New Living Wage Benchmarks Point the Way Forward

10 June 2014

Three reports published today set new living wage benchmarks for rural South Africa, Dominican Republic and Malawi.

The reports, commissioned by Fairtrade International (Western Cape, South Africa), Fairtrade and Social Accountability International (Dominican Republic), and Fairtrade, Sustainable Agriculture Network/Rainforest Alliance and UTZ Certified (Malawi) have been prepared by international experts Richard and Martha Anker[1] pioneering a new living wage methodology. The methodology is a major step forward in measuring living wage and can be used in any country for either rural or urban areas.

The reports document worker needs in a detailed yet simple, transparent way that everyone can understand. The reports clearly indicate the cost of a basic but decent standard of living for workers and their families. They also compare living wage estimates with current wages and include innovative ways to estimate fair and reasonable values for in-kind benefits.

Workers and employers in all three countries participated in the process to set the living wage benchmarks, and have given predominantly very positive feedback on the findings. With project co-ordination from our office in Bonn and together with local teams, the Ankers investigated the actual costs of workers on South African wine grape farms, Dominican Republic banana farms, and Malawi tea farms. We are also grateful for the support which field staff of Ethical Tea Partnership and Oxfam provided during the study in Malawi.

The teams visited markets where workers shop for food, visited workers homes, had discussions with workers as well as small farm owners, cooperative officers, plantation managers and owners, municipal officials, trade union members, university professors, architects and others. They also used many papers, reports and statistics from researchers, government agencies, and international organizations.[2]

The living wage for the wine grape growing region of Western Cape in South Africa was calculated to be ZAR 2385 per month (US$230) for permanent workers who receive free housing, free transportation to town each week as well as a 13th month bonus. For seasonal workers, it was ZAR 3122 per month (US$302).

In rural Dominican Republic the estimated living wage is DOP 11,966 per month (US$277) on farms that provide free transport, breakfast and lunch, or DOP 13,869 (US$319) per month without in-kind benefits.

In Malawi the living wage is K32,392 per month (US$75) when workers receive common in-kind benefits including lunch on workdays, health clinic, school building and crèche, and recreational services, or K35,222 per month (US$82) when no in-kind benefits are provided.

In all three countries the current national minimum wage falls short of the living wage estimates. In South Africa the gap is moderate for permanent workers (5%) but large for seasonal workers. In Dominican Republic and Malawi, the difference is substantial for all workers.

“These reports show us just how much work lies ahead. Finally we have clear numbers on what is a living wage, and the gap we must work towards closing,” said Wilbert Flinterman, Fairtrade International’s Senior Advisor on Workers’ Rights and Trade Union Relations.

The revised Fairtrade Standard for Hired Labour, which comes into effect in June, will require employers to negotiate with workers’ representatives on wages and make annual increases on real wages towards the living wage. It also opens the possibility for workers to spend up to 20% of the Fairtrade Premium as a bonus payment if they choose.

“All organizations involved in the research agree that there is no magic solution to quickly fix the low wage levels in developing countries that supply agricultural commodities to global markets," stressed Flinterman. “Instead, we are strongly committed to fighting the causes of poverty among workers with a combination of our own interventions plus collaboration with other certifiers, NGOs and multi-stakeholder platforms, local employers, unions, buyers of agricultural commodities and retailers.”

Fairtrade has committed to seeking solutions for low wages together with other voluntary standards organizations in the ISEAL network.

In addition to the South Africa, Dominican Republic and Malawi studies, Fairtrade International has co-funded a living wage study with SAN/Rainforest Alliance and UTZ Certified for Kenya based on workers’ costs on flower plantations. This study is due to be published shortly.

Following this, Fairtrade International will work with partners to develop plans for moving toward living wage levels in all regions around the world where we have Fairtrade certified plantations and hired labour set-ups.

Download the Living Wage reports here.

Read more about Fairtrade’s living wage project here.

Read opinion article 'Living wage: setting benchmarks for farm workers' by Wilbert Flinterman on The Guardian

[1] Richard Anker is an economist retired from International Labour Organization (ILO) and an expert on labour, poverty and development. He has worked extensively on measurement of living wages and decent work and written a comprehensive review of living wages published by ILO (2011). He is currently a visiting scholar at the Political Economy Research Institute, University of Massachusetts.

Martha Anker is a statistician, retired from World Health Organization (WHO), who has extensive experience rapid assessment methodologies, and health and gender issues. She is currently adjunct faculty at the School of Public Health and Health Sciences, University of Massachusetts.

[2] Estimates of expenses for food are based on the local cost of a locally acceptable, inexpensive, nutritious diet that meets WHO/FAO standards for nutrition. Estimates of expenses for housing are based on the local cost of basic housing that meets international and national standards of acceptability. Estimates for other costs, which are based on available survey data, are checked to make sure that enough money is available for education and healthcare as these are akin to basic human rights.

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