Leisure and farmers’ welfare in changing conditions Jukka Kola and Sanna Sihvola Kola, J. & Sihvola, S. 1994. Leisure and farmers’ welfare in changing conditions. Agricultural Science in Finland 3; 1-14. (Department of Economics and Management, P.O. Box 27, FIN-00014 University of Helsinki, Finland.) This paper examines the background for leisure-labour decisions in agriculture and evaluates welfare effects of a shift in farmers’ relief services from a state-led subsidised system to a market mechanism. Leisure provided by relief services in agriculture contributes to well-being, but the leisure-labour choice also influences the revenue. Besides conventional economic and demographic factors, we emphasize the importance of special biological bindings and continuity, as well as risk and uncertainty affecting farmers’ time allocation in agricultural production. We consider structural development as an aggregate factor to explain the demand for farmers’ relief services. In Finland the organisation of the services is more centralized than in the other Nordic countries or the European Union. If government subsidies for relief services were removed and a market mechanism with free price formation adopted, direct government savings would be more than enough to compensate for substantial losses to farmers. Moreover, market forces could produce economic efficiency and local flexibility of a higher degree. State subsidization may still be needed to some extent in changing conditions in order to enable the relief services to develop and serve as a support system of a social, de-cou- pled, and less distorting nature. Key words: agriculture, social security, relief services, allocation of time, welfare economics, Finland Introduction Almost 30 years ago, Gary S. Becker (1965) wrote in his seminal work on theallocation of time that"... the allocation and efficiency of non-working time may now be more important to economic welfare than that of working time; yet the attention paid by economists to the latter dwarfs any paid to the former." We dare to suggest that Becker’s argu- ment is still very valid especially in the agricultural sector. Because interesting special characteristics of agriculture have not been assessed adequately in leisure-labour studies, our article makes an attempt to respond to an obvious need to evaluate welfare implications of leisure in agriculture. The ultimate purpose of economic activity is to satisfy human needs and thereby increase welfare. The need for rest and leisure is determinedon both the biological and social basis. Demand for leisure and e.g. access to recreational market are also influ- enced by economic activities. The task of social welfare policy is to allocate welfare among the members of the society equally and with justice. Farmers’ relief services represent social welfare policy of agriculture. The policy aims at improving the social position of agricultural population. Spe- cially arranged relief services are also intended to increase farmers’ welfare, when they provide farm- ers the possibility for leisure and recreation as well as recovery in case of e.g. sickness and accidents. 1 Agricultural Science in Finland 3 (1994) https://www.c-info.fi/en/info/?token=8enbUUMe8mk9IrfC.61izhdmyk4KmqCHrWaDipw.Fvsiv2g_uA_CXGRt2EpXsovCZ-8HCX9xN3R0LE1pQzbYlaybu-hi5sBMY1D57QTpJ4LjUodnoATJpwDwGL8VdY4GU_JMhvBdpcagKhTX8xVVY_MHl2KVD6y0BdiuCbCW0iro_xdAxLt226JMe78983bp7iXfZm2PqHW_7jX1w27kJh6xGrAVINCypMgr-uf9DgS0CioU8KX5tNBs8xp_nuUTpMOB4AwLbygvFSzKzlP2lttKRv4qlO4408PVOr7HtfRv_9PCQHGOfD96PVg6JWCzTA Farmers’ social security has been promptly devel- oped during recent decades in Finland. Today, however, there are various obstacles pre- venting social welfare policy as a wholefrom being developed further. Budgetary constraints in dire economic recession and deep state indebtedness do not allow growing costs in social welfare policy. Uncertainty of the fate and shape of Finnish agri- culture under both international, e.g. European in- tegration and the GeneralAgreement on Tariffs and Trade (GATT), and domestic pressures affects farmers’ social security systems. In practice, strict economic realities require restructuring in the whole system of extensive social welfare policy. To begin with, this article examines the welfare aspects of farmers’ relief services that are used to provide access to leisure and recreation for farmers. The choice between leisure and labour is ap- proached through the theory of consumer choice, the indifference analysis, and welfare economics. We make an attempt to extend the standard theo- retical framework of wage-earners’ leisure-labour choices to special characteristics of agriculture and farm enterprises. Secondly, we outline the current state of relief services in Finland, and take a brief look at the determinants of demand for and supply of leisure/relief services in changing