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2.2 The livelihoods framework

The livelihoods framework is a way of looking at the complexity of people's livelihoods, especially the livelihoods of the poor, whether they be rural or urban. It seeks to understand the various dimensions of a person's livelihood; the strategies and objectives pursued, and associated opportunities and constraints.

There are various ways of conceptualising the components of a livelihood and the influences upon it, and you may encounter various slightly different diagrammatic representations of these variables and their interconnections. In 2.2.1 you will find one adapted from Ellis (2000). Although this is focused on rural livelihoods, most of its essential features also apply to many urban livelihoods.

2.2.1 A framework for micro policy analysis of rural livelihoods

Source: Ellis (2000) p. 30.

Study the diagram and see whether you can see possible relationships between the different variables listed in columns A to F. In discussing this we start at the centre, columns D and E, then move to the right (column F) before coming back to columns A to C.

Livelihood strategies and activities (columns D and E)

The livelihood strategies and activities of poor people are often complex and diverse. For rural people, agriculture and other natural resource-based activities may play an important role, but rural households also diversify into other activities, some of which are linked to agriculture and the natural resources sector, others which are not. Strategies may include subsistence production or production for the market, participation in labour markets or labouring in the home. Poor urban people often also depend upon multiple diverse livelihood activities involving different employment (labouring) and self employment activities.

One can examine strategies from the perspective of an individual or from the perspective of a household, although, as we shall see later, there are problems with treating the 'household' as a unified decision-making unit pursuing a joint strategy with common goals. Poor people usually employ a mix of different 'strategies', especially when resources are to some extent pooled. A relatively unified 'household' will obviously be able to employ a wider range of strategies than an individual acting alone.

Livelihood outcomes (column F)

In the framework presented here, the outcomes of livelihood strategies are divided between the effects on livelihood security and the effects on environmental sustainability.We have also added an additional feedback arrow to Ellis' original diagram to emphasise the (positive or negative) effects that livelihood strategies and outcomes can have on livelihood assets.

Note also that, whilst improved access to livelihood assets and the outcome of greater livelihood security (especially higher incomes, more stable incomes, and reduced risk) are usually important objectives in rural livelihood strategies, environmental sustainability may or may not be an objective. That is why in the livelihoods framework the latter is usually labelled along with livelihood security as an outcome variable rather than as an objective.

Livelihood security

In relation to livelihood security, take particular note of the distinction between income level, income stability (or regularity), and degrees of risk. Income level is obviously important to people, but to poor people income stability and risk avoidance may be as important, if not more so. Also bear in mind that income in the livelihood security box does not just refer to monetary income but also to incomes in kind, such as the food produced by smallholder farmers for home consumption.

Seasonality refers to the fact that many rural livelihood strategies (especially in agriculture) result in seasonal fluctuations in income. This affects livelihood security, and people usually try to reduce seasonal income fluctuations or their vulnerability to them.

Whilst rural people may seek improvements across a wide range of livelihood outcomes the need to prioritise may force them to make undesirable trade-offs between them, at least in the short term.

Can you think of some examples of such trade-offs?

Income stability or regularity may come at the cost of lower aggregate income. For example, a household may prefer a low income based upon regular weekly receipts to a larger one made up of just one or two annual receipts.

A similar trade-off exists between income and risk. For example, specialisation in one activity may yield potentially higher returns over a long period, but at the risk of low returns over some short periods. Diversification may reduce this risk, but at the cost of lower returns in the long term (although not necessarily).

Efforts to raise or stabilise incomes, to reduce risk, and to deal with the seasonality of certain types of income (especially farming incomes) may lead to the over-exploitation of environmental resources and the erosion of natural capital over the longer term. Clearly, efforts to increase short-term livelihood security may be counterproductive in the longer term if they have this effect.

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The objective of those wishing to promote sustainable livelihoods is to minimise trade-offs of the sort discussed above and to maximise complementarities. Over the longer term, the variables in the 'livelihood security' box, the 'environmental sustainability' box, and the 'livelihood assets' box can act positively on each other, providing that appropriate livelihood strategies are adopted. For example, better access to environmental capital may improve access to financial capital and physical capital; and greater income stability and lower risk may lead to higher aggregate income in the long term by reducing the probability of having to sell off productive assets in times of crisis, or by enhancing the returns to individual assets. Such interactions are important in the increasing attention given by policy-makers to interactions between 'social protection' (social transfers and safety nets) and development.

