An art and a science: Key takeaways from the LICOP Measurement webinar
Author: Molly Leavens, Program Manager, Agricultural and Development, Sustainable Food Lab
Measuring household income for small-scale producers allows you to compare it to a living income benchmark to understand the current living income gap and strategize opportunities for reducing that gap.
Drawing on recent studies and tools, LICOP’s latest webinar focused on decision-making in the actual income measurement process—from navigating methodological trade-offs to communicating progress towards a living income. Understanding use case and capacity helps find a balance between ensuring high quality data and minimizing data collection costs and burden to producers.
The webinar featured three speakers, who each offered their experience on navigating three key challenges – Cost of production, Non-focus crop/activity income, and Illustration of income results – often faced when measuring and reporting living income.
- Adrian de Groot Ruiz, CEO & co-founder of Impact Institute
- Vaibhav Panpaliya, Better Income Senior Innovations Manager at KIT
- Anna Laven, Associate Senior Researcher and Advisor at IDH.
1. Cost of production
Why collect? Understanding the cost of production is essential for calculating net income from a specific crop or income source.
Key considerations:
- Actual cost of production may not reflect sustainable cost of production (which you may want to use in your decision making). Producer households may be underinvesting because of a lack of funds for investment and/or a lack of faith in return on investment. Therefore, cost of production data may not reflect what would be invested in an optimal system – this is a system where producers invest in suggested practices and are paid a price enabling them to do so.
- Data collection is time-consuming and complex. There are many small inputs—labour, fertiliser, tools—that must be tracked accurately across farming activities. The IDH Income Calculator Tool can help streamline the collection of these costs.
- Producer recall is often unreliable. KIT found that simplifying survey design by asking for labour in “days” instead of monetary units helped improve accuracy.
Takeaway: Where possible, triangulate cost of production data with secondary sources or modelled estimates—and be clear whether you’re measuring actual or ‘sustainable’ costs.
2. Non-focus crop / target source income
Why collect? To compare to a living income benchmark, actual household income should include all sources—not just from the main crop or activity. Non-focus income is often essential for financial stability and offers insight into opportunities for diversification.
Key considerations:
- Non-focus income data can be difficult to collect accurately. Surveys that try to track too many sources may become too long, leading to respondent fatigue and unreliable answers.
- Data may be underutilised. If the main goal is to calculate net household income (not to design diversification strategies), it may be more efficient to focus only on key secondary income sources.
Takeaways: In landscapes dominated by the target crop/activity, asking respondents for the percentage of income that comes from that crop/activity (vs. other sources) can provide an estimate of total household income without extensive data detail. It could be helpful for producers to estimate this percentage with stones or other visual tools. In lieu of collecting data on non-fishing income sources, the Impact Institute study adjusted the number of months for the living income benchmark to only include the months spent fishing.
3. Illustration of income results
Why does it matter? How the living income story is told is often just an important as the data collected.
Key considerations:
- Avoid focusing solely on the % of households above the benchmark. This risks excluding the most vulnerable producers and fishers who may never reach a living income due to structural constraints.
- Use the median, not the mean. A small number of high earners can skew averages. The median better represents the “typical” household and ensures programs are designed for the majority.
- Highlight progress in income drivers. Even if net household income hasn’t reached the living income benchmark, improvements in productivity, diversification, and other income drivers can highlight the effectiveness of interventions.
Applying Living Income to Fisheries
Adrian de Groot Ruiz (Impact Institute) presented on a recent Impact Institute study. Ruiz’s presentation marked an exciting new application of the living income concept to small-scale fisheries. Most often focused on perennial smallholder crops like cocoa and coffee, this application broadens the relevance of living income work. The Impact Institute study used secondary data to assess how value is distributed along the supply chain and to estimate living income gaps for fishers. LICOP looks forward to ongoing engagement with the seafood sector.
Relevant LICOP Resources
In the past year, LICOP has published two foundational resources designed to support practitioners. Together, these resources support users in developing fit-for-purpose income measurement studies while ensuring alignment on public reporting.
1. Actual Income Measurement FAQ:
Supports users to identify an approach to measuring incomes and the income gap based on use case and capacity. These documents are a great primer for understanding the income measurement process, different methodological decisions you can make, and links to relevant resources. They also provide guidance on key questions around measurement of specific net household income elements.
2. Aligned Inclusive Living Income Narrative and Indicators:
In addition to providing a narrative for a more inclusive approach to living income (highlighting the progress of the typical producer household rather than the % of households that reach a living income), this document provides aligned indicators for living income measurement and reporting. Although these indicators are aligned, they can be informed by results derived from a range of methodologies. Additionally, the document contains a list of best practices for analysis and reporting and a template for practitioners to label their methodological decisions and publish alongside studies for more transparency and easier comparison across studies.