Are wages the fly in the Fairtrade ointment?

September 9, 2013

     By Duncan Green     

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.

September 9, 2013
Duncan Green