Closing the Living Wage Gap

Although the situation has vastly improved since 1990 when the number stood at 1.9 billion people, progress has slowed in recent years. And now the impact of COVID-19 is expected to lead to the first increase in poverty rates since 1998 due to job losses, price hikes and disruption to vital services such as health care and education.

Ending all poverty by 2030 – the first and arguably most celebrated of the UN’s Sustainable Developments Goals (SDGs) – appears to be drifting out of reach. And in sub-Saharan Africa, where many of Taylors’ suppliers are based, the situation is especially worrying, with the rate of extreme poverty not expected to drop below 10% by the end of the decade, never mind reach zero.

The challenge of eradicating poverty may be as immense as it is complicated, but ensuring people get paid enough to finance their basic needs is central to any solution. Unfortunately, millions of people across the world still don’t earn enough to support a decent quality of life, and in Africa 38% of employees live in dire poverty despite having a job.

Calculating the living wage in a particular region is the necessary first step we must go through to implement a living wage for workers, since it provides a baseline on which to compare future increases in wages and set targets. However, the process of working it out is complex and made all the more so by needing to account for bonuses and in-kind benefits (e.g. housing, healthcare, schooling and subsidised food) that might be provided to an employee on top of their basic wage.

This has resulted in numerous methodologies over the years, which in turn has led to several efforts to introduce a living wage failing due to different stakeholders’ conflicting views on what that wage should be. Thankfully, the situation has improved in recent years with the broad adoption of the Anker Methodology, which is serving to standardise the process.

At Taylors, we’ve worked with IDH – The Sustainable Trade Initiative to measure the living wage gap with our tea and coffee suppliers. Our ambition is to see a living wage being paid to all employees and a living income earned by all farmers within our supply chains. We are now developing new approaches with key suppliers that will test how we close the gap.

While calculating the living wage has presented practical challenges for those trying to implement a living wage, the wider issues of why wages are low in the first place and what can be done to improve them remain.

Central to the problem is that implementing a living wage runs against the grain of deeply entrenched value models for commodities, which in the main are still focused on low costs and profit maximisation. Through these models, income distribution across the value chain is uneven, with the primary producers very often receiving a disproportionately low financial return for their hard work.

This is a multi-faceted problem that cannot be boiled down to a single solution, such as increasing the cost to consumer – although this is certainly a factor where retail prices don’t reflect the true cost of the commodity. Nor can it be adequately addressed by putting pressure on suppliers to pay more to their workers when they are themselves at the mercy of volatile and permanently fluctuating market prices. Introducing measures that don’t look out for the long-term sustainability of the sector would be counterproductive and put jobs at risk.

To create meaningful, wide-scale change involves rethinking this broken system to one that ensures a fair return for effort across the value chain. And this can only be achieved through an awareness and understanding of the problems, and the participation and co-operation of all stakeholders across the entire sector, from retailers, buyers and suppliers, to in-country governments, standard-setting organisations and the workers themselves. Not surprisingly, that is a lot easier said than done.

This isn’t to say there hasn’t been progress. In November 2019, Taylors took part in the world’s first international living wage conference, The Only Way Is Up, which was held to address living wage and living income in global agri-food supply chains.

In the same month, the IDH launched the Banana Retail Commitment (BRC) in the Netherlands – the first ever country-wide commitment from retailers to close the living wage gap in the banana supply chain. Through the initiative, the country’s biggest supermarkets are aiming to reduce the living wage gap for banana producers by at least 75% within five years. Importantly, IDH is planning to increase the scope and positive impact of the BRC by inviting other interested private sector parties to sign up to the initiative, including supermarkets in other countries outside the Netherlands.

Time will tell how well the coalition succeeds, but it’s a clear demonstration of the joined-up approach and unilateral ambition necessary to bring about wide-scale change.

At Taylors, we understand as well as anyone how wages and incomes are a highly complex issue with no simple, one-size-fits-all solution. Making the situation harder is the shortage of case studies that would promote best practice and support replication, where replication is possible. To address this, a group of organisations and companies, including Taylors, are lending support to IDH’s Roadmap on Living Wages coalition to help avoid duplication of efforts and share lessons learned.

As we continue with our own living wage ambitions, we take enormous heart in seeing bold initiatives like the BRC and living wages coalition start to emerge around the world. Only by building up and sharing examples of best practice across all sectors, can we generate the experience and know-how for making universal living wage a reality and help eradicate poverty for good.