Fairtrade has made no positive difference to wage workers; its
contribution to poverty reduction is not the most effective one
Excerpt
May 19, 2014 (Re-published on May
24, 2014)
This research project addresses
three intersecting issues where it has been acknowledged that there is too
little empirical knowledge: the transmission mechanisms linking global trade in
agricultural products with poverty reduction; the functioning and significance
of rural labour markets in low-income countries; and the labour market
dimensions of Fairtrade certification. The Fairtrade, Employment and Poverty
Reduction in Ethiopia and Uganda (FTEPR) research team, based at SOAS,
University of London, set out to develop and apply innovative, careful research
methods in order to gather analytically useful, policy relevant evidence on
these issues.
Thus, the core objective of the
research was to improve knowledge of transmission mechanisms between the lives
of extremely poor rural people (especially women) and international trade in
agricultural commodities, focusing especially on the role of labour markets as
means of transmission. In particular, the purpose of the research was to
understand better the comparative benefits/disadvantages of different
institutional arrangements for agricultural production for poor rural people
needing access to wage employment. This applies specifically to the
comparison–from this labour market and poverty reduction perspective–between
Fairtrade certification and production not certified as Fairtrade. And the
over-arching research question was whether a poor rural person dependent on
access to wage employment for their (and their family’s) survival is better
served by employment opportunities in areas where there is a Fairtrade
certified producer organization or in areas where there is none.
Thus, the research set out to
support a response to the call by the June 2007 International Development
Committee report on Fair Trade and Development: “we believe there should be
more systematic analysis of the impact of Fair Trade on poverty and would urge
DFID to contribute to this process”.
Conclusion
The empirical evidence produced by
this research has generated findings discussed in Section 3 above. There were three
especially clear findings. First, wage employment is very prevalent in rural
areas producing agricultural export commodities. This may seem relatively
unsurprising in major flower growing areas in Ethiopia or in those areas close
to a large multinational owned coffee plantation in Uganda or in the Jimma
region of Ethiopia where there are large coffee enterprises, though even in
these areas the scale of the labour market is striking and rarely reported.
However, more significant is the high level of recent wage employment
experience in areas regarded as “smallholder”, “family” farming areas producing
tea or coffee. Thus, between a third and a half of adults in the short survey
reported that they had worked for wages in coffee production in the 12 months
prior to the interview. In the Ugandan smallholder coffee production research
sites a comparable, even slightly higher, proportion of adults had worked for
wages in coffee production, while in the main Ugandan tea smallholder research
sites between 40 and 50 per cent of adults had recently worked for wages
producing tea. This finding is hugely important given the widespread assertion
that very little wage employment has been created by smallholders in Africa.
Labour markets are, clearly, fundamental links in the chain of international
trade in agricultural commodities. What happens in those labour markets matters
for the governance of global trade. And developments in international markets,
including price changes in EU markets for coffee and flowers, for example,
affects the welfare and prospects of the huge numbers of poor rural people who
depend for their survival on access to such employment.
Second, the wage workers in the
FTEPR sample are about as far as it is possible to get from some notional
“labour aristocracy”. Analysis of the sample – in Section 3.3 above – shows that
these workers are extremely poor by any standard; and they are relatively
deprived by comparison with other estimates of poverty in rural Ethiopia and Uganda,
for example in DHS estimates. A high proportion of female agricultural wage
worker respondents in the FTEPR sample, for example, have little or no primary
education, they own or have access to barely any widely available assets, and
they live on extremely narrow diets. They are also vulnerable because they are
more likely than other rural women to be divorced, separated or widowed and
without any support from a male partner. Those interested in understanding the
characteristics of the poorest in rural societies, and those interested in
crafting interventions to help reduce poverty, ought to be struck by the
evidence of how commonplace it is for desperately poor men and women – in many
cases boys and girls – to depend on wage employment. It is, then, important to
understand much more about the mechanisms affecting the annual number
of days of employment available to people who depend on such work in order to
survive. Equally important is an understanding of the mechanisms affecting the
wage rates that in combination with days of work may or may not begin to create
possibilities for an escape from extreme poverty. FTEPR research certainly does
not provide a complete explanation of these mechanisms, but it has made an
important contribution towards a clearer understanding of how they operate.