Livelihood assets (column A)

All livelihood strategies depend upon access to assets of some kind or other, whether such access involves private ownership or other forms of access. In the livelihoods framework, assets are conventionally divided into the following

In conventional economics such assets are usually known as factors of production and are typically subdivided into land (natural capital), labour (human capital) and capital (physical and financial capital). Conventional economics does not have a social capital category and precisely what social capital consists of is open to debate. One definition is presented in 2.2.2. More broadly, social capital may refer to the ability to access and use to advantage socially constructed rules, organisations or relationships (these are also referred to as 'institutions'). Use of the term capital implies that it can serve productive ends. Bear in mind, however, that the institutions that enhance one person's productivity may constrain or diminish the productivity of others.

2.2.2 Social capital

Social capital relates to the formal and informal social resources that people draw upon in pursuit of their livelihoods. People develop these social resources by investing time, effort and other resources in

  • membership of formal groups or organisations
  • informal social interactions in and outside the workplace
  • relationships of reciprocity, including gift exchange and mutual assistance

Such investments may help to build trust and facilitate co-operation. They can increase access to information and reduce transactions costs. They may allow people to make claims on other people's obligations to support them, and can help in the development of informal safety nets amongst the poor. Finally, they can increase people's power and influence.

Source: Unit author

Livelihood assets are something from which people derive a flow of income or consumption. They are also something people invest in so as to increase future flows of income/consumption.

Access to assets - key influences (column B)

Better access to assets is a desirable outcome of any livelihood strategy. Livelihood strategies may focus on increasing the range of assets to which a person or household has access, or on increasing access to particular types of capital. The ultimate objective of these investment strategies is to improve long-term livelihood security and the quality of life more generally.

On the whole, the more assets someone has the less vulnerable they are to the various shocks and trends outlined earlier. Shocks can wipe out assets very suddenly if they are not protected and adverse trends can result in them being gradually eroded if livelihoods are not able to adapt to change.

How effective an individual asset is in providing security will depend upon contextual factors, such as the functioning of markets, social relations, and others. These factors influence not only what can be achieved with assets, but the access people have to them in the first place.

This category of influences comes under a variety of different headings. You may encounter, 'transforming structures and processes' (Carney 1998) or 'Policies, Institutions and processes' (a more recent classification). In this unit we adopt the classification used by Ellis (2000), which is based on the following

Again, have a look at the diagram that we introduced earlier, to see what is listed under these different headings. It should be fairly clear that all of the listed items can affect an individual's access to assets, although precisely how will obviously depend upon the situation being examined.

Livelihood context (column C)

Another important influence on livelihood strategies is exposure to various trends and shocks (have another look at the diagram in 2.2.1 to see what these are). They represent, respectively, gradual and sudden change. Note that in the 'shocks' box one might also add prices, since these can also change fairly suddenly. Note also that trends in a community or country may be made up of increasing or decreasing shocks affecting individual people or livelihoods (for example, increasing morbidity and mortality from HIV/AIDS may be a trend in a country but the onset of HIV/AIDS is a shock to those directly affected by it).

These trends and shocks are sometimes known in livelihoods analysis as the vulnerability context, suggesting that the changes thus represented have potentially harmful effects. It is worth bearing in mind, however, that some of the trends listed here do offer opportunities as well as acting as a potential threat (eg technological change, national and world economic trends).

Exposure to change can have a direct influence on livelihoods by weakening them, strengthening them, or forcing a new direction. They can also influence livelihood strategies in a slightly less direct way, when people, anticipating the potential impact of trends and shocks, design their livelihood strategies in a way that helps them manage their exposure to sudden or gradual change and cope better with the potentially harmful effects of such change. We shall look more at these ideas in Section 3.

Concluding remarks

As with any abstract model, the livelihoods framework is not entirely free of ambiguity, especially in relation to what is put in the various 'boxes' and the relationship the boxes have with each other. For example, the category of 'social relations' overlaps to some extent with 'social capital' in the 'assets' box.

Nevertheless, what the framework does offer is a way of conceptualising in a simplified way the complexity of rural livelihoods, and the different variables that shape activities, objectives, and outcomes.

Finally, it is worth noting that participation is central to the livelihoods approach. The livelihoods framework offers a conceptualisation that can help outsiders work together with the poor to identify the priorities of the poor and associated opportunities and constraints.