Prema of Teddy Exports in India with her Floral TotesThe guarantee of a “fair wage in the local context” is one of the most often publicized of the fair trade criteria. Fair Trade attempts to empower disadvantaged producers in countries that often do not have adequate workers’ rights laws including a minimum wage. Fair trade guarantees at least the minimum wage even in countries that have a minimum wage law but do not enforce it. In countries that do not have a minimum wage the buyer of the product is still bound by the fair trade criteria to pay a fair wage in the local context.
For some products, such as coffee and bananas, a Fair Trade price is set by the Fair Trade Labeling Organizations. These minimum prices are always paid despite fluctuations in the market price and, of course, the market price is paid if it ever rises above the Fair Trade price. These prices also have a social premium included that producer cooperatives use to enhance infrastructure, provide social services and educate and train.
However, there is a large set of Fair Trade products that are not certified at the product level, mostly decorative arts and handcrafts. With these products Fair Trade, for pragmatic reasons, takes the approach of certifying wholesale importers and retail outlets who deal directly with artisan cooperatives. In this scenario the responsibility to pay a fair wage rests with the importer of the goods. So how does an importer know what a fair wage is "in the local context" of the producers? The primary and preferred mode is to simply talk with the producers to find out what they deem is a fair and living wage. There is some additional help in the form of an online fair wage calculator, created by World of Good Development, to help determine what a fair wage might be in any given local context.
I input the required information for Teddy Exports’ Floral Tote that we offer over at the shop (which we buy wholesale from direct importer World Finds, a model Fair Trade organization) into the calculator. I found that the women at Teddy making the Floral Totes are making roughly four times the minimum wage of 2.15 USD per day in India. This wage is in addition to the free health care, daily meal, child care and schooling each artisan is entitled to at Teddy. The wage is also two times the Acumen Fund poverty line for urban India. The tool simply aggregates all the freely available economic information necessary to determine a fair price for goods. But it makes the process of determining a fair price price more streamlined and accessible.
Paying a fair wage is the most basic of the Fair Trade criteria but is perhaps the most important. A mutually respectful trading relationship cannot exist without it.
This is the second in a series of posts discussing the Fair Trade criteria. Also check out Fair Trade: Transparency.