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The Pros and Cons of different remuneration methods (an elaboration of last month’s article)
Last month we focused on the complex and sometimes destructive relationship between remuneration methods for fishermen and the overall management implications of different remuneration methods. Our main claim was that if wages are almost completely driven by the volume of catch, fishers become very vulnerable to TAC decisions, since this has immediate, always painful and at times intolerable economic implications. To give a local (South African) example, in the early 1990’s the west coast rock lobster TAC was severely cut due to a sharp decline in the catch rate. This was followed by much fuss and quarreling which eventually led to a considerable decline in the minimum legal size (this story justifies and will receive an article of its own one day).
Strangely enough, after a short settling down period, it became apparent that the price per kg of smaller lobsters in the Japanese market is considerably higher than that of their larger predecessors. This event coincided with a sharp decline in the value of the South African rand. The end result was that despite a significant reduction in TAC, the South African west coast rock lobster industry still enjoyed a good income. Nevertheless, the prevailing method of remuneration at the time was simply rands per kg caught. This meant that while the industry as a whole managed to survive the TAC crisis, many fishers had either to be retrenched (less lobsters to be caught) or suffer declines in their income. The result of dynamics such as this is that fishers or any participant whose income is linked solely to the volume of fish caught are likely to resist all attempts to reduce the TAC.
Although this article does not deal with what happens after fish are landed, it is important to appreciate that decisions relating to production may have significant downstream effects, with implications for processing workers and other employees in the fishing sector. For example, any change in the size of quota, fishing season, or even the average size of fish will have an effect on employees downstream of the catching operation. Overcapitalisation can often manifest itself as a surplus of processing and storage facilities, and not just excess harvesting infrastructure. Therefore the pressure to maintain a high effort fishery is also driven by the need to keep and utilize extensive processing facilities with a large labour force. Planning for the fishing sector as a whole should consider these impacts.
If however wages are linked to profitability, rather than to volume, and fishers (in the context of both this and last month’s article the term fishers is meant those involved in catching fish who are not involved in processing and marketing) are able to reap the benefit of better prices due to higher product quality and/or better market conditions, then the pressure to resist TAC reductions is likely to be less.
The reader may recall that we did issue a caution last month about pitfalls associated with a quality based remuneration method. As mentioned, this can lead to unreported and unaccounted (in TAC terms) discarding of “less desirable fish” due to poor quality and/or undesirable size mixes. These discarded fish are likely to die (although this is less likely for lobsters and crabs, it is virtually certain for finfish) and hence the real fishing mortality may exceed the TAC by a considerable amount. Another problem linked to discarding is that it leads to incorrect CPUE data under circumstances where the effort is correctly reported but only the landed catch is reported.
To summarise, we feel that the most desirable remuneration method should have three components built into it:
- a) A basic salary/fee/wage which is not linked to catch but rather to working hours.
- b) A commission for volume of catch
- c) A commission for quality (fish condition, size and species breakdown) of fish caught.
Some may be tempted to propose a direct link between the final market value of fish and its landed value to fishers. This, however, is not as simple an issue as it sounds (normally the case) since there are many other players and participants in the fishing industry who are not fishers but nevertheless have the right to enjoy the benefits of improved market conditions. This issue is discussed in the following section.
Perceived value of the fishery versus wage expectations
The real value of a fish is the price that consumer's are prepared to pay for it in its final marketed form. The value of the landed product is an intermediate step, and does not necessarily reflect the most costly step involved in getting the product to the consumer. Storage, processing, shipping and marketing is sometimes much more expensive than the harvesting costs. Although many fish species are considered to be a cheap and readily available source of protein, this is rarely what makes them a lucrative product. The real market for fish is probably the higher value market in which a high quality product and aggressive marketing is the key to high returns. Large sectors of the public still see fish as an inferior product compared to other protein sources such as red meat and poultry.
If anything, wage expectations of fishers can only be legitimately linked to the value of the landed product (e.g. the price that the factory or retailers are prepared to pay for the landed fish), and should not be unrealistically related to the value of the end-product. Taking this further, the crew have some claim on the value added by their labour, i.e. the price of landed fish minus the value of fish in the sea. To work this out one would have to subtract from this figure depreciation on capital equipment, running costs and the like.
Our view, which is probably not a popular one, is that fishers’s wage claims should therefore not necessarily be pegged to the value of the end product, but rather to the value added by their labour, unless it incorporates links to the payment basis for workers involved in processing, shipping, marketing and administration.