Are wages the fly in the Fairtrade ointment?

Next year will be the 20th anniversary of the Fairtrade Foundation, (Oxfam was one of its founders) and there will be lots of well-meritedfairTradeLogo celebrations. The growth of fair-trade has been phenomenal. In the UK total sales of Fairtrade products have soared from £63m in 2002, to £1530m last year, growing at double digit rates even through our new age of austerity.

Like many other development types, I’m a huge fan of Fairtrade. It’s an action you can take in your daily life that makes a difference. Hundreds of thousands of people producing products from coffee to tea, bananas and flowers have benefited. In Malawi the Fairtrade Premium supports the largest adult-education project for tea workers in the country. In Kenya flower workers were found to have better employment contracts, and the premium has funded gas cylinders and pressure cookers which reduce the time women spend gathering firewood.

But there is a fly in the fair-trade ointment. Wages. Back in the 1990s I remember being shocked when a Honduran trade unionist asked me if I realized that wages and conditions were substantially better on Chiquita’s banana plantations than on their Fairtrade-certified neighbours.

Recent research suggests that not enough has changed since that conversation took place. This year, Oxfam took part in a research project on wages in the tea industry with Ethical Tea Partnership, and found that wages were uniformly low on all hired labour plantations in the countries studied, whether Fairtrade (or or UTZ or Rainforest Alliance) certified or not. In Malawi, even adding in-kind benefits and productivity payments to cash piece-rates still didn’t take wages above the level required to get past the international extreme poverty line .

The Fairtrade Foundation tells me in an email, however that ‘certified farms are more likely to provide better conditions in terms of overtime, maternity, written contracts etc.’ But still, this hardly seems to compensate as long as the core issue of poverty wages is not resolved.

Some steps are now being taken. Fairtrade International, the global body to which the Foundation belongs, has a programme on workers’ rights and has just finished a public consultation on the draft of a new Standard for Hired Labour.

That draft includes attempts to strengthen the ‘teeth’ of Fairtrade certification when it comes to getting beyond paying a minimum wage to paying a ‘living wage’. But as the document to its credit acknowledges, that’s because such efforts have so far stayed as vague aspirations, routinely ignored by auditors when they arrive to certify farms.

So what are the obstacles to workers on certified farms getting a living wage? I think one problem is about framing – the imaginary world of fair trade is populated by peasants: family farmers cultivating their own land, who need help with getting organized into co-ops and getting a decent price for their products. That’s where research seems to find the most impact, rather than on plantations with hired labour.

tea-pickersFairtrade International’s own independently commissioned research concluded that the incomes of Malawi tea smallholders increased 3 fold with Fairtrade, a big contrast to our findings on plantation wages. As a Fairtrade fan, this means I will have to change my shopping habits. Up to now, I thought the benefits to workers of any Fairtrade-certified product were more or less the same, so I buy supermarket brands to encourage them to stock the stuff. But now it seems that some Fairtrade products are more beneficial than others. Cafedirect reports that 22% of the value of a box of Teadirect tea goes direct to the producer coops (who are all smallholder tea growers, no estates involved).

The Divine chocolate company is nearly half owned by Kuapa Kokoo cocoa producers in Ghana While Fairtrade ensures farmers receive a better deal for their cocoa and additional income to invest in their community, company ownership gives farmers a share of Divine’s profits and a stronger voice in the cocoa industry.

But peasants are often also employers, and that seems hard for fair-trade and NGO types to get their heads around: I remember visiting an Oxfam ‘small farmer’ project in Nigeria, where the lead farmer told me he employed 50 workers – we had never even asked what they were earning. How much of the Cafedirect or Kuapa Kokoo benefits goes to temporary hired labour on smallholder farms?

And as for hired workers on large farms, how could we ensure that Fairtrade certified plantations pay a living wage?

One option might be for buyers to pay a ‘Fairtrade living wage premium’ directly to workers. The point there is to ensure that an extra 5 pence (or 8 cents) on a bouquet  of fairtrade flowers does not then get multiplied up the supply chain and cost a lot more for shoppers. They should just pay the additional 8 cents. Oxfam did something a bit like that 10 years ago when we found out just how little people were earning by making our Christmas crackers in South Wales. But what if only 10% of the workers on a plantation are producing for Fairtrade for 10% of the year? Real life tends to get messy.

