People - Adjustment - Changed dependence on off farm income
Changed dependence on off farm income
Background
The previous indicators have demonstrated the importance of off farm income as a means of stabilising farm family income against fluctuating farm fortunes. Off-farm income is not a new phenomena in Australian agriculture (Barr & Almond 1981; Core 1974; Paul 1982). Each of these reports showed off farm income was important in some sections of the agricultural community. More recent studies published by Australian Bureau of Agricultural and Resource Economics have shown how important off farm income has become crucial to the income of any broadacre farmers (Garnaut & Lym Applegate 1998; Rasheed, Rodriguez, & Garnaut 1998).
- Off farm income has risen consistently in broadacre agriculture over the past 20 years from $6,000 to $20,000. Off farm income has not risen nearly as far in the dairy industry. During 1994-95 farm income comprised only 37 per cent of farm family income on broadacre farms.
- Of farm income is derived from a number of sources. The major source of off farm income is from wages and salaries. Currently a quarter of broadacre farmers undertake off farm employment. Other major sources of off farm income are from investments and social security payments. Older farmers tend to derive off farm income from investments. Farm families with dependent children are much more likely to be in off farm employment (Garnaut & Lym Applegate 1998).
- Almost 40 per cent of broadacre farm families earned off farm salaries and wages, and these wages contributed 50 per cent of family income in these households (Agricultural Council of Australia and New Zealand 1998).
- The decision to seek off farm employment is driven by low farm incomes. Families with off farm income tend to be operating smaller farms with lower incomes. Women with off farm employment are more likely to have a professional qualification (Rasheed, Rodriguez, & Garnaut 1998).
- Off farm income can be a transitional strategy towards leaving farming for farmers with dependent children.. The risk of unemployment or underemployment after leaving farming is significant (Bryant 1989). A study of the decision to leave farming by the rural counselling service has shown that farm families needed to be convinced they would not be worse off financially if the leave agriculture (Ginnevan & Lees 1991). Existing off farm employment reduces these concerns (Bell & Nalson 1974).
- In some locations off farm income may act as a means of staving off the decision to leave farming (Rathge, Leistritz, & Goreham 1988).
The authors cautioned that farm incomes were low in much of eastern Australia in this season because of drought, but still concluded, ?it is no longer appropriate to consider the farm as the main source of income for a large number of farm households?.
One outcome of this increasing dependence on off farm income is a realignment of the concept of what makes a farmer. In some rural communities the concept of the full time farmer who works solely upon the land is being replaced by the understanding of farming identity as encompassing salaried work or an off farm business which allows one to continue farming (Bryant 1999).
The increasing reliance of farm families upon the income of a spouse working off the farm should be viewed within the context of two major demographic trends across the developed world. One is the shift towards the two income families as the middle class norm that has taken place over the past generation within Australian society. The other is the trend towards part time farming in other developed countries. In both North America and Europe farm households are more dependent upon off farm employment than Australian farm households. In the United States the USDA estimates that 90 per cent of farm family income is derived from off farm sources (Economic Research Service 1996; Korb 1999) (This estimate is not strictly comparable with Australian data as the USDA definition of a farm includes smaller farms than are included in definitions used by the Australian Bureau of Statistics or Australian Bureau of Agricultural and Resource Econoics). In Canada, farm families have become increasingly dependent upon off farm earnings of farm women (Olfert, Taylor, & Stabler 1998). As far back as 1971, only 33 per cent of farm household income in Canada was derived from farm self employment (Steeves 1979). Part time farming is widespread across European agriculture (Djurfeldt & Waldenstrom 1999; Gasson 1999; Kinsella et al. 2000).
Data Source
The Australian Bureau of Agricultural and Resource Economics conducts an annual financial survey of broadacre farms across Australia (ABARE 2000b). Data on off farm earnings was purchased Statistical Divisions of Australia for the years 1996-98.
Indicator construction
The indicator is the average off farm earnings over the period. This includes wages and salaries, investment earnings and social security payments.
Indicator limitations
- Only broadacre farms are included within this indicator. Horticultural and dairy farms are not included.
- The definition of a farm used by Australian Bureau of Agricultural and Resource Economics includes only those businesses with a gross value of production greater than $22,500 in nominal dollars of the survey year. This is not comparable to the definition of a farm or farm family which is used for the Population and Housing Census. Thus, data from these two sources are not directly comparable.
- Because of the size of the sample used for this survey, data is not available for geographic units of less than Statistical Division size.
Observations
Proximity to off farm employment opportunities in major population centres explains only some of the variation in off farm income. Off farm income is high across much of south eastern Australia. It is lowest in much of the rangelands, and the cropping zones of Victoria, South Australia and Western Australia.
Figure 1 Off farm income earned on Australian broadacre and Australian dairy farms 1980 to 1998 expressed in constant 1996 dollar terms (Source: Australian Bureau of Agricultural and Resource Economics Farm Surveys)
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Figure 2 Average annual family off-farm income for broadacre farm families by Statistical Division 1996-98
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