Fair trade coffee workers paid below minimum wage
The FT reports that fair trade coffee from Peru is being produced by workers who are not treated as Fair Trade consumers would wish:
The FT visited five Peruvian smallholdings, all of which have Fairtrade certification.
Each farm hires 12-20 casual coffee pickers during the harvest season. All house and feed their workers, which allows them to deduct 30 per cent from their wages.
After that reduction from the legal daily minimum wage for casual agricultural workers of 16 soles ($5),farm owners are still obliged to pay at least 11.20 soles a day. In four of the five farms visited by the FT, pickers received 10 soles aday, while the other farm paid workers 12 soles a day.
The Fair Trade brand depends completely on the credibility of the certification process; and it has always been somewhat haphazard and untransparent. The fair trade labelling organization, FLO, needs to define clearer standards for the fair trade brand internationally, and to enforce them.
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Owen – has this evidence altered your priors about whether Fairtrade certification is an effective way to stimulate development? It seems that your solution "define clearer standards for the fair trade brand internationally, and to enforce them" is hampered by the same sorts of problems that the FT has now reported.
In an ideal world, Fairtrade would work, and in an ideal world stating what needs to be done will make it so…. but maybe Fairtrade is just the latest in a long long list of development projects where the sentiment and will has been undone by faulty economic reasoning?
It’s a real shame
Anthony
You are right: it is a shame. No: I have never seen fair trade as making more than a tiny contribution to development. It is a niche market that does no harm, and some good. It is, in effect, a form of charitable giving. But I don’t agree with you that the economic reasoning is faulty. It is commendable, but it is hard to see how it could make a significant difference to the systems and institutions that will lead to overall economic development.
I myself prefer to buy coffee that is more likely to have been produced by workers who are better paid, even if that means paying more. That is my preference, and there is nothing faulty about a free market system that gives me that option.
Owen
Sorry, I wasn’t claiming that a free market system was faulty, or that Fairtrade is faulty economic reasoning, hence the "maybe" at the front and a question mark at the end!
Clearly though it has the potential to create price floors (which may lead to unemployment), and rents (which may lead to corruption), and as evidence emerges that these unintended consequences might be ocurring, we can retain our "preference" for higher wages to coffee farmers, but re-examine the methods by which we try to acheive that.
Regardless, I’m surprised you’re following the "as long as it’s voluntary it’s ok" line – that approach applies for moral arguments, but not economic ones. After all, people have the right to buy lottery tickets as a means to securing a pension, but it’s still daft!
[...] Owen Barder notices the FT confirming a comment on Tyler Cowen’s Fairtrade perplex. As “Tom” says in Tyler’s comments, Fairtrade suppliers are not perfect employers and buy coffee from neighbours when they can sell more than they can produce. So what? The Fairtrade producers quoted are still better employers than other coffee producers. The problem coffee producers face is that they have less capital than almost all of the other players in the coffee value chain which means that they hold almost no bargaining power. The Fairtrade deal, guaranteeing a minimum price, is effectively an injection of capital. Starbucks and others have exploited the demand inelasticity for coffee but its rise has done very little for coffee producers. Fairtrade is not an end in itself, schemes like Cup of Excellence and the culture that makes it viable offer a more secure future. Ideally it would end up as irrelevant as would Fairtrade wine. [...]
You might be interested in reading <a href="http://www.fairtrade.org.uk/pr110906.htm">FLO’s response to the FT article here</a> — I believe FLO’s response was pub’d as a letter to the editor.
[...] A Financial Times article, which sez coffee farm peeps in Peru aren’t even making minimum wage, has got the fair trade world abuzz — and FLO, the org that certifies farms as fair trade, on the defensive. [...]
[...] Read more insights at Owen’s musings and Green LA Girl. Filed under: Fair Trade | Tags: coffee farmers, fairtrade, FT, minimum wage, peru. [...]