conditions. The welfare economics approach is employed in the empirical part to evaluate the effects if relief services have to be organised, financed, and priced differently in the future. Finally, we draw conclu- sions on the welfare implications and applicable development strategies in changing conditions. Welfare and farmers’ relief services The economic welfare status of an individual is formally given by the individual’s utility level. The utility level of an individual depends on both mar- ket and nonmarket goods and services. Conse- quently, the state of welfare is affected by e.g. socio-economic political system, culture, environ- ment, and traditions. A difficulty with utility, or economic welfare is that it is not an observable variable. Thus, in addition to obvious conceptual ambiguities in terms of meaning, contents and di- versity of welfare (e.g. Von Bergmann-Winberg 1987), this causes measurement problems. Economic surpluses have been defined to facilitate measurements for welfare (Just et al. 1982). Meas- urements involve inherent pros and cons. Con- sumer surplus (CS) can be used to measure welfare effects due to, say, changes in opportunity to use recreational services, e.g. farmers’ relief services. Ordinary CS is defined as a geometric area above the price line and below the Marshallian demand curve, and it can be presented as follows: Qe CS = J (D(Q)-p e )dQ O where p is price, Q quantity, D(Q) the demand curve, and e denotes equilibrium values. Quasi-rent, the excess ofgross receipts over total variable costs, is often used to represent producers’ net benefits. Geometrically, producer surplus (PS) is the area below the price line and above the supply curve. This area is (same notation as above, except S(Q) is the supply curve): Qe PS = J (p e -S(Q))dQ o The classical theory of consumer demand is based on the assumption that consumers maximise their utility subject to the budget constraint. Con- sumer’s utility is often related to the number of goods consumed. Becker (1965) revised the the- ory of choice by systematically incorporating the allocation of time in the traditional theory of con- sumer behaviour. If leisure time is the time that remains when the time for sleeping, eating, work- ing, schooling, and housework has been deducted, the following division is applicable (see. e.g. Lilja 1982): - the time for human physical needs: necessary ob- ligations - the timefor wage earning and education: accepted obligations - the time for housework - the time for leisure 2 Agricultural Science in Finland 3 (1994) The division is not unambiguous. Subjective valuations may distort it. The individual may per- ceive so-called productive consumption (Becker 1965) as leisure. This causes obvious measurement problems. E.g. in farm households the line be- tween housework and ’pure’ productive activities is vague, indeed. Leisure becomes a more significant contributor to well-being when economic welfare in general increases. Most farmers, too, are not willing to put seven-day weeks throughout the year in order to maximise profits. Conceptual analyses of labour supply and the relation between income and leisure are familiar examples ofeconomics textbooks (e.g. Rosen 1985, Varian 1990, Hirshleifer and Glazer 1992). Owen (1971) and Liu a (1982) represent examples of empirical analyses of demand for leisure. In agricultural economics, even concep- tual analyses (e.g. RITSON 1980) have been rare, and empirical applications almost non-existent. Commonproblems in analyses have been e.g. the opportunity cost of leisure, the relation between profit maximisation behaviour and leisure, and the possibility of a backwards-bending labour supply curve. It is especially difficult to determine farm- ers’ income/leisure choices because of the delicate line between labour and leisure in entrepreneurial activities in a farm firm. Different characteristics of entrepreneurship and employees, seasonal varia- tion, versatility, and high engagement of farm work make comparison of working hours between farm- ers and wage-earners difficult. The point of departure in analyzing demand for, or expressed in the opposite way, supply of labour is the theory ofconsumer choice. Supply ofa labour input is determined by the difference between a certain fixed time constraint and demand for lei- sure. Demand for leisure follows the common de- terminantsof demandfor consumer goods: demand is determined according to the exogenous income and the prices of goods. The choice between con- sumer goods (c) and leisure (L) that maximises consumer’s utility can be written as follows (e.g. INGBERG et al. 1986): max U = u(c, L) s.t. c = (TL-L)w +M, c, L where TL is the total time endowment available to consumer, TL-L is the supply of labour input, w is the wage rate, and M is exogenous income. General conclusions from the model of con- sumer choiceare that