Rise in non-farm income cuts domestic migration

A one per cent increase in non-farm income reduces domestic migration to other districts by 4 to 7 per cent in rural areas and municipalities, a new study found. 

The impact is stronger for the households in the municipalities where the likelihood of migration goes down by 6-10 per cent, said the study, "Local Nonfarm Opportunities and Migration Decisions: Evidence from Bangladesh.

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The Bangladesh Institute of Development Studies (BIDS) conducted the study. The findings were disclosed at a programme at the auditorium of the think-tank in Dhaka yesterday.

There are some indications that higher non-farm income encourages migration in rural areas.

"The impact is more pronounced for the income rich, land poor and educated households," said Kazi Iqbal, a senior research fellow of the BIDS who led the study, while making a presentation.

In order to check the robustness of the results, the researchers used the location of the SME clusters and found that the likelihood of migration was lower from the union with SME cluster.

"If infrastructure develops in the rural areas, the investment will increase in the SME sector there," said Binayak Sen, director-general of the BIDS.

"As a result, employment will increase in the rural non-farm sector, and migration will come down."

Shykh Seraj, noted development journalist and head of news of Channel i, said if there was industrialisation in the rural areas, more farmland would be used to set up industries.

He suggested promoting the agriculture sector and agro-based industries to create more jobs in the rural areas instead of industrialisation seen in urban areas.

Non-farm activities in developing countries have a strong impact on rural employment opportunities and poverty reduction. It is also argued that local non-farm opportunities slow down rural-urban migration. The understanding of the relationship is pivotal for rural development strategies, sustainable urban development and policies influencing domestic migrations, according to the study.

The study provides the first robust evidence of the relationship for Bangladesh, combining two sets of secondary data: the Household Income and Expenditure Survey 2016 and the Economic Census 2013.

The study raised questions about whether workers should come closer to the industry or the industry should go closer to the labourers.

So far, many countries, including Bangladesh, have been following the first strategy, which can be justified at the initial level of development.

"However, as the economy grows and cities become crowded, the second strategy is more desirable for the balanced growth and welfare," the study report said. 

In Bangladesh, the private sector has little incentives to move industries to remote areas where the cost of production is high.

"Government interventions are required in terms of policy supports and investments to incentivise the private sector to relocate industries to rural and semi-rural areas," the BIDS study said.

For example, the multiplier effect on growth and poverty of a garment factory in rural areas, where most of the workers are from, will be much higher than the one in Dhaka city, if adequately incentivised.

 "These positive externalities justify government's intervention in setting up industrial zones in rural areas. That is, the geography of industrial units is an important policy tool that the government can use to reduce poverty and income inequality."

The report said while incentivising migration can be effective in smaller scales in the short run, a long-term strategy for rural development should involve creating job opportunities for the rural labour forces.

Generation of non-farm businesses and employment has long been argued to be an effective strategy for rural development, which will slow down both short term seasonal migration and permanent migration.

"We provide strong evidence on this relationship. Hence, creating non-farm opportunities at the local level is central to the idea of reducing the influx of people to the urban areas."

A related issue that has been debated in the development literature is the development of growth centres, rural or secondary towns in rural areas or closer to the rural areas.

While this growth has been endogenous, there are scopes for public interventions to facilitate such towns that are the hub of non-farm activities. 

"Such secondary towns can be a catalyst to non-farm growth and can discourage migration to the urban areas."

"A detailed plan for the development of such secondary towns is required which can be a part of the overarching land use policy of the developing countries."

During the initial periods of the coronavirus pandemic, migrant workers suffered when the lockdown was announced as they worked away from home.

Creating opportunities for work closer to the places where workers live can only avoid such humanitarian crises in the future, the study said.