Third, FTEPR research focused in
particular on the role of Fairtrade certification in influencing pay, amount of
work, and working conditions. As a simple version of one of the research
questions put it: is a poor rural person dependent on access to wage employment
for their (and their family’s) survival better served by employment opportunities
on certified farms or on non-certified farms? The research findings show unambiguously
that Fairtrade has made no positive difference – relative to other forms of
employment in the production of the same crops – to wage workers.
Systematically, wage workers in the FTEPR sample in research sites
characterised by the presence of Fairtrade certified producer organizations earned
less than equivalent workers in research sites without Fairtrade production. A
relatively high proportion of wage workers employed in the production of
commodities sold to and through Fairtrade certified channels earned less than
60 per cent of the median wage for equivalent work. And in most cases average
wages were significantly lower for the workers interviewed who were in the
Fairtrade samples were among the workers in the overall samples (for coffee,
tea, and flowers) who could be said to earn relatively high wages.
FTEPR cannot make direct causal
claims from its findings, such as that ‘Fairtrade causes low wages’, for
example. Basu’s (2013) scepticism about the scope for empirical studies to
prove causation is directly relevant here. However, the research does reject
the hypothesis that there is a positive causal chain between Fairtrade
certification and working conditions. Section 3.4 and Section 3.6, in particular,
explore some of the reasons why this ought not to be surprising. On the one
hand, there are reasons why Fairtrade has not made a better impact on poor
rural wage workers. On the other hand, there are other factors that do directly
affect wages, the amount of work available, and working conditions. The reasons
for Fairtrade’s failure to make a clear positive difference to wages and
conditions, or to the amount of work offered, are fairly clear. They have to do
–especially in the production of “smallholder” commodities – with what this
research suggests has been in the past a wilful denial of the significance of wage
labour and an obsessive concentration on producers/employers and their organisations.
While both SPO and Hired Labour Standards may have been adapted recently, this
research suggests that a large number of obstacles remain in implementing
improved standards in a way that will benefit rural workers. First and foremost
is the need not just for more monitoring and evaluation, but also for better methods.
And they have to do – again, especially where Fairtrade certification is awarded
to cooperatives – with the espousal of a romantic ideology of how cooperatives operate
in poor rural areas. One implication of revealing the obfuscation and even inversion
of reality sustained by this ideology is that Fairtrade may well help to make a
contribution (though the evidence suggests it is not the most effective
contribution) to poverty reduction; but that it does so as an unintended
consequence of its promotion of a class of emerging rural capitalists.
Given the obstacles to a very
different and much more effective form of Fairtrade certification, perhaps the
most important recommendations made below are directed at how to pursue such an
aim – the promotion of a more dynamic agricultural capitalism with the capacity
to make genuine inroads on poverty reduction – through different, more
effective interventions. The policy recommendations made below draw on Basu’s (2013)
recommended combination of empirical observation (FTEPR findings) and reasoned
intuition (decades of research experience, wide reading of secondary literature,
qualitative interviews with a wide range of specialists and key informants) as the
only foundation for designing policy.
Recommendations for Fairtrade
In 2013, consumers of garments produced
by small factory owners in Bangladesh would not have been reassured by a label
informing them that the profits of the factory owners had been increasing.
Before paying a premium price, ethical consumers would want to know something
about the working conditions and wages of the women employed in these small
factories. Similarly, if Fairtrade organizations are unable to make any positive
difference to the wages and working conditions of those providing the manual labour
in the production of certified goods, their claims to ‘ethical trading’ and to
make a major contribution to improving the lives of very poor rural people will
remain hollow. Therefore, the first set of recommendations from FTEPR research,
briefly and simply, provides suggestions for such organizations that may want
to improve their credibility. These recommendations are intended to contribute
to ongoing discussions within Fairtrade organizations and between them and
other organizations (including trade union organizations and donor agencies).
·
Fairtrade standards and audit
procedures – even and perhaps especially for so-called smallholder commodities –
must be redesigned to include compliance with specific standards for the
remuneration of manual agricultural wage workers, not only on processing
stations (for example, in coffee and tea), but also on the farms where such
workers are employed.
