What is a livelihood?
A livelihood is a combination of the resources used and the activities undertaken by a household for the material provisioning of its members.
Resources consist of individual skills and abilities (human capital), land, savings and equipment (natural, financial and physical capital, respectively) and formal support groups or informal networks that assist in the activities being undertaken (social capital).
These are the assets on which livelihoods are built. They can be divided into five core categories (types of capital):
- Human capital
- Natural capital
- Financial capital
- Social capital
- Physical capital
People’s choice of livelihood strategies, as well as the degree of influence they have over policy, institutions and processes, depends partly upon the nature and mix of the assets they have available to them. Some combination of these assets is required by people to improve their quality of life significantly on a sustainable basis.
- No single category of assets on its own is sufficient to achieve this, but not all assets may be required in equal measure.
- A single asset can generate multiple benefits.
- For example, if someone has secure access to land (natural capital) they may also be able to get better access to financial capital, as they can use the land both for productive uses and as security for a loan.
1- Human Capital
Defined as the skills, knowledge, capacity to work, and good health that together enable people to pursue different livelihood strategies and achieve their livelihood outcomes.
- A household’s level of human capital depends on household size, skill levels, education, leadership potential, and health status.
- Human capital is necessary to be able to make use of the other four types of livelihood assets.
2- Natural Capital
Defined as natural resource stocks (trees, land, clean air, coastal resources, etc.) upon which people rely. Benefits of these stocks are both direct and indirect.
- For example, land and trees provide direct benefits by contributing to income and people’s sense of well-being. The indirect benefits that they provide include nutrient cycling and protection from erosion and storms.
3- Financial Capital
Defined within the Sustainable Livelihoods framework as the financial resources people use to achieve their livelihood objectives.
- Savings are the preferred type of financial capital because they do not have liabilities attached and usually do not entail reliance on others. They can be held in the form of cash, bank deposits, or liquid assets such as livestock or jewelry.
- Credit obtained from either credit-providing organizations or informal money lenders represents a stock of financial capital, too.
- The definition above differs from a strict economic definition of financial capital, as it includes stocks and flows. (Economists consider stocks, not flows, to be capital).
4- Social Capital
Defined as the formal and informal social relationships (or social resources) from which various opportunities and benefits can be drawn by people in their pursuit of livelihoods.
These social resources are developed through investment in:
- Interactions (through work or shared interests) that increase people’s ability to work together;
- Membership of more formal groups in which relationships are governed by accepted rules and norms;
- Relationships of trust that facilitate co-operation, reduce transactions costs and sometimes help in the development of informal safety nets amongst the poor.
- Benefits of social capital:
- Access to information
- Access to influence or power
- Claims or obligation for support from others.
- Access to information
5- Physical Capital
Defined as physical goods and facilities, both public and private, that support livelihoods.
Public physical capital, often called infrastructure, includes:
- Affordable transport systems
- Water supply and sanitation (of adequate quantity and quality)
- Facilities that make energy affordable and clean
- Good communications and access to information.
Private physical capital includes:
- Shelter of adequate quality and durability
- Productive assets that enhance income (e.g. bicycles, rickshaws, sewing machines, agricultural equipment)
- Household goods, utensils, and equipment (such as radios and refrigerators).
- Physical is often owned by individuals or groups.
- Some physical capital, such as larger agricultural equipment or processing units, can be accessed through rental or by paying a fee for the services used.
Asset Status is an individual’s or group’s access to livelihood assets changes over time.
A change in asset status may involve:
- Increase in access to livelihood assets
- Decrease in access to livelihood assets
- Change in the composition of the accessible livelihood assets.
Vulnerability Context refers to the shocks, seasonality, and trends that affect people’s livelihoods. It focuses on factors that are not controllable by local people in the immediate or medium-term. Vulnerability or livelihood insecurity resulting from these factors is a constant reality for many poor people.
Shocks are a key element in the vulnerability context. Shocks are sudden events that have a significant impact – usually negative – on livelihoods. They are irregular and vary in intensity and include events such as natural disasters, civil conflict, losing one’s job, a collapse in crop prices for farmers, etc.
Categories of shocks:
- Natural shocks (e.g., floods, earthquakes);
- Human shocks (e.g., illness, accidents);
- Conflict (e.g., war, violent disputes);
- Economic shocks (e.g., job losses, sudden price changes);
- Crop/livestock health shocks.
Shocks may be linked to trends. For example, some changes that appear as trends at a national or even regional level (such as increased infection rate for diseases such as AIDS and malaria) can impact upon a household or individual as severe shocks (i.e., death in the family).
Seasonality is another key element in the vulnerability context. Seasonality refers to seasonal changes that affect assets, activities, prices, production, health, and employment opportunities. Poor households and individuals are often especially vulnerable to seasonal changes in the value and productivity of natural capital (because they live close to nature) and human capital (because they have relatively little of it). The poor are often more vulnerable to the adverse effects of seasonality than wealthier groups.
Trends are the last key element in the vulnerability context. Trends are long-term forces that have either a positive or a negative effect on livelihoods and involve changes that take place over a longer period of time than is the case with changes brought about by shocks or seasonality. Examples:
- Population trends (e.g., increasing population pressure)
- Resource trends (e.g., soil erosion, deforestation)
- Economic trends (e.g., declining commodity prices, development of new markets)
- Trends in governance/politics (e.g., increasing accountability)
- Technological trends (e.g. the development of more efficient production techniques).
The range and combination of activities and choices that people make to achieve their livelihood goals. Livelihood strategies include:
- How people combine their income-generating activities
- The way in which they use their assets
- Which assets they chose to invest in
- How they manage to preserve existing assets and income.
- Livelihood strategies may reflect underlying priorities, such as to diversify risk.
- Livelihood strategies are diverse not just across households but even within households
- For example, members of a household may live and work in different places, engaging in various activities, either temporarily or permanently.
- Individuals themselves may rely on a range of different income-generating activities at the same time, and are likely to be pursuing a variety of goals.
All livelihood content was adapted from Department of International Development, Sustainable Livelihoods Guidance Sheets.
Available at http://www.livelihoods.org.