Another way is to try and ensure that certification exerts steady upward pressure towards achieving living wages (which it has so far failed to do). The draft standard text says ‘Your company must negotiate with workers on how a living wage will be reached.’ But there is no deadline that feels pretty weak – what if no agreement is reached, or the talks drag on for years? And anyway, is this within the power of Fairtrade to deliver, when dealing with powerful brands and retailers competing with each other on price?

The other way is of course, the trade union route preferred by organizations like the Ethical Trading Initiative. Trade unions are understandablyCafe direct logo worried about their representative position being undermined by private standards, even Fairtrade ones: who decides wage rates, the union or a Living Wage auditor? In the case of Indian tea pickers, though, even trade unions have been unable to overcome the crisis in the industry – Assam, which has a union-negotiated collective bargaining agreement, has failed to achieve progress on wages. Plantation owners are able to argue that they are sticking to Collective Bargaining Agreements on wages (which set sub-living wage levels), as the proper mechanism for agreeing wages.

The draft standard wants to introduce a Right to Unionize protocol that must be signed by all employers, but it is not clear what happens if they sign, but then ignore it – will that tick the box or not? In the tea industry, union agreements have so far not managed to reach living wage levels, but in the long run, the role of fairtrade is surely to support the unions to get better deals across the whole tea sector, rather than establish any kind of substitute mechanism that only applies to certified plantations.

All of this would be made a great deal easier if the brands and retailers would find ways to absorb a small increase – earmarked for wages – and the industry finds ways to make wage negotiation more meaningful. So kudos to Fairtrade for grasping the nettle of trying to ensure that people on the sharp end receive wages they can live on. Let’s hope they succeed and that there’s a knock on effect on the rest of the supply chain.

If you find this a long and confusing post, sorry, but this is a messy and complex problem – if it was simple, it would have been fixed by now.

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11 Responses to “Are wages the fly in the Fairtrade ointment?”
  1. Gareth Price-Jones

    Great post. I’ve always been a bit skeptical of Fair Trade’s ability to scale up and compete, so super impressed at the 1.5bn sales in a time of austerity – that’s not far off 1% of the 169.7 billion UK grocery market in 2013. Not surprised by the challenges – everyone employing staff in environments where low skills attract tiny wages has that challenge – do you disrupt labour markets and increase your own costs/undermine profitability by paying more, or do you make yourself complicit in poverty wages?

    My experience with private businesses in Bangladesh is that there is usually plenty of scope for those at the top to take a little less with transformative impacts for those at the bottom, but relatively little political/social pressure for them to do so, so I’d suggest trade unions (coupled with NGOs and progressive legislators) were a better route than auditors.

  2. Paul Spray, Traidcraft

    Given Traidcraft’s history as a Fair trade company, we can clearly see its benefits. But Fairtrade needs to continue to pioneer, and I agree it has not made enough progress in ensuring living wages for all tea workers. As you say, this is partly because Fairtrade still sadly accounts for only 0.5% of global tea supply. But, with the impetus of the ETP/Oxfam report, Fairtrade can take a lead in arguing for greater commitment and investment from the tea brands,retailers and all the certification schemes, to bring about a step change in the sector. That must include involving workers in deciding what their living wage is.

  3. As someone who’s worked on wages in agriculture and garment supply chains for over a decade, I see the challenges to achieving a living wage as being so deep rooted and complex the only way of overcoming them is for the whole industry, and its key stakeholders to work together to tackle them. Low pay and poor working conditions are often not within the ability of a company or certification organisation to address alone.

    I am cautiously optimistic that positive change will happen, now that a critical mass of stakeholders has committed to working together to find solutions to the problem of low wages, starting in Malawi. A blog on this is here

    I would like to see everyone who, like me, loves drinking tea to take an interest in what their favourite tea brands – and those who certify them – are doing on this issue and make clear your expectations of a living wage for workers. I will also continue to go out of my way to Fairtrade-certified tea and other products. Fairtrade, with its strong ethical values, premium distribution and work with trade unions, is well placed to play a leadership role in ensuring a living wage as well as continue to ensure a fair deal for smallholders. Other certification organisations also need to play a proactive role and incorporated a living wage in their standards and auditing processes, and there are signs this is beginning to happen. Watch this space and help it grow.