leisure is regarded as a normal good, i.e. consumption of leisurerises with income, and supply of labour increases with wage, at least in some income brackets (INGBERG et al. 1986).Com- mon sense may suggest that high unemployment, which currently burdens many western European economies, may influence the demand for leisure and price ofcommercial recreation. In fact, Owen (1971) has included the unemployment rate as a determinant of the price for leisure: pL = w(l-kE) wherepL is price for leisure, w is the wage rate, E is the unemployment rate, and k is a constant (o Primary/secondary person entitled to holiday Farmers contribute to the costs of the scheme, and the amounts are determined according to the num- ber ofreplacement hours and animal units. Farmers younger than 65 years of age can get substitute help in the case of temporary disability to perform necessary farm activities. The substitute help system is more extensive than the annual holi- day or weekly days-off systems, because in practice all farmers are included in the system. E.g. illness, an accident, maternity, professional training and adult education of a farmer or his/her spouse entitle to substitute help. The farmer pays for the substitute help and the amounts are determined by the munici- pality according to the farmer’s income level. In 1991, 24 000 farmers used substitute help. Organisation and financing The Ministry of Social and Health Affairs is re- sponsible for the supreme management and moni- toring of the annual holiday, weekly days-off and substitute help systems of farmers in Finland. The administrative board has the corresponding task in the provinces. In the municipalities the relief serv- ice boards are the executive instances responsible for the practical organisation of the services. A municipality can organise the services by employ- ing an adequate number of replacement workers by itself or in cooperation with other municipalities. It can also purchase services from another municipal- ity or other public or private service supplier. In exceptional cases a replacement worker acquired by the farmer himself can also be accepted. In 1991 there were about 9 500 full-timereplace- ment workers, whose share of all days done was about 70 per cent. On the average, there were 9.5 farmers entitled to annual holiday per a replace- ment worker in 1991. In 1985, the corresponding figure was 24. Both the increase in the number of replacement workers and the decrease in the num- ber of farmers has contributed to the beneficial development. Of all animal husbandry farms, 75 per cent used relief services in 1990. 6 Agricultural Science in Finland 3 (1994) The farmers' relief services and theiradministra- tion is financed through the state budget. Agricul- ture has a collective responsibility for part of the costs through farm income. It is realised in the annual farm income negotiations between the state and the farmers' unions. In the farm income agreements the significance of the social policy as a whole has increased during the recent years. It has been easier politically to raise farm income through social policy measures than through higher target prices (Fig. 3). In the negotiations half of the increase in the number of holidays and one fourth ofother increase in the appropriations for this purpose is regarded as contributing to farm income. Accumulatively, farm income originating from the annual holiday system is FIM 330.6 million (Table 2), or 0.4 per cent ofthe total farm income, in 1974-1991. The substitute help system is financed by the state, the collective input of agriculture, and the individual user payments. The payments are taken Table 2. The costs, the share regarded as farm income, and user payments of the farmers’ relief services in Finland in 1974-1991. Year The closing of the accounts Regarded as farm income FIM mill2 ) User payments FIM mill.’)of the state, FIM mi11 .2) Annual Substitute Weekly Annual Substitute Weekly Substitute Weekly holiday help days-off holiday help days-off help days-off 1974 50.0 1975 120.810.0 1976 130.014.0 1977 133.017.5 1978 130.016.3 1979 217.030.0 1980 261.044.0 1981 247.534.6 1982 369.773.1 1983 400.6122.8 1984 409.7156.4 1985 452.7190.8 23.3 1986 492.2185.5 28.4 1987 564.5214.5 37.6 1988 605.7236.8 42.5 1989 688.0e 271.4e 46.9e 1990 761.2e 318.4e 60.8e 1991 886.2e 456.4e 91.9e 25.0 35.02.5 5.01.0 0.00.0 0.00.0 1.4 43.54.0 1.9 14.03.0 2.5 -12.4 -2.32.3 47.110.0 4.1 8.312.8 6.2 4.03.0 9.3 10.36.0 5.715.2 8.3 20.77.7 27.016.8 10.3 12.1 -1.2 -14.018.4 11.0 23.45.3 4.017.1 12.6 50.311.8 1.416.5 12.4 25.126.7 6.225.0 15.6 19.23.8 4.229.0 15.6 e = estimate 11 Since 1989, the closing of the accounts has been compiled under the same subsection for the systems of annual holiday, weekly days-off and substitute help. The division of the closing of the accounts between annual holiday, weekly days-off and substitute help is based on the estimation of the Ministry of Social and Health Affairs. 