The challenges of resolving chronic endemic poverty on the estates

By the Economist

Last week’s column quoted The World Bank report: Sri Lanka Poverty Assessment Engendering Growth with Equity: Opportunities and Challenges that pointed out that the only sector where poverty had not declined was the estate sector. In fact poverty has increased considerably on the estates from 21 per cent in 1990/91 to 30 per cent in 2002. The report says, “The story in the estate-homes for only 5 per cent of the country’s population – seems to be one of stagnation rather than a drastic fall in welfare.”

An important feature of estate poverty is that there is a high concentration of consumption around the poverty line. The implication of this is that a small change in incomes could cause a drastic increase in poverty. The high and increasing acute poverty is indeed a serious problem and challenge. The recent wage increase on the plantations, it is hoped would alleviate conditions to some extent. This is however an unrealistic expectation with the current high inflation of 20 per cent for the country. Besides, there are fundamental reasons for the persistence of poverty on the estates.

One of the fundamental reasons for the increasing estate poverty is that estate wages do not keep up with inflation. Unlike in the case of informal sector wages that increase continuously in response to both the demand for labour and the cost of living, estate wages remain more or less the same till a new round of wage bargaining. For instance, at the time when the recent wage demand occurred estate wages were one-half or less than those that labour commanded outside of the estates. Consequently estates suffered from a shortage of labour as estate workers opted to seek as much employment as they could get outside while retaining their status as estate employed with the minimum number of mandatory days on the roll. This was rational economic behaviour of maximising income and ensuring job security.

The World Bank report had a special focus on the estates, where the poverty situation had deteriorated. Apart from the fact that nearly a third of the population was in abject poverty, there were other characteristics on the estates that make their povery unacceptable. It is to the credit of the analysis that these other issues were discussed in the report and a holistic perspective on poverty adopted. The detailed analysis of the poverty condition on the estates to which the report devotes a specific focus is based on research and analysis done by the Centre for Poverty Analysis (CEPA). This analysis did not focus solely on income poverty but other indicators as well and was based on national sample data and a sample study of estates that was both quantitative and qualitative. That study highlighted the endemic flaws in the estate structure which trap many workers in poverty. This poverty cycle like similar poverty cycles of poverty elsewhere keeps the population permanently in poverty. To escape this cycle there is only one real solution, that of leaving the estate enclave for greener pastures outside the plantations, sometimes for foreign employment. Such an escape route is limited owing to the poor education facilities available to the children on the estates.

An important observation was that income earning opportunities were not the principal issue. Poverty on the estates is not merely one of income poverty. Poverty of the workers is multi-dimensional. It encompasses the whole fabric of living conditions that are very poor, despite some improvements in the last three decades. There are also several specific features in the anatomy of estate poverty. The report was of the view that estate workers have the chance to earn incomes above the poverty line in most plantations. A high proportion of the estate population obtains income from outside their estate employment.
CEPA’s research also found that the enclosed nature of the estate structure influences workers’ perceptions and economic decisions. Workers appear to remain on the estates merely because most of them have no other option. Estate workers have a negative attitude towards work and life on the plantations and perceived the plantation system as restrictive and exploitative. They prefer to seek work outside the estates than maximise work on the estates. In the context of the country’s wage structure this probably increases their incomes. This raises serious problems with respect to the sustainability of the estates that already have shortages of labour.

The perception of their condition of poverty is affected by marginalisation, isolation and poor access to facilities such as good education and health services. The report also refers to tensions that have arisen within the estate sector in response to the social, cultural and economic changes that the country has experienced, leaving the estate sector hardly touched by these. Alcoholism is a serious problem on the estates and no doubt has serious implications for nutrition, health and savings of the community.

It is possible that the income data obtained in the survey was understated as the respondents may not have wanted to disclose their ex-estate incomes. Besides many workers do obtain other income that may have been inadequately captured in the survey. Therefore income poverty as such may not be as severe as indicated by the figures. It must also be admitted that this sort of income underestimation occurs in other sectors as well. One of the responses to the report by critics is that estate poverty has increased due to the privatisation of tea estates.

They contend that the poverty rate has significantly worsened after many of the tea and rubber plantations were privatised and that this has led to a sustained attack on the wages and conditions of estate workers. The fact is that there is a fundamental flaw in an industry that is a significant contributor to foreign exchange earnings of the country and the profits of the managing companies and yet unable to pay a decent wage. Despite reasonable rates of economic growth in recent years the country has failed to reduce poverty significantly except in urban areas. Poverty on the estates is the most acute problem and requires a strong policy thrust to make a serious dent. Policies should address not only the issue of wages and incomes that are fundamental to reducing poverty but also the broader issues of improving the social amenities and social infrastructure on the estates.