New CAP will attempt to end the decline in
IRELAND’S unemployment rate thankfully continues to fall as the economy continues its slow recovery from the 2008 economic recession. The total number at work now again exceeds two million since the middle of last year. However, in other EU countries unemployment, particularly among young people, remains stubbornly high.
Commission President JeanClaude Juncker entered office in October 2014 with a promise to focus on a jobs, growth and investment agenda. In his mission letter to incoming Commissioner for Agriculture and Rural Development Phil Hogan, he stressed that the last CAP reform should be implemented in a way that maximises its contribution to this jobs and growth agenda.
One of the specific objectives for rural development programmes in the period 2014-2020 is the creation and maintenance of employment as part of its contribution to achieving a balanced territorial development of rural economies and communities.
This has led to a renewed interest in the impact of the CAP on rural jobs and employment. At first sight, it might seem self-evident that support for agriculture through the CAP should promote agricultural employment and stimulate rural jobs.
In practice, however, it has proven surprisingly difficult to document a positive relationship, and indeed many studies find the opposite. If we rank OECD countries according to the level of agricultural support that farmers receive, it turns out agricultural employment has fallen fastest in those countries which have provided the highest support.
Also within the EU, a report for the European Parliament last year showed that CAP sub- sidies are more often linked to lower agricultural employment than the other way round.
A number of explanations have been given for this counterintuitive finding. One is that CAP subsidies facilitate a process of investment and mechanisation which has substituted capital for labour and thus reduced the demand for labour on farms.
Another explanation is that most CAP supports go to larger farms enabling them to grow more rapidly at the expense of smaller farms. Because larger farms are less labour-intensive than smaller farms, this could be another reason why agricultural support is negatively associated with employment.
Given the family farm structure of much EU and Irish agriculture, the evolution of agricultural employment large- ly depends on the willingness of farmers’ children to take over the family farm. One intriguing explanation hypothesises that the higher income farmers enjoy as a result of policy support allows them to invest more in the education of their children, but higher educational qualifications increase the probability that the children are no longer interested in taking over the family farm.
Despite the contradictory evidence, policy-makers are asking whether agricultural policy could do more, or be more effective, in contributing to job creation. Last year, the European Parliament passed a resolution on how the CAP could improve job creation in rural areas. This issue will also be raised in the Commission’s Communication on modern- ising and simplifying the CAP, which is expected towards the end of this year.
Agricultural employment can be broadly defined to include not only direct employment in primary agriculture but also the indirect jobs supported in the upstream and downstream industries as well as through the spending of agricultural incomes.
Productivity
One issue which must be emphasised in this debate is that jobs in agriculture should be created by improving the overall productivity of the sector rather than simply by redistributing jobs from other sectors of the economy.
Increasing support to farming may well lead to an increase in farm-related jobs, but the taxation needed to fund this