2 > Sources: the closing of the accounts of the state, and the farm income agreements in 1974-1991. 31 Sources: the Ministry of Social and Health Affairs and the Agricultural Economics Research Institute. Fig. 3. The division between the means of compensation in the farm income agreements in 1980 to 1992 in Finland. Source: The farm income agreements. 7 Agricultural Science in Finland 3 (1994) into account as agricultural cost and they cover only 7 per cent of the total costs of the system. One fourth of the annual increase in the appropriations for this system is regarded as farm income in the negotiations. Accumulatively, farm income origi- nating from the substitute help system is FIM 94.1 million (Table 2) in 1975-1991. The share of the payments of farmers in the weekly days-off scheme has been about 25 per cent of the total costs. In the farm income calculation, the payments are taken into account as agricultural cost, and the annual increase of the appropriations in full as agricultural income. In 1985 to 1991, the accumulative sum considered farm income was FIM 34.5 million in this system (Table 2). Until 1991, the sum considered farm income of all relief service systems together was FIM 459.2 million. The state also compensates the municipalities for their necessary operating costs of organising the relief services. In the case of administrative costs the municipalities can use the general-purpose state allowance, which covers 31-64 per cent of the total costs depending on the classification by economic solvency of the municipality. In the extent and organisation of farmers’ relief services there are clear differences between the EC and Finland. The EC member states have mainly organised the services in a decentralised way at the local level with private law authorities (Flandin 1991). Naturally, the system varies country by country in the Community, but a common factor is the regional or infra-regional level. In Finland, and in the Nordic welfare states in general, the state plays a more central role, and a social emphasis is stronger. Yet, the private sector has been more significant in Norway and Sweden than in Finland in organising the services. Determinants of demand for leisure and relief services in Finnish agriculture The usual determinants of demand are the price of a good, and related goods, income level, prefer- ences, and population in case of aggregate demand. Effects of these factors on quantity demanded can be quantitatively estimated in order to obtain elas- ticities of own price, cross-price, and income. Lack of consistent data is a usual hindrance to quantita- tive estimations. Yet, equally important here is to consider the changing conditions in terms of e.g. anticipated revisions in regulations and administrationof farm- ers’ social security system, and persistent uncer- tainty in agricultural development. E.g. farmers’ income development has been unfavourable during the recent years, and the future development de- pends crucially on decisions with respect to EC membership and GATT negotiations. Kola et al. (1992) expect a drastic drop in farm income due to the application of the Common Agricultural Policy CAP. The situation is aggravated by an emerging financial crisis on highly indebted farms, especially pig farms. Thus, PEP or lEP effects on demand for leisure are not clear on Finnish farms facing chang- ing operating conditions. Structural development and changes in farm population are among the key factors determining the extent ofdemandfor relief services at the macro level. Naturally, structural development also de- pends on microeconomic factors affecting farmers’ decisions. Yet, a considerable degree of wider socio-political aspects and plain demographic fac- tors prevail. Structural development has been rapid in Finland: there were 331 000 farms in 1959, but only 129 000 active farms in 1990, or 91 000 milk suppliers, who are primary users of relief services, in 1980,and 35 000 in 1992. Even though not correlated in a direct proportion, the number of farmers entitled to holiday schemes has also decreased continuously since the late 19705,and at a faster pace in the 1990 s (Table I). The division and development between different lines of production is also important, because re- lief services are primarily intended for livestock farms. Although the objectives of the Ministry of Social and Health Affairs would indicate longer holidays for farmers, i.e. annual holiday of 30 days and weekly days-off of 24 days, we regard status quo a more likely situation, especially concerning budget constraints and economic uncertainties. In order to evaluate expenditure and budgetary implications, rough prediction on structural development is not 8 Agricultural Science in Finland 3 (1994) sufficient