Living Wage… Coming Soon to an Industry Near You!

It’s here! I have the distinct impression that most producers recoil in horror at the prospect of a living wage benchmark being conducted for their industry. And understandably so. No one wants to hear that, even if they are paying the legal minimum wages, this might not be enough for a decent standard of living, or that to pay such wages may mean substantial increases in employment costs. However, as certification bodies place increasingly stringent requirements on producers to pay living wages, or at least have a time-bound plan to achieve them, it’s becoming a necessity for producers across all kinds of commodities and countries to understand the cost of living and socio-economic context in which they operate, and to take a close look at their business model in light of these realities.

ETP-TEAMUP16-0206At TEAM UP 2016, we were treated to a trailer from the soon-to-be-released Sri Lankan study – prevailing wages are significantly higher than both World Bank and Sri Lankan national poverty line benchmarks, so we know wages there are considerably closer to a living wage than other origins where these benchmarks have been conducted. So this must mean that everything in Sri Lanka is hunky-dory and everyone is happy, right? Grab your popcorn, because this is where the plot thickens.

A trailer never gives away the full story, and neither does a living wage benchmark. Despite high wages, the Sri Lankan industry still grapples with low productivity and high rates of absenteeism. Although the plantation sector performs well against national averages on a variety of sustainability indicators, such as maternal mortality and low birth weight, tea is not a career choice for many Sri Lankans. In addition to this, the high cost of production is currently outweighing the prices paid for tea, and in fact earlier this year tea prices were bolstered by government intervention to prevent an economic crisis for the industry.

In 2014, ETP and partners began to develop the Malawi 2020 Tea Revitalisation Programme with the objective of enabling the tea industry there to pay a living wage to its workforce. It quickly became apparent that a range of interventions was necessary to ensure that the industry would remain viable as it raised wages, and that raising wages actually resulted in improvements in the standard of living and opportunities for Malawians. As a result, the Malawi Tea 2020 programme is a holistic set of projects supporting everything from innovative finance to improving nutrition – both of which were discussed at length during TEAM UP 2016. While in Sri Lanka the story begins in a setting of relatively high wages, the plot remains the same. Without addressing the fundamental structure of the industry, and providing opportunities for workers to benefit from this, we cannot reach our happy ending.

During the TEAM UP session on living wages, we heard from Roshan Rajadurai, Chairman of the Ceylon Planter’s Association, about his rather radical plan to change the wage model from a quota-based system to a productivity based one, and as you read this, ETP is supporting a trial to transform tea workers on Sri Lankan plantations into entrepreneurs who are responsible for their tea crop, which they then sell to the estates. Roshan believes that his model will at least double the incomes of tea workers at the same time as it puts the industry back into a profitable mode. This sounds like a sequel worth waiting for.

We also heard from Binesh Pananwela, CEO of the Sri Lankan company Watawala Plantations, who told us about how a more democratic model of decision making on tea estates – the Plantation Communities Empowerment Model – had transformed his company. Among many other benefits it enabled the workforce – now known as Associates – to diversify their income base beyond tea. Don’t you just love when the spinoff is better than the original?

So far, the Global Living Wage Coalition has published 5 different commodities in as many countries, including tea in Malawi. Eighteen further benchmarks, from seafood to flowers, are currently either in the works or about to commence, so if you don’t already know what the living wage is for your region or commodity, don’t worry, there’s bound to be a benchmark coming soon to an industry near you. But don’t be scared, the benchmark is only Part 1; there is a lot to look forward to.