  4. Thanks Duncan for highlighting this issue and the conundrum associated with it. You are right that topic of living wages for hired labour is not confined to estates only because smallholder tea farmers do – either permanently or temporarily – often rely on hired workers to tend to their tea gardens.

    How do we at Cafédirect tackle this issue? Yes, we depend to a certain degree on the overall Fairtrade standards to incorporate the topic of living wages, not only in tea but all Fairtrade certified products. But next to this more ‘top-down’ approach we also discuss issues around environmental & social challenges with all our smallholder partners on a regular basis. A more ‘bottom-up’ approach if you like. This does not necessarily result in immediate changes but does allow for a more sustained change of practices & behaviour because the key stakeholders understand & embrace the issues at stake.
    And you put your finger on a vital fact: most of our smallholder tea organisations only sell between 1-2% of their overall annual production under Fairtrade terms… hence any solution must look at wider tea industry practices & business model beyond Fairtrade. Forum for the Future, where we are a member, are doing that with their Tea 2030 project that looks into wider sustainability issues shaping the future of the tea industry.

  5. Peter Williams

    You describe well the challenges facing Fairtrade, but let’s give credit where it’s due.

    Fairtrade’s proposed Freedom of Association protocol , which plantations will have to sign if they want Fairtrade certification, is a potential game-changer. It creates opportunities for workers to negotiate over wages, and (underpinned by audits) is likely to yield progress on wages relatively quickly.

    This strikes me as just the kind of strategy which supports change across the board, which Oxfam has been asking Fairtrade for.

    Oxfam sits on the Fairtrade Workers Rights Advisory Committee, alongside international unions (IUF and ITUC) and other stakeholders. Part of our role is to help Fairtrade build learning and best practice from the wider world into the standards.

    Fairtrade stands head and shoulders above the other certification agencies in reaching out to global unions and other stakeholders, and is now putting in place measures which should make Fairtrade as effective on plantations as it has proved with smallhodler farmers.

    (Peter Williams represents Oxfam Fair Trade Working Group on the Workers Rights Advisory Commitee of Fairtrade International)

  6. It’s very important that we in the Fairtrade movement have such mature debates about what is working, and where we need to focus more effort, which is why we advocated that the Oxfam/ETP research focussed on wage levels in Assam and Malawi to seek to better understand and unlock the problems being experienced in trying to make progress on living wage. I also blogged on this same subject recently

    I’m curious to know which plantations your 1990’s Honduran trade unionist friend was referring to, Duncan, given Fairtrade certified bananas were only launched in 2000, and I believe before that there were only tiny volumes of mostly smallholder bananas going into Europe! Fairtrade was established precisely to try to secure market access for those without the patronage of major multinational supply chains, as well as improve the negotiating position of those trying to sell into them!

    Gareth, I think your point about disrupting labour markets vs adhering to local ‘poverty wage’ norms reflects very much the kind of conversation going on amongst tea plantation owners – they are adhering to the negotiated Collective Bargaining Agreements in Assam, for example, to avoid which in turn are failing to deliver progress towards living wages. So there has to be a more holistic way forward, as both certification and union-led programmes to improve wages will only make any headway with significant industry and government sponsorship and buy in alongside.

    As Wolfgang and Paul Chandler have said, Fairtrade is currently only a tiny percentage of global tea – in Assam just 12 out of 900 plantations are certified. The obstacles to greater certification are not dissimilar to the obstacles to moving forward on living wages – the World Bank estimates that between 1970 and 2002 tea prices fell in real terms by some 44%. Whilst there has been some slight recovery of prices more recently, the deep scars of decades of underinvestment remain. So any approach to tackling living wages must look more deeply into the distribution of value through the supply chain and how that can be rebalanced to deliver what workers need and deserve.

  7. I am very much disillusioned with the approach of the NGOs who were supposed to fight for social justice.

    Instead they are now playing shopkeeper for a niche market in the North.

    In the third world the most politically active forces are bought by ” fair trade”, isolating them from solidarity with the mainstream economy and the most needy.

    What is needed is a fight for social justice, not the creation of a parallel market for people in the north who want to feel better by paying more.

    Social justice is never given, it is taken.

    I fear the Fair trade movement is a distraction from this fight.

    I don’t know of countries or industries that became equitable because of external pressure, or the creation of a parallel system that eventually took over.

    In most countries workers’ rights were fought for and won within the system, leading to a change in the system.

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