but reliable predictions on inflation, prices ofrelief services, and administration (organ- isation) and efficacy of social security services would be needed. This is a task for another study, however. In spite of our recognition of special charac- teristics of farming, we emphasize the role of price in determining demand for leisure and relief serv- ices in changing conditions. The PEP and lEP should be taken into consideration. In fact, it is interesting that the extent of and expenditure on farmers’ holiday schemes have increased (Table 1 and 2). This is due to, firstly, better availability of services because of e.g. legislative changes and more relief workers with better qualifications and continuity, but, secondly, also farmers’ higher will- ingness to use services because ofe.g. PEP and lEP effects. After all, the social and biological need for relief services remains very much in tact, because the length offarmers working hours have remained almost unchanged during the last decades (Niemi and PÄÄKKÖNEN 1990). Technological advances have evidently reduced the physical exertions, but new responsibilities and requirements for special skills and knowledge have emerged. Price also affects the supply of relief services. As budgetary constraints become tighter, higher cost efficiency is also required in organising farmers’ relief services. The state and municipalities, which have this far been responsible for arranging the services, can increase efficacy through changes in organisation and financing. Savings are searched for, and if executed they will also affect the price of and demand for services. The central means to di- vide costs more equally between farmers and the state are an increase of payments in the systems of substitute help and weekly days-off. The Ministry of Social and Health Affairs has estimated that the increases could save FIM 124 million, but reduce the use and employment opportunities of the sys- tems (Table 3). The changes in the most extensive system, i.e. annual holidays, are more complicated to calculate because the division of financing is decided in the farm income negotiations (Table 2). The Ministry has, however, estimated that a mere FIM 100 mil- lion of savings would imply a substantial loss of Table 3. Effects of increased user payments in farmers’ relief services. Substitute help Weekly days-off Raise in user payments FIM 20 (38%) FIM 60 (48%) Decrease in demand 204 000 days 40 500 days for services (25%) (25%) Decrease in demand 900 working 190 working for relief workers years years Savings (excl. [unemployment effect) FIM 103 million FIM 21 million Source: Lomituspalvelutoimikunta 1993. 1 750 working years for relief workers in the annual holiday system. Implied job losses would be detri- mental in numerous agriculture dominated munici- palities, in which the unemployment rate exceeds even the exceptionally high national average of 19 per cent. Because farmers’ relief services are being devel- oped as a part offarmers’ social security in the farm income negotiations, the political economy of deci- sion making affects crucially the organisation as well as demand for and supply of relief services. The pressure to reform the organisation of farmers’ relief services in Finland became apparent in late 1992 when the government planned to cut the state financing of services by FIM 800 million in 1994- 95. Yet, the final reduction was FIM 200 million. The amount and distribution of costs of the serv- ices, and the degree of the reform are decisive factors in thereorganisation offarmers’ reliefserv- ices. In the following chapter we evaluate the wel- fare implications of a thorough reform in farmers’ relief services. Welfare implications of reformed relief services in Finland The effects of the changing organisation and fi- nancing of farmers’ relief services from the state- led, subsidised system to a privately organised mar- ket mechanism are examined quantitatively by 9 Agricultural Science in Finland 3 (1994) Table 4. Quantities of relief services demanded and supplied and changes in surpluses of farmers and service suppliers at different price levels in the system of reformed relief services. Price of holiday Quantity supplied Quantity demanded Change in farmer Change in service (FIM/day) (mill, days) (mill, days) surplus (CS) supplier’s surplus ~I ■ “ : (FIM mill.)Total Per farmer (FIM mill.) entitled to holiday (FIM) 400 legal min 1.7 2.5 44.2 449.7 -32.2 418 basis 1.8 2.4 495 equilibrium 2.2 2.2 -176.1 -1 793.1 153.7 650 legal max 2.8 1.8 -482.6 -4 914.8 541.7 evaluating the changes in economic surpluses of producers and consumers. The government obtains direct savings when its expenditure on and inter- vention in farmers’ relief services are removed. Magnitude of the effects of price changes on supply of and demandfor relief services depends on price elasticities. Changes in