Introduction
Addressing low wages and poor working conditions is a fundamental issue for sustainable trade. For workers in many developing and emerging economies, working for export sectors is a potential exit from poverty. Yet in a lot of sectors and countries, incomes are insufficient to enable people to work themselves out of poverty, and working conditions are poor. This impact theme closely relates to the eighth Sustainable Development Goal: decent work and economic growth.
Target 2020:
IDH aims to improve the working conditions of 290,000 workers, 80,000 of whom are expected to see an increase in their living wage. In the cotton program, we aim to train 3.5 million farmers on Decent Work to improve the working conditions of farm laborers.
To accelerate learning on how to enable a living wage, IDH has bundled its learning across sectors, with an impact focus based on three pillars:
- Building sector initiatives that lead to committed public and private policy making, worker-management dialogues and/or collective bargaining agreements to improve sector governance, creating an enabling environment to achieve living wage and improve working conditions.
- Improving human resource management, capacity building and training (of workers, farmers, or trainers) to improve workers’ voice, skills, safety, in-kind benefits and satisfaction, which leads to better working conditions that may translate into higher worker productivity.
- Piloting innovations on more efficient and effective business models that enable profit margins to increase, and allow companies to increase wages and improve working conditions.
IDH looks at living wage projects in terms of three outcomes. A drive towards improved living wages (and better working conditions) is at the heart of every project, but this drive needs to be accompanied by initiatives for improved sector governance and fueled by improved sector competitiveness.
The process of convening businesses around a living wage agenda is challenging. Different supply chain partners often look through different lenses depending on whether they are a buyer, a producer, or a government partner. Finding middle ground and showing players that there are benefits to raising wages for all can be tough.
For instance, from the point of view of the producer, raising wages to a living standard can be seen as a negative agenda. It increases costs, and may be perceived to add extra problems for a business that already struggles to make a profit even though its prevailing wage is above the minimum. By encouraging sectors to look at industry revitalization in tandem with addressing the issue of wages, IDH is able to engage in programs that have the potential to make a real impact on the wages of workers and the livelihoods of farmers.
The supply chain needs to support two targets: increasing profitability and competitiveness, and in return working towards a living wage for workers and a living income for smallholders.
In Malawi, one of the world’s poorest countries, 62% of people live below the World Bank’s extreme poverty line, and there is a lack of access to adequate nutrition for around 50% of children. We began addressing wages in the Malawian tea sector by linking the wage agenda with an agenda to raise profitability and competitiveness, which gave us the ear of the producers.
The Malawian tea program is an excellent example of an initiative in which all three pillars are implemented through a coalition of tea packers and traders, the Malawian Tea Producers Association, Malawian unions, the Ethical Tea Partnership (ETP), Oxfam, and IDH.
Malawian tea producers get on board
When we started the program in Malawi, we needed producer buy-in from the start. The producers were initially wary, but after a few days of stakeholders talking and showing an open attitude, we gained the trust of the Tea Association of Malawi who presented a declaration of intent to work with the program. This was the key unlocking moment: and it had taken just one week of on-the-ground involvement to achieve.
Wage improvement is not simply a matter of convening buyers to exert influence in the market. Saying “we won’t buy your product unless you work towards a living wage” is an oversimplification, which ignores the pressures faced by the producers. The key is to find a way for a producer to say “I am willing to work towards a living wage”—despite the cost problems. Asking the question “What are the challenges in the tea production industry?” allowed us to begin designing solutions that would look at easing the financial burden of wage increases: delivering a better-managed and more competitive Malawian tea sector, and receiving higher wages in return.
Global campaigning by NGOs is important for adding weight to a program driving towards a living wage. To drive this change, in-depth understanding of the sector is required to navigate dilemmas thrown up by the drive itself. Here, IDH can add value.
Holistic solutions for improved farmer livelihoods
A holistic approach is required to bring about action on the issue of living wages. Buyers need to pay higher prices. Producers may need to raise the quality of their product to encourage buyers to pay more. Increased quality is easier to achieve when farmers and their families are properly nourished and protected from disease. Better nourishment is an in-kind benefit of receiving a living wage, which gives access to more and potentially healthier food. Healthier food will produce higher worker satisfaction, which in return may help increase productivity.
NGOs, buyers, producers, and governments all have roles to play. Around nine buyers signed the Malawian program’s Memorandum of Understanding over a six-month period, creating a safe space for tea-industry players to commit to the program. In tandem with being consulted on the architecture of the program, this developed a roadmap in which the various components of the solution could be orchestrated by a convener.With lots of players working together, neutral convening was vital. Global campaigning by NGOs, for example, is important for adding weight to a program driving towards a living wage. To drive this change, in-depth understanding of the sector is required to navigate dilemmas thrown up by the drive itself. Here, IDH can add value. The Malawian government was able to advise on issues presented by the living wage program: for example, increased mechanization may lead to unemployment. And the buyers were able to communicate that the time between committing to paying higher prices and actually paying may be longer than hoped for by the NGOs.
Delve behind “the what”
There had never been a collective bargaining agreement (CBA) process in the Malawian tea sector: wages are historically set by the employer alone. First it was necessary to look behind the what, in order to discover the why.
You have this complex public-private partnership. But if you also have a few very tangible projects that can show progress pretty quickly, then you can demonstrate the partnership really working.
Why hadn’t there been a CBA process before? Who needed educating in order to make the CBA process happen? By training the producers—teaching them that if they were to found a CBA process their public relations would immediately improve—the program enabled the first-ever CBA to be signed in the summer of 2016. And by training workers’ unions to become fit for purpose as effective negotiating partners, the program also developed an environment in which future wage negotiations could be usefully conducted.
Maintain negotiations to keep in step with inflation
The successes of the Malawian tea-sector living wage program are encouraging. The tea-sector wage now stands at two-thirds of a living wage, and is 50% higher than the rural minimum country wage. However, inflation moves rapidly and can cancel out much of the good work done by the Tea Association and the Plantation Agricultural Workers’ Union that signed Malawi’s first CBA. It’s important to maintain a regular schedule of negotiations if we want to keep wages increasing as well as compensating for inflation.
[Producers] consider living wage a buyer’s agenda, but that’s not true. It is actually a civil-society agenda. And we have to make it a business agenda.
Diversify for a robust sector capable of paying a living wage
It has been difficult to put the Malawian living wage program up for investment, making it prudent to look at other means by which the producers can solidify their businesses.
The cocoa sector is a good model: major cocoa producers also trade coconut, rubber, or palm oil. The Malawian tea sector could emulate this diversification by complementing tea with other crops or products such as macadamia nuts and tourism.