·
These standards should focus on
whether average wage rates among such workers are at least as good as, if not
higher than, those of very similar workers employed in the production of the
same crops in non-Fairtrade institutional conditions.
·
Standards should also seek to secure
at least as good, if not better, non-wage working conditions and facilities.
·
Preference in awarding certification
should be given to those producer groups who can demonstrate that they provide
crèches for the care of very young, pre-school age children of working mothers.
·
There is a strong case for
revisiting the distinction between “smallholder producer organizations” and
“hired labour organizations” in Fairtrade standards. At the very least, if
there is to remain a distinction based on scale and organization of production
it should no longer be defined in terms of a distinction between those that
hire labour and those that do not, given that they all do.
·
Fairtrade labelling and general
branding literature and imagery should be clarified to state whether or not the
product being sold (and for which premium prices are paid by consumers anxious
to “make a difference”) is produced in conditions that are likely to make a
positive difference to poor wage workers. In other words, there should be much
clearer information available on the limits to what Fairtrade really seeks to
and can claim to do.
·
Fairtrade standards should seek
proactively to support and protect independent and effective trade unions
serving the interests of wage workers in agriculture and in particular in the production
of export crops.
·
Fairtrade labelling and branding
information should clarify whether and how seasonal and migrant manual
agricultural wage workers and their families have access to any “community”
projects and benefits supported through Fairtrade “social premiums”.
·
Fairtrade organizations have only
thus far been able to devote minuscule budgets to careful and thorough
research. Either they need to increase budget allocations to research or they
need to seek public funding for deeper, data intensive research, to overcome
the severe constraints on the research literature they have been able to draw
on.
·
It is imperative that Fairtrade
organizations invest far greater resources in effective, regular and properly
independent monitoring to ensure that producers do meet the standards to which
they have signed up (and for membership of which they have paid) in order to
get access to sought after international markets. Qualitative research for
FTEPR confirmed that monitoring has often been cursory and infrequent. This
increases the risk of Fairtrade facing “horse meat” moments, when the media
publicizes an unsavoury aspect of partners’ production processes.
·
Where local political dynamics
confound the scope for effective monitoring and independence, Fairtrade will
have to choose between immediate de-certification, so as not to mislead
consumers, and a very long-term strategy of providing support to independent
workers organisations and to the very best employers with a view to eventual
certification.
·
Fairtrade literature also needs to
be clearer and more detailed about the structure of cooperatives, where these
are the production organization through which commodities are
traded. They should avoid branding that suggests these cooperatives or producer
groups are egalitarian and democratic, unless there is very good and replicable
evidence to confirm that this is the case.
These recommendations are unlikely
to be welcomed by Fairtrade organisations, or by the supermarkets that profit
from the important public relations and product differentiation opportunities
that certified products provide. It may appear that these recommendations are
demanding, unrealistic even. If that is the case, then at a minimum FTEPR
research suggests that Fairtrade labelling and branding information needs to be
changed substantially to reflect the limitations of the claims made and an inability
to monitor the wages and working conditions of people employed on the farms of
members of small producers organisations. However, it may well be that it
proves too costly for Fairtrade organizations, and the producer and retail
organizations who trumpet their Fairtrade certification, to implement these
recommendations in such a way that a substantive positive difference can be
made to the welfare of manual agricultural wage workers. That is one reason why
FTEPR recommends a broader public attention to, even potentially a reallocation
of resources from Fairtrade towards, other types of intervention, to be supported
by governments and donor agencies.
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FTEPR Final Report Main Document is stored here: http://www.scribd.com/doc/225969719/Fairtrade-Employment-and-Poverty-Reduction-in-Ethiopia-and-Uganda-Final-Report-to-DFID-April-2014
FTEPR Final Report Appendices: http://ftepr.org/wp-content/uploads/FTEPR-Final-Report-Appendices-April-11th-2014-FINAL.pdf
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The Fair Trade, Employment and
Poverty Reduction (FTEPR) project is a four-year research project
funded by the UK Department for International Development (DFID) and
implemented in Ethiopia and Uganda. The project aims to collect detailed
micro-level evidence from areas producing agricultural exports on how rural
labour markets affect poor people’s lives.
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