economic surpluses indicate income transfers realised between suppli- ers of the services and consumers of relief services, i.e. farmers. If implementation of a policy instru- ment causes disequilibrium between supply and demand, resource allocation is sub-optimal. Con- sider the present state-led system, in which the average price of a relief service was FIM 418 per day in 1990 (Sihvola 1992). This subsidised price easily leads to a situation, in which demand for services is higher than supply of them (Table 4). Primarily, FIM 418 represents the cost of a service supplier, i.e. the state. In the state-led system there were also the minimum and maximum price levels, i.e. FIM 400 and 650 in 1990,respectively. There are evident problems to estimate price elasticities of demand for leisure and supply of relief services in this particular case of farmers and agricultural production. Hence, as the starting point, we employ the price elasticity of demand, q = -0.65, from Nyberg’s (1979) results of a Rot- terdam type model (Theil 1975), and assume the price elasticity of supply of farmers’ relief services to be unit elastic, e = 1.0. Because of the obvious uncertainty with respect to the elasticities, the re- suits of the analysis should be interpreted with care and only as an indication of directions and magni- tudes ofeffects ofcertain changes or policy actions. However, the uncertainty is mitigated and applica- bility of the forthcoming results is improved by an essential sensitivity analysis (Table 5). In order to estimate the welfare effects we em- ploy constant elasticity demand D(p) and supply S(p) functions of a Cobb-Douglas type, where q = output, a = constant, p = price of relief services faced by both producers and consumers, q = price elasticity of demand, e = price elasticity ofsupply: D (p); q = a,p3 S (p): q = a 2p^ The equilibrium price, when D(p) = S(p), is FIM 495 in the reformed market system. We use this price, the actual 1990 price as a basis, and the legislatively set minimum and maximum price levels of the state-led system in 1990 as outer boundaries to calculate quantities of services sup- plied and demanded (Table 4). Economic surpluses of farmers consuming relief services (CS) and serv- ice suppliers (PS) at different price levels (Table 4) are calculated according to the following equations: Pd cs d = j D(p)dp = a,{(l/(r1 + +l) Pl - (1/(T|+ l))p,(T1+l) } 10 Agricultural Science in Finland 3(1994) Table 5. Sensitivity of welfare effects to changes in price elasticities. Price Price of Quantity Quantity Change in CS Change elasticity of a holiday supplied demanded of in PS -demand (FIM/day) (mill, days) (mill, days) (FIM mill.) (FIM mill.) entitled to - supply * = equil. price holiday (FIM) -0,35 1,00 400 1.7 2.5 43.9446.7 -32.2 -223.7 -2 277.9195.6 -516.9 -5 264.1541.7 44.4452.6 -32.2 -146.6 -1 493.3128.0 -451.3 -4 595.4541.7 •514 2.2 2.2 650 2.8 2.1 -0,95 1,00 400 1.7 2.5 *483 2.1 2.1 650 2.8 1.6 -0,65 0,70 400 1.8 2.5 44.2 449.7 -216.7 -2 207.2 -482,6 -4 914.8 -32.4 *514 2.1 2.1 189.2 502.5650 2.5 1.8 Pu PSd = j S (p) dp = S (p d) -S (p,) Pi When compared to the extent of relief services realised in 1990 in the state-led system, the equilibrium would be reached, ceteris paribus, if quantity demanded were 200 000 days, or 2 days per farmer entitled to holiday, smaller, and quantity supplied were 400 000 days, or 4 days per farmer, larger. Were the relief service system to reach a market equilibrium, the average cost, and price, per vacation day would increase by 18 per cent. Naturally, the higher the price of the service, the lower farmers’ surplus. The opposite is true for service suppliers, at least at this range and elasticity of prices. Because supply is more elastic than de- mand, the difference between the changes of sur- pluses increases as the price rises. In the market system, if equilibrium does not hold and supply exceeds demand, service suppliers incur losses due to sub-optimal use of resource capacity, e.g. replacement workers, dedicated to relief services. In the case of an inadequate supply, consumer-farmers face welfare losses in the form of an impaired working ability and increasedrisk of accidents due to lack of relaxation and leisure. Moreover, farmers are prevented from maximising utility when the optimal L-L choice is unattainable. In order to provide a reasonable range to evaluate the calculated welfare effects, a sensitivity analysis with the different elasticity pairs is conducted (Table 5). Compared to the basis, the market equilibrium in a privately organised system ofrelief services causes reductions in surplus of aboutFIM 1 500 - 2 300 per farmer (Table 4 and 5). In addi- tion, the total increase in service suppliers surplus is smaller than the total decrease in farmer surplus. Thus, a Pareto improvement according to the Kal- dor-Hicks compensation criterion remains