Understanding Wage Issues in the Tea Industry | Living Wage

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Wage levels are an issue of concern across the globe as individuals, companies and governments wrestle with how wages paid to workers relate to costs of living, corporate and national competitiveness, profitability and broader macroeconomic trends and challenges. The project was co-ordinated by Oxfam and the Ethical Tea Partnership (ETP) at a global level, and funded by IDH (the Sustainable Trade Initiative),
  May 2013 Understanding Wage Issues in the Tea Industry Report from a multi-stakeholder project As part of the Tea Improvement Program (TIP), facilitated by IDH – The Sustainable Trade Initiative  2 Table of Contents 1 Background and purpose of the study 8  1.1. Background 8 1.2. Perspectives of different stakeholders 10 1.3. Purpose and governance of the study 11 1.4. Methodology 12 2 Understanding wages and benefits 13  2.1. International principles relating to wages 13 2.2. Composition of benefits 13 2.3. Relating wages to poverty and wage benchmarks 18 3 Findings and recommendations of the research team 19  3.1. Findings 19 3.2. Recommendations 24 4 Barriers to raising wages 255 Project partners’ conclusions and proposed next steps 26 5.1. Conclusions 26 5.2. Proposed next steps 27 6 Appendices 29  Appendix 1: Wage and Poverty Benchmarks used by Ergon Associates in their wage ladder analysis 29 Appendix 2: Acknowledgements 31 Appendix 3: Response of certification organisations and their commitment to improve wages 31 Cover photo: Tea pluckers, West Java, Indonesia 2013. Sarah Roberts  3 Introduction Wage levels are an issue of concern across the globe as individuals, companies and governments wrestle with how wages paid to workers relate to costs of living, corporate and national competitiveness, profitability and broader macro-economic trends and challenges.Reports by civil society organisations, including Oxfam 1 , have highlighted the issue of low wages and excessive working hours in the supply chains of a range of commodities and manufactured items, including tea. They argue that corporate compliance programmes and product certification schemes have achieved only limited reach to the root causes of supply chain problems, including low wages, and many have called for a Living Wage for workers.While statutory minimum wages are established in 90 per cent of countries, in many cases wages paid to workers fail to comply with these, and where there is compliance, minimum wages may not meet the basic needs of workers and their families. The recent spikes in food prices, highlighted as part of Oxfam’s GROW campaign, have especially hurt those who spend more than 50 per cent of their income on food 1 . It is in this context that Oxfam and the Ethical Tea Partnership (ETP), a not-for-profit member organization of tea companies  2  committed to improving the lives of tea workers and their environment, initiated a project in 2010 to increase understanding of wages in the tea sector, and to use this as a basis for constructive dialogue in the future, with three objectives: 1. Developing an evidence-based understanding of what wages are paid in relation to a range of wage benchmarks, including developing and testing a wage ladder tool.2. Building a partnership of stakeholders with a common concern to ensure that tea workers’ wages are adequate for sustainable livelihoods3. Identifying obstacles to raising wages 1. See http://www.oxfam.org.uk2. The members of ETP are Ahmad Tea, All About Tea, Bell Tea, Bettys & Taylors of Harrogate Ltd, Booths, D.E Master Blenders 1753, DJ Miles & Co Ltd, Imperial Tea Court, Imporient UK Ltd, Intertee, Jing Tea, Mars Drinks, Metropolitan Tea Co, Mother Parkers Tea & Coffee Inc, Newby teas, Ostfriesische Tee Gesellschaft (OTG), Reginald Ames Ltd, The Republic of Tea, Ringtons, Tazo Tea, Tea Ltd, The Tetley Group Ltd, Twinings, United Coffee, Windmill The project was co-ordinated by Oxfam  and ETP  at a global level, and funded by ETP, Unilever, Oxfam Novib and IDH – The Sustainable Trade Initiative. It was supported by the certification organisations Fairtrade International, UTZ Certified and Rainforest Alliance (RA), the Ethical Trading Initiative and a number of NGOs active in the tea sector.Research was conducted by Ergon Associates in 2011, to understand wages generally, and in the tea industry in three case study areas: Malawi, West Java (Indonesia) and Assam (India). It focused purely on hired labour on plantations, with a particular focus on tea pluckers. Smallholders were out of scope for this study. The in-country research was conducted between January and June 2012. The tea estates studied for the research were selected as a representative sample of those serving the export market, and included a mix of certified (Fairtrade, Rainforest Alliance and UTZ Certified) and non-certified estates. Researching an evidence-based understanding of wages in the tea industry In the tea sector, wages are generally set at the national