Living wage – the price of a decent cuppa?

As we near the end of the TUC’s Fair Pay Fortnight, Sabita Banerji has blogged about the challenges of moving towards living wages in global supply chains. Oxfam (which like TUC recently became a living wage employer) has been looking at wages in other countries and their relationship to poverty benchmarks, for example on tea plantations in Malawi.

The good news is that their workers receive at least the national minimum wage. But it doesn’t mean they can meet their basic needs, according to a recent  study for the Ethical Tea Partnership (ETP) and Oxfam, with research by Ergon Associates. Indeed, wages were found to be below the World Bank’s Extreme Poverty Line of USD$1.25/day at household level and prompted the formation of a coalition to address the findings.

So what would be a sufficient wage for Malawi’s tea pluckers to live on?

Many companies contemplating the issue fall at this first hurdle of trying to establish what exactly a living wage is. Yes, ok, it's the amount a worker needs to earn in a standard working week to be able to support his or her family to a decent standard of living and have some discretionary income for emergencies... But how do you establish an average family size and how many earners it has, what a decent standard of living is for a typical week and how much discretionary income it is reasonable to allow for? 

All these factors can vary enormously from one country to another, or even within one country. They can also vary over time. And it's at this point that many companies throw up their hands and say, "This is just too hard to sort out, let's focus on something easier to measure and fix, like health and safety."

Part of the problem has been the lack of a single agreed methodology for establishing a living wage level. But in a context like the Malawian tea sector, whether or not you can be confident about the right ‘number’, it is a no brainer that the workers need to earn more if they are to meet their basic needs and get a fair share of the value generated by the retail chain. 

Now a group of standard setting organisations including Fairtrade International, SAI, UTZ and Rainforest Alliance, together with the ISEAL Alliance has commissioned Richard and Martha Anker to adapt their methodology for measuring living wages (already used in urban areas in nine countries)  for agricultural areas, leading to studies in South Africa (wine grapes), Dominican Republic (bananas), Malawi (tea) and Kenya (fresh cut flowers). 

The methodology uses local costs and normative standards to estimate food, housing, health care and education costs, and statistically representative data to estimate other essential costs. It also estimates the value of in-kind benefits, an important part of the remuneration package in agriculture. Findings will be shared with stakeholders and the public, not least as an input to collective bargaining, as it is of fundamental importance that workers and wider society are part of the process

But once a living wage level has been established, what next? At a recent workshop for ETI members, participants were urged not to be discouraged by the perceived challenges of calculating living wage levels but to take the first steps by focusing on the underlying causes of low wages and what can be done to tackle them.

The tea wage coalition, led by Ethical Tea Partnership and Oxfam (both members of ETI) now includes progressive tea companies, retailers, certification organisations, NGOs and IDH, the Sustainable Trade Initiative. Members met on 1st April to hear more about the Anker living wage methodology and to discuss progress and next steps. The good news is that tea workers’ wages are already higher than at the time of the study. But much of the discussion focused on what needs to change in Malawi and the UK to make higher wages sustainable for the industry, retailers and consumers. 

Yet change there must be, at both ends of the supply chain. It is not right that workers are living in such poverty to supply our daily cuppa. 70% of supermarket tea is sold on promotion, is that commercially sustainable let alone equitable? All stakeholders have a responsibility to find solutions but they are unlikely to be cost free. The work continues and I’m quite sure will make a difference. The coalition is open to new members, contact ETP.

ETI's blog covers issues at the intersection of business and human rights. We feature posts by, for and from our members and allies; we do not accept or offer payment for posts or publish content outside of these criteria. We welcome a range of insights and opinions from our guest bloggers, though don't necessarily agree with everything they say.