unat- tainable when farmers and service suppliers only are taken into account. Net welfare gain is, however, obvious when di- rect government savings (see costs in Table 2) due to the reform are included in the welfare assess- ment. Even the proposed reduction in government expenditure of FIM 200 million would be adequate to cover the differencebetween farmers’ losses and service suppliers gains, and maintain a net welfare gain. Hence, there is scope to use government sup- port for farmers’ relief services in a more efficient way in the market system of reformed relief serv- ices. Concluding observations The significance of leisure as a contributor to well- being increases when economic welfare reaches a higher level. Leisure and recreation are social rights 11 Agricultural Science in Finland 3 (1994) and associated to many other determinants of wel- fare, e.g. health and social activity. In the future, farmers’ leisure-labour (L-L) decisions may be in- fluenced to an increasing extent by the need to have sufficient time for social activity in the form of political pressure and lobbying to defend e.g. farm- ers’ social security systems. In Finland, leisure and relaxation are made available to farmers by relief services. They are a part of farmers’ social security intended to guarantee the agricultural sector a just position in the society in terms of the development and allocation of welfare. Conventionally, both economic and demog- raphic factors affect farmers’ L-L choices. Due to several special characteristics of agriculture and farm enterprises we want to emphasize the follow- ing factors in connection to farmers’ L-L choices; (a) the importance of price and income effects (see the PEP and lEP analysis) exceeds that of inter-gen- erational changes in attitudes, to which farmers’ stronger preference to leisure is too often referred, (b) biological bindings and continuity of agricul- tural production has special repercussions on farm- ers’ L-L choices, and (c) the L-L choice involves considerable risk especially in agricultural produc- tion. These three arguments suggest that farm in- come development, the degree of specialization, and availability of skilled and reliable relief work- ers have to be taken into account in the determina- tion of the opportunity cost of leisure for a farmer. The leisure-labourchoice is often a choice between economic result and foregone earnings. Structural development in agriculture is an im- portant factor in explaining the demand for relief services. On the one hand, therapid decrease in the number of farmers has reduced the demand. But, on the other hand, improved availability and increased use of the possibility to hire relief workers have increased the number of relief days done in the systems. Income and price effects are, however, crucial in conditions that are changing condi- tions bearing the impression of great uncertainty. Pressure to reform is apparent in both agricultural and the entire social security system due to economic recession, budgetary constraints, and, ap- parently, possible EU membership. We conclude that the following broadly defined factors crucially affect demand for farmers’ leisure and relief services: (a) structural development in agriculture, (b) structural reform of the social secu- rity system as a whole, (c) the form of administra- tion, organisation, and financing of services, (d) affordability of services with respect to income and price implications, and (e) European integration and legislative harmonisation. The welfare analysis implies that increases in farmers’ costs and user payments would lead to substantial losses for farmers, and a decline in the demand for services. However, direct government savings would abundantly suffice to compensate for farmers losses, and still maintain net welfare gain in the reform of the relief service system. Moreover, a shift from a heavily administered state- led system to a market oriented system could pro- duce economic benefits and efficiency through bet- ter local organisation and increased flexibility be- tween suppliers and consumers of relief services. When the number of farms decreases and diver- sity in the needs for relief services increases, a local, multipurpose enterprise could be the most efficient and flexible in meeting the changing de- mand offarmers for relief services. This wouldalso facilitate a shift towards the practice common in many EU countries. State subsidization, either to a service supplier or a farmer according to services actually used, could still be required in order to lower farmers’ cost of services and to maintain the systems in operation. Problems may persist, how- ever, between diverse objectives of social (welfare) policy and agricultural policy. In European integration farmers’ relief services could be developed as an allowed mechanism of national support, ifso desired, to secure a fair stand- ard of living for farmers. Moreover, farmers can be both users and suppliers of relief services. The re- formed relief services can generate an appropriate source to increase farmers’ welfare by, convention- ally, transferring support of a de-coupled, non-dis- torting, social policy nature to farmers, and, more contemporarily, creating additional income and employment opportunities in rural areas through service-supplier farm firms. 