1 April, 2016

Do not be fooled! Living Wage benchmarks should reflect real cost of living

Fairtrade tea picker
by Barbara Crowther, Director of Policy and Public Affairs for the Fairtrade Foundation

Today, 1 April 2016, the new Government set minimum wage level for over 25s comes into force, in a rebranding exercise that now calls it a National Living Wage.

At the Fairtrade Foundation, we are proud accredited members of The Living Wage Foundation, which currently calculates living wage levels at a minimum of £8.25 per hour, or £9.20 in London, and applies this to all workers over the age of 18.  The new ‘National Living Wage’ raises payments to £7.20 per hour for over 25s only, and even for them falls very short of the independent figures supported now by over 2,300 employers in the UK, and the whole of the Greater London Authority and London boroughs.

A diagram explaining UK Wage Rates

Closing the gap between official minimum wage levels and what would genuinely constitute a living wage enough to actually live on is not easy, and requires a good deal of political will, as well as effective business models that take the long view on sustainability. It is a subject we have long been grappling with in the Fairtrade movement, where the starting point for many global supply chains sourcing from developing countries have been national minimums or industry norms that sit well below the poverty line, and even then are rarely monitored and enforced.

Requiring compliance with local laws and paying industry averages or above was where we and many other ethical trade initiatives started, but in recent years there is increasing consensus that even when these standards are met, the reality is still falling a long way short of our stated vision that “everyone, through their work, can maintain a decent and dignified livelihood and develop their full potential.”

The same barriers and fears that have been expressed here in the UK are routinely part of the debate in global supply chains too – that raising wage levels will result in increased layoffs, reduced hours, or that businesses and low wage economies moving towards Living Wages will then struggle to compete in excessively price sensitive industries, and industry will then move to cheaper locations.

But let’s be honest, similar arguments were made by politicians in the UK in 1819 regarding child chimney sweeps “better to employ a large number of children in poor working conditions,” it was said, “than to offer them no work at all”. We’ve been here before. Working with partners such as Oxfam to understand why companies fail to pay living wage, and making clear the long term business case for doing so, has been critical in identifying workable solutions.

So how has Fairtrade been responding?

Firstly, to make clear our own principles and vision to support progress towards decent work, real costs of sustainable production and living wages everywhere, applied equally to all workers doing similar work, without discrimination. That commitment now sits right at the heart of the Fairtrade Foundation’s recently launched 2016-20 Strategy.  However, simply to rewrite Fairtrade’s labour standard and apply it with immediate effect could have had unintended adverse consequences for workers, if it resulted in farm management or businesses deciding they could no longer afford to be part of the Fairtrade system. Instead, the revised Fairtrade Hired Labour Standard that came into force in 2015, you see a progressive, developmental approach whereby companies must commit to a timeline for working steadily towards payment of living wages, and demonstrate progress against this.

Secondly, we recognised that we would only be able to drive this progress on an industry wide level, rather than a farm-by-farm approach. And for many of the countries and industries where Fairtrade works, calculations of living wages simply hadn’t been done, or were deemed not to include all the necessary components for a decent livelihood. That’s why the methodology for calculating benchmarks for Living Wages, developed for Fairtrade International by Richard and Martha Anker, has now been shared with, and adopted by, all the social and environmental certifications working together through the ISEAL Alliance, and has led to the establishment of a Global Living Wage Coalition, all working to the same definitions and sharing the workload. Research and benchmarking of Living Wage levels has been done for rural South Africa, Dominican Republic, Malawi and semi-urban Kenya, training of researchers is being conducted, and more than 18 further studies are now underway. 

The big question is how to close the gap between existing wage levels and Living Wage calculations. In Malawi, a coalition including the Tea Association of Malawi, Fairtrade, Oxfam, Utz Certified, Rainforest Alliance, members of the Ethical Tea Partnership, the Dutch sustainability initiative IDH, and the German development agency GIZ have collaborated in supporting the establishment of a Malawi 2020 Tea Revitalisation Programme, including living wages. And we in Fairtrade, within this, have continued to research and advocate the need for “wage rich prices” for tea to be paid by companies and retailers. With supermarket basic or value branded teas typically retailing for as little as half a penny per tea bag, ensuring enough value enters the supply chain at the shopper end, as well as improving the distribution of that value, is critical.

Whilst governments, companies and labour unions play the biggest role in change, as shoppers and consumers, we also have a part in the movement towards Living Wages. This includes challenging the relentless race to the bottom on prices for goods and services we buy, which continue to hold workers – from shop cleaners and till worker to farm and factory labourers – in poverty.

So on this day, as the Government debate on minimum vs living wages rages, let’s not be fooled by discounts, offers and always lowest prices, but recommit to genuine living wages, not just here in Britain but for all workers everywhere, and let’s support the businesses and choose the products that are at the forefront of changing working conditions for good.

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