Living wages in Africa: Experiences from the Cut Flower and Garment Industry in Kenya

1. Living wages in Africa: Experiences from the Cut Flower and Garment Industry in Kenya BDS Workshop 16-18 September 2009

2. Kenya’s Cut Flower Industry • Globalization’s success story • Oldest and most successful in Africa • Largest cut flower exporter to EU • 1st /2nd largest foreign exchange earner • Employment (40,000-50,000 / 100,000) • Feminized and flexible labor strategies

3. Kenya’s Garment Industry • Not a significant contributor to GDP • Employment = 40,000 • Garments are manufactured products whose price elasticity is relatively less erratic than that of agricultural products (major sources of foreign exchange earnings for Kenya) • It is also believed that it will enable the hitherto largely elusive take-off to industrialization for the SSA economies

4. Towards living wages? • Policies to set living wages are a popular but controversial instrument • Minimum wage legislation is supposed to empower workers whose wages are constrained by the excessive market power of employers • Kenya has had an active minimum wage setting policy since independence setting a large number of minimum wage floors that vary by occupation, sector of activity and location • Minimum wages are often updated annually and effected on Labour Day

5. Towards living wages? • 2006-2008 minimum wage not revised • On 1st May 2009 the government announced an 11% Ksh. 735 (US$9.8) average increase of minimum wages: • Agricultural sector wages – Ksh. 3043 (US$40.6) • General wages for the 3 cities – Ksh. 6130 (US$81.7) • General wages for municipalities wages – Ksh. 5655 (US$75.4) • General wages for all other areas in the country – Ksh. 3270 (US$43.6) • Enforcement and coverage of minimum wage legislation is often wanting (urban vs. rural, formal vs. informal)

6. Towards living wages? • The criteria used by government to set minimum wages does not reflect the real cost of living • Average annual inflation rates almost tripled from 9.8% in 2007 to 26.2% in 2008 • Bread basket for an average urban household of 3-4 person is estimated at Ksh. 23,670 (US$315.6) • In addition to minimum wages floors there are usually non-wage benefits (housing, healthcare, childcare, transport etc)

7. Living wages and codes of practice • Most social codes have different living wage clauses • The basic premise of a living wage is that full-time workers should receive sufficient compensation from their work to be able to support a small family at least at a minimum acceptable living standard • However the issue of what constitutes a living wage is left open to interpretation

9. Living wages and codes of practice • WRC clause on living wage appears to be more proactive unlike the other 3 codes – not pegged to minimum wage legislation • WRC has proposed a sample living wage estimate with illustrations from Indonesia and El Salvador. • It has also estimated the impact of labor cost increases on apparel retail prices • So what constitutes a living wage?

10. Determining living wages • According to the WRC establishing a living wage involves: • Determining a basic, culturally appropriate market basket of the goods and services necessary to support a household in a given country, with primary emphasis on the most critical area, nutrition. • Determining the market price of each good and service that would be locally available to a garment worker and generating a monthly figure for living costs from this data. • The WRC proposes that living wage levels would be determined for the locality within a given country where a particular factory is located, at the specific time when a dispute arises as to whether that factory is meeting the living wage standard.

11. WRC Living Wage Estimate: Jakarta, Indonesia

12. Consequences of Wage Increases on Apparel Production Costs

13. JO-IN Initiative • The Joint Initiative (JO-IN) (Clean Clothes Campaign, ETI, Fair Labour Association, Fair Wear Foundation,Social Accountability International & WRC) established in 2003 • It is attempting to move living wage discussions from “what is?” and “how” a living wage can be implemented • Project in Turkey: Wage ladder – a benchmaking system for mapping factory progress in improving wages

14. What is a living wage? • The cut flower and garment industry pay over the legal minimum wage usually in accordance with a 2-year CBA • CBA negotiated by Kenya Plantation & Agricultural Workers Union signed in 2007: Min. wage for general worker KSh.5958 (US$79.4) with an increase of 8% every year • CBA negotiated by Tailors & Textile Workers Union signed in 2003: Min. wage for general & a skilled worker was KSh.5276 (US$70.3) & KSh.6634 (US$88.5) respectively with an increase of 8% every year • But the estimated food basket of Ksh. 23,670 (US$315.6) is nearly five-fold the wages paid in the two sectors • Workers also indicate that the wages that they receive are not sufficient for their basic needs

15. Implementing of living wages • WHO should take responsibility particularly on global supply chains? • Are JO-IN projects a solution? Is this realistic? • ALL stakeholders (buyers, suppliers, TUs, NGOs and workers) should participate • But are there incentives for each stakeholder’s participation? • It must be clear what incentives are there for each stakeholder • What are the responsibilities of the different parties involved (buyers, suppliers, unions, government and others)