This background paper for the World Development Report 2007 focuses on the question of how rural labour markets and migration can be made to work better for poverty reduction. We find that while agricultural wages have remained relatively low, a few rural labouring households have been able to break out of poverty through household diversification strategies that use a combination of two or more of the following: accessing regular work (not necessarily well-paid) inside or outside the village; leasing in land or being given a land by a patron for cultivating; and starting up a small business. Skills, education, strong intra-family cooperation with pooling of labour and resources; being able to use social networks to one’s advantage and the capacity to “shift” occupations from traditional to modern ones are critical in accessing better paid jobs and more work.