12 Agricultural Science in Finland 3 (1994) References Becker, G. 1965. A theory of the allocation of time. The Economic Journal 75: 493-517. Flandin, N. 1991. Present or future relief services in the different countries of the community. Summary of the questionnaire sent out to the member organisations of the COPA Women’s Committee in June-July 1991. 9 p. Hirshleifer, J. & Glazer, A. 1992. Price theory and applica- tions. 563 p. sth ed. Prentice-Hall, Englewood Cliffs, New Jersey. Ingberg, M.. Lahdenperä, H., Pulli, M. & Skurnik, S. 1986. Työvoiman tarjonta. Pellervon taloudellisen tutkimuslai- toksen julkaisuja 7: 1-190. Just,R. E., Hueth, D. L, & Scmitz, A. 1982.Applied welfare economics and public policy. 491 p. Prentice Hall, Engle- wood Cliffs, New Jersey, Kola, J., Marttila, J. & Niemi, J. 1992. Finnish agriculture in European integration: A firm level approach. Agricul- tural Science in Finland 1:5-14. Lilja, R. 1982. Leisure time and consumption. An explora- tive study of the Finnish wage earner families in 1971. Helsingin kauppakorkeakoulun julkaisuja B-59: 1-127. Lomituspalvelutoimikunta 1993. Lomituspalvelutoimikun- nan mietintö 1993:10.63 p. Valtion painatuskeskus, Hel- sinki. Maatalousväestön japienyrittäjien lomakomitea 1973. Maa- talousväestön ja pienyrittäjien lomakomitean mietintö 1973:28. MTH 1991, Maatilatalouden rakenneohjelma. Maatilahalli- tus. 123p. Niemi, I. & Pääkkönen, H. 1990. Time use changes in Fin- land in the 1980s. Studies 174; l-l 18. Nyberg, A. 1979. Developing a sales forecasting system. Proceedings of the 2nd Finnish-Soviet symposium in economics. Publications of the Finnish-Soviet Commit- tee on Scientific-Technological Cooperation 5: 229-242. Owen, J. 1971. The demand for leisure. Journal of Political Economy 79, 1: 56-76. Ritson, C. 1980.Agricultural economics. Principles and pol- icy. 409 p. Granada, London. Rosen, H. S. 1985. Public finance. 641 p. Irwin Inc., Home- wood, Illinois. Sihvola, S. 1992. Maatalousyrittäjien lomituspalveluiden sosioekonominen merkitys jaerilaiset kehittämismahdol- lisuudet. Maatalouspolitiikan tutkielma. Helsingin yli- opisto. 86 p. Theo,, H. 1975. Theory and measurement of consumer de- mand, Amsterdam. Varian, H.R, 1990. Intermediate microeconomics. A mod- em approach. 599 p. 2nd ed. Norton, New York. Von Bergman-Winberg, M.L. 1987. Wohlfart, Lebens- niveau und Lebensweise im Deutsch-Deutschen Ver- gleich. Ekonomi och samhälle. Skrifter utgivna vid Sven- ska handelshögskolan 38: 1-463. Sources of statistics: Agricultural Economics Research Institute. Statistics about farmers subsidized holidays in 1974-1992. The closing of the accounts ofFinland 1974-1991. The Finnish farm income agreements in 1974-1991. The Ministry of Social and Health Affairs. Statistics about farmers subsidized holidays in 1974-1991. Manuscript received August 1993 13 Agricultural Science in Finland 3 (1994) SELOSTUS Vapaa-aika ja viljelijöiden hyvinvointi muuttuvissa olosuhteissa Jukka Kola ja Sanna Sihvola Helsingin yliopisto Artikkelissa tarkastellaan työ-vapaa-aika -valintaa maatalou- dessa ja arvioidaan hyvinvointivaikutuksia siirryttäessä val- tiojohtoisesta tuetusta järjestelmästä kohti markkinamekanis- mia. Lomituspalveluiden avulla jäljestetty vapaa-aika on tär- keä viljelijöiden hyvinvoinnin osatekijä, mutta työ-vapaa-aika -valinta vaikuttaa myös tilan taloudelliseen tulokseen. Taloudellisten ja demografisten tekijöiden lisäksi artikke- lissa tarkastellaan maataloustuotannon biologista sidonnai- suutta ja jatkuvuutta sekä riskiä jaepävarmuutta, jotka vaikut- tavat viljelijöiden ajankäyttöön. Lomituspalveluiden kysyn- nän kehittymistä selitetään maatalouden rakennemuutoksella. Suomessa lomituspalveluiden organisointi on keskitetym- pää kuin muissa Pohjoismaissa tai Euroopan yhteisössä. Hy- vinvointitaloustieteellisellä laskelmalla arvioidaan vaikutuk- sia, mikäli lomituspalveluiden valtiontuki poistettaisiin Suo- messa ja järjestelmä toimisi vapaasti markkinoilla. Laskelman mukaan suorat valtion säästöt olisivat riittäviä kompensoi- maan viljelijöiden hyvinvoinnin menetyksiä. Vapaasti toimi- vat markkinat toisivat taloudellista tehokkuutta ja joustavuut- ta. Jonkinasteista valtion tukea muuttuvissa olosuhteissa saa- tetaan kuitenkin tarvita, jottapalvelut kehittyisivät japalveli- sivat tukijärjestelmänä, joka on luonteeltaan sosiaalinen ja kilpailua vääristämätön. 14 Agricultural Science in Finland 3 (1994)