B Lab Forces for Good Podcast — Episode 5: How can business alleviate poverty and promote living wages?
Episode 5 of this Forces for Good podcast series features "