countries grew at 2.3 percent a year. The rate of
culture, where the amount of capital per worker growth will increase to 3 percent a year between
and average productivity was relatively low, to 1980 and 2000. The effects on the future growth of
industry and services, where they were relatively the agricultural labor force can be illustrated with
some hypothetical calculations.
Figure 5.2 portrays a country in which 70 percent
of the labor force is in agriculture and in which
FIGURE 5.2 nonagricultural employment is growing at 4 per-
When will the number of agricultural workers cent a year. It shows, for different rates of growth
of the total labor force, the time required for the
Annual growth rate of total labor force size of the agricultural labor force to start to decline
4 Kenya in absolute numbers. For example, if it is assumed
Nonagricultuhraltempoymen w that the annual growth of the total labor force is 2.5
3 3 percent 4 percent percent (which, combined with a 4 percent growth
in nonagricultural employment, is a fairly typical
combination in low-income countries), the agricul-
2 "best case" tural labor force would continue to grow in absolute
size (though declining slowly as a share of the
total) for about fifty years (point x). If the total
labor force were to grow by 3 percent a year
\ Japan,
approximately 1890
instead, the time required for the agricultural labor
force to start to decline would nearly double to
0 150 200 ninety-five years (point y). Although this example
Years until the agricultural labor force starts to decline oversimplifies-for instance, it does not admit the
Assumes 70 percent of labor force in agriculture. possibility of massive urban unemployment-it
Source: Johnston and Clark, 1982, does seem clear that the size of the agricultural
88