Turning the Living Income Vision into a Reality
Living income is a complex, multisector issue that requires a complex, multisector solution. The contextual factors affecting households, and specifically incomes of households, are many (see the figure below). There is a multitude of development practitioners coming together to solve this challenge, and SCOPEinsight is helping these efforts with a predictive model for development professionals who work with agribusinesses. We are convinced that, through coordinated and sustained effort, farmers in emerging markets can achieve a living income.
The living income challenge
Current estimates indicate that 1 in 10 people worldwide live on under $1.90 a day, the threshold for extreme poverty. Approximately 80% of these people live in rural areas. Since living income is region-specific, it is challenging to calculate global percentages. Still, it can be safely assumed that the proportion of people worldwide who earn less than a living income is significantly higher than 1 in 10. It can also be assumed that many smallholder farmers worldwide fall into this category.
It is imperative to increase global income levels for many reasons, including reaching the United Nation’s Sustainable Development Goal (SDG) of No Poverty by 2030. Unfortunately, increasing the incomes of smallholder farmers sustainably is a complex issue. Many short-term solutions, such as simply increasing market prices for produce, will cause additional challenges in the long term. It is also vital to increase incomes in an environmentally sustainable way and not, for example, by increasing farm size and yields through deforestation.
The issue of living income in agriculture is not a problem that smallholder farmers can solve alone. It is also not sufficient to constrain efforts solely within the agricultural sector. Efforts to solve this challenge must also come from the development sector, the private sector and governments. A true solution to the living income challenge will require coordinated, well-designed efforts from all stakeholders involved.
It takes a village
Agriculture can be an enormous driver of growth in a country and a way out of poverty for rural farmers. However, the path to realizing this potential is a long way off for many countries. It must involve a multitude of actors who work in complementary ways. Similarly, to increase farmers’ income, many interventions need to come together to solve systemic problems. No one action should be taken alone because this may have unintended consequences. For example, a price increase can unwittingly induce oversupply and indirectly cause harmful effects on the environment that may lead to companies changing their sourcing strategies. Price increases should therefore be combined with other measures if implemented at scale.
Of course, interventions need to be guided by evidence and research. A 2018 study conducted through the Farmer Income Lab by Dalberg and Wageningen University identified a few interventions that had high and medium impact on living income. Among these were: access to finance, contract farming and productivity enhancement.
Using data and machine learning to predict living income
After 11 years and nearly 6,000 agribusiness assessments — each with over 200 data points — SCOPEinsight wanted to see what evidence we had to predict living income for farmers. While we do not collect farmer-level data, we do collect a significant amount of information about agribusiness members. To develop the Living Income Predictor, we worked with NewForesight Consulting to first develop a theory of assessment. We then took the SCOPE data through a machine learning process to validate the theory and develop the model.
We have found that six of the eight dimensions from the SCOPE Basic Assessment significantly impact living income. These are: internal management, operations, sustainability, production base, market and enabling environment. By analyzing specific data from these dimensions, our model assesses the likelihood that the assessed agribusiness can play a role in helping its members earn a living income. If the likelihood is low, it also provides insight into what efforts the agribusiness should take to reach that level.
While agribusiness professionalism on its own is not enough to ensure a living income, we have evidence that it can play a role in pushing the needle further and increasing overall income. A professional agribusiness can ensure a higher net farm income, bringing farmers closer to an overall living income. The model’s guidance on strengths and weaknesses will help capacity builders target the areas that need the most help.
To find out more about the Living Income Predictor, please sign up for the International Social and Environmental Accreditation and Labelling (ISEAL) Alliance’s working group on living income where we will be sharing the results of our pilot using this model. More details here: https://tinyurl.com/2r7z4mzw.