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Working Group 2: Distribution of Value

In some markets, value has been stripped out of the banana value chain because of price competition and intra-firm competition, even though it is shown that reducing banana prices does not lead to increased consumption. Unsustainably low banana retail prices undermine efforts to redistribute value to the parts of the chain where people are not earning a decent livelihood.

The Working Group on the Distribution of Value's focus on living wages has generated a wealth of new information on actual wages, with studies undertaken over the last few months in both Ecuador and Colombia. The agreement that, as a first step, filling the gap between actual wages and the cost of a basket of basic goods and services provides a very tangible target that could benefit hundreds of thousands employed in the industry. Further work in West Africa will add impetus to this process. 

The wage information summarised below was gathered by the Colombian banana producers' association, AUGURA, between December 2011 and February 2012, and validated by the trade union SINTRAINAGRO. It covers close to 90% of the industry. 
A study of actual wages was carried out in Ecuador in January-February 2012 by a team of five MBA students from the INCAE Business School (Costa Rica). This is the model they used for gathering information on worker income (from interviews with both workers and management): 

The INCAE team systematised field data from a broad spectrum of six different farm types from small-scale growers with mainly family labour, through to large-scale plantations. They then compared the results with the cost of government-calculated baskets of goods of services : the Canasta Vital is a 'survival' basket of food and basic services ; the Canasta Básica is a 'basic' but more extensive basket of goods and services. 

The above graphics compare actual workers' income in small-and medium-scale farms (T1) and in large-scale farms (T2) with the costs of the two different baskets of goods and services (the latter costs are figures published monthly by the Ecuadorian government). A further distinction is made in the first type of worker between those with permanent contracts ('Formal') and those working in teams that move from farm to farm ('Cuadrillas'). In the large farms, the study distinguishes between the buying power of field workers ('Campo') and that of packhouse workers ('Empaque'). The green segment shows the percentage of each type of worker in the sample that earn above what is needed to buy the 'survival' basket (on the left-hand side) and the 'basic' basket (on the right-hand side). 

Minimum wages and poverty lines 
A global study commissioned by the coordinators of the Working Group from Ergon Associates, a London-based labour consultancy firm, produces wage benchmarks or indicators for eight banana-exporting countries (5 in Latin America, 2 in Africa and 1 in the Caribbean). The 'wage ladders' produced expose the gaps that exist between poverty levels and minimum wages in agriculture and are designed to provide a practical benchmark for concerted action across widely differing exporting countries. The 'ladders' are available on the Forum website. 
The key role of good industrial relations through collective bargaining is clearly demonstrated by the example of Colombia, where actual wages are consistently higher than the cost of the government-calculated basket of basic goods and services. Over 90% of workers in the Colombian industry are union members. 
On the wider issue of the distribution of value, analysis by CIRAD (see box) for the Forum estimates that increasing the share of plantation workers of the price to consumers from the current level (3-4%) to just 5% would only put 2 euro cents per kilogram on the price to consumers. 

Increase value and distribute it better 
The thinking in the World Banana Forum centred on the notion of sustainability is very beneficial for the sector and the corresponding initiatives taken by the WBF are essential. The ongoing work will make it possible to look at the details, but it is already possible to estimate the distribution of value along the chain. As with production costs, the variations between different chains are considerable. 
On the basis of experience in Ecuador, a farm worker receives 3 to 4% of the total value of the chain. Let us imagine a world in which this share were to be increased to 5%. The worker's wages would increase by 30% and his/her life would change, while the retail price would only go up by €0.02/ kg! 
This calculation might well seem too theoretical, simplistic and imperfect as the issues are not just wages but also the working and living conditions of the first players in the sector. But the calculation is useful nonetheless so that everybody can see that the road to be travelled is perhaps not as long and complicated as all that. It will be even shorter when everyone has understood that on the one hand it is possible to halt the worsening of value-added and even to increase it, and on the other hand distribution can be somewhat fairer. If not, there is still 'something rotten in the state of Denmark' (Denis Loeillet, CIRAD Fruit Market Observatory, France). 

Although the relationship between retail prices and wages is clearly not direct, it does demonstrate that the Forum's objective of a more equitable distribution of value is far from being utopian. 
Finally, the FAO is supporting the production of three detailed value chain studies that will be published in the next few weeks. The above graphic gives a special 'sneak' preview to BTNB readers of the distribution of value of an important source of bananas into the UK market. The information is aggregated from six chains between the same producing country origin and six different UK retailers. For the time being, we leave it to your expert knowledge to guess to which banana producers this information refers. Answers on a postcard (or e-mail) to Banana Link! 

1. Introduction
2. Working Group 01: Sustainable Banana Production and Trade
3. Working Group 02: Distribution of Value 
4. Working Group 03: Labour Rights
5. Chiquita’s steps towards gender equality
6. Consumers are a key stakeholder
7. Small farmers show the way: mobilising all stakeholders

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