Mainly cultivated on large estates, tea is also grown on small plots of farmland owned by individual farmers.
In countries such as Kenya and Sri Lanka, tea is cultivated on a small-scale. However, tea growers receive low and fluctuating prices and are the most vulnerable in supply chains controlled by large companies. Increasing supply chain pressures to reduce tea prices are often passed onto them, reducing already-low incomes and pushing them further into poverty. Tea growers earn a fraction of the selling price of tea on the international market.
Smallholder farmers face additional challenges as they have to compete with plantation tea. Farmers sell their green leaf tea to tea factories and plantations who pay them a smaller price because their tea is often of lower quality, and because they have a greater amount of information on market prices than farmers themselves have. Smallholders may also lack the necessary agricultural inputs, such as fertilizers or irrigation, to improve the quality of their tea.
Securing higher prices for farmers is a significant challenge given how pricing works in the tea industry. Tea is unusual among agricultural commodities in that it is sold through auction centers (around 70% of the world’s tea is traded through auctions). Unlike coffee and cocoa, there is no futures market for tea. Although the system appears to be a fair market in which prices are determined solely by supply and demand, a small number of companies dominate sales at each auction. The large companies have such purchasing power that they can often influence the demand, and thus price, of particular qualities and types of tea. Brokers and buyers have sometimes colluded to influence prices, lowering the price received by producers. In 2005, the situation became so bad in Kenya that the National Chamber of Commerce called, unsuccessfully, for the elimination of tea auctions. What this means is that middlemen can take a large slice of the price paid by the factory for the growers’ tea.
Globally, most tea is grown on commercial plantations, also known as estates or tea gardens. Such large plantations employ workers to pluck leaves, fertilize, weed and prune tea bushes. Most estates also operate their own tea factory where more workers are employed to process green leaf into ‘made’ tea. Wages on tea plantations are notoriously low, usually around the national legal minimum but rarely constituting a decent, living wage, and often providing too little to feed families adequately. Additionally, many workers lack job security or representation by trustworthy, effective and independent trade unions.
Growing tea is very labour-intensive, with labour – mostly plucking - accounting for about half the production cost. ‘Pluckers’ undertake physically demanding tasks, often enduring back pains as well as exposure to pesticides. Discrimination and sexual harassment against women workers, who often comprise the majority of plantation workers, is widespread, and women often work long hours for lower wages than men.
Workers in the tea sector, much like in other sectors dominated by plantations, have little power to voice their opinion to estate management or negotiate for higher wages and better working conditions. This imbalance in power between workers and management has left workers in successive cycles of poverty, given the limited alternative employment options in these countries.
Fairtrade works with both small-scale tea farmers and workers on tea plantations. There are currently 177,000 tea farmers and 128,000 tea workers participating in Fairtrade. Fairtrade Standards are designed to improve employment conditions and protect the rights of workers on plantations. They also support members of smallholder organizations gain more control within the tea supply chains and increase their incomes.
Fairtrade Standards for tea act as a safety net against the unpredictable market, ensuring growers always get a price that covers their costs of production. Fairtrade producer organizations receive the Fairtrade Minimum Price which is origin-specific. A Fairtrade Premium of $0.23/pound of made tea, is paid to the producer organization for community and economic investments.
Fairtrade has specific standards for plantations that support worker organization and representation to negotiate with management and progress towards living wages. Workers need strong organizations to represent them in these negotiations. Our new Hired Labor Standard greatly strengthens workers’ Freedom of Association in practice. We also changed the rules for the Fairtrade Premium, so workers can spend up to 20% of the Premium for cash or in-kind benefits, or up to 50% if migrant workers form a majority.
In 2013, more than $6.6 million in Premium was paid to producers groups or workers’ organizations on Fairtrade tea estates. This additional sum of money was largely invested in projects that improved workers’ access to health, education, better housing and in accessing small loans.
Fairtrade has for long been championing and advocating for industry-wide change in the tea sector to address low wages. Working towards a living wage has been as aspiration within the Fairtrade Standard for years. Our Standard for Hired Labor states that plantations must start off paying the legal national minimum wage then progress towards a living wage.
But there are several obstacles to taking concerted action on the issue of living wages. Among the challenges to achieving this is the lack of a globally agreed definition or benchmarks for living wages for agricultural workers in various countries. Then there is the question of how to get companies towards paying a living wage without pushing businesses that pay them out of the market. We need to make sure plantations can raise wages and stay in business; otherwise there is a risk of workers losing their jobs and ending up in a far worse situation. Without solutions to these questions – and even though workers have been benefiting from Fairtrade Premiums for education, health care, housing and community projects – workers have not seen enough progress on wages.
In 2013, Fairtrade International, in collaboration with other partners, started concerted work on living wages. In doing so, it commissioned the experts Richard and Martha Anker to adapt their method of calculating this wage to the needs of an agricultural worker (and of his/her family), running four pilot studies and working with local teams in South African wine grape farms, Dominican Republic banana plantations, Malawian tea plantations, and Kenyan flower plantations. The result was an assessment of expenses based on a three “basket” scheme: food and nutrition costs, decent housing and other essential needs. After living wage benchmarks have been set, the next step is to tackle how companies can progress from paying legal minimum wages to paying a proper living wage. The idea is that workers can themselves negotiate for better pay and working conditions. They therefore need to be well represented by trade unions and strong organizations – a point that is well recognized in Fairtrade’s new Standard for Hired Labor. Progress towards living wages is a long journey and needs change across the sector but Fairtrade is committed to using our platform to drive this change.
Alongside this work on setting wage benchmarks and the promotion of wage bargaining, Fairtrade is also an active participant in industry initiatives such as Tea 2030, a global project to build a sustainable tea industry for the future, so that better wages become a commitment for everyone along the tea supply chain.