or regional level. Research suggests that pluckers are paid the same rates across individual regions, around the level of the applicable minimum wage, regardless of the economic performance or social responsibility of the individual estate that they are working at. There are, however, variations in provision of in-kind benefits, such as food, fuel and accommodation, which may make up a significant part of workers’ total benefits.Compliance with minimum wage legislation is generally good in the tea regions studied. However, rather than act as a ‘floor wage’, the minimum wage is often the default wage paid. This is in spite of the fact that in Assam and Indonesia, collective bargaining between tea associations and trade unions is part of the wage setting process. Executive Summary  4The way that plantations were established in remote areas during colonial times has left a legacy of employment and welfare requirements on tea producers from governments in countries such as India and Indonesia, which impacts on the way that producers manage costs. Labour is the biggest proportion of a tea producer costs and in some countries producers cannot vary their labour force without the involvement of government. Productivity is low in some regions and producer incomes have been cyclical.A wage ladder tool was developed for each country: a visual representation of how actual wages paid relate to a range of internationally and nationally recognised benchmarks, including national poverty lines and World Bank poverty lines, expressed in Purchasing Power Parity (PPP) dollars to allow international comparisons. The World Bank poverty line is currently set at US $2 PPP/day. This is the minimum consumption of a person in poverty (food and basic needs, where food = >50 per cent of expenditure). The extreme poverty line, defined as living on the edge of subsistence, is currently set at US$1.25 PPP/day. Wages support households, not just individuals, so average household size and average number of earners for tea regions were used to calculate household poverty thresholds and basic needs.In all three regions, in-kind benefits and non-wage allowances – including food, fuel and acommodation – make up a significant proportion of total benefits for pluckers on estates. The research team quantified (‘monetised’) these in-kind benefits (including allowances) using the best available methodology, and making clear their assumptions. However, local research suggested that the actual take-up of in-kind benefits, namely the proportion of workers who receive the full effective value of these in-kind provisions, varied widely.The tea estates studied for the research were selected by ETP and Ergon as a representative sample of each sector while being important for the export market, and included a mix of certified and non-certified estates. Summary of findings The development of the wage ladders for the various tea producing countries has proved to be a complex challenge. Note to readers of the findings: The ladders shown in the report are representative of our research findings but the methodology involved making assumptions about key variables, including household composition; conversion of local currency to $PPP; value and uptake of in-kind benefits (particularly in the case of Assam) and seasonality of earnings. Different assumptions would alter the appearance of the wage ladders, and other interpretations of the data could be valid. Other caveats include: ã Our research only enables us to present an average for a tea-growing region and circumstances may well vary between tea-growing communities. ã The situation also varies over time with one significant devaluation in currency (Malawi Kwacha) and several increases to minimum wage levels taking place during the course of the two-year project. ã Local researchers used slightly different methodologies in the three countries to understand workers’ wages.So we have come to regard wage ladders as a useful tool and aid to discussion but wider analysis is required to properly understand the circumstances of families living in the various individual tea communities.In West Java (Indonesia) , the research team calculated that pluckers’ wages were above international poverty benchmarks and local researchers estimated that they were close to a living wage for a household if in-kind benefits are included. However, Indonesia’s economy has been developing fast, and they are low in relative terms.The reverse is true in Malawi . In absolute terms, wages are very low: a tea plucker’s earnings are below the World Bank extreme poverty line for an average household with an average number of earners. However, they are not particularly low relative to others in Malawi, which is one of the poorest countries in the world, having the ninth lowest GDP per capita 3 . Basic cash wages from tea are lower than the national poverty line, which is however reached when productivity payments and in-kind benefits are included. 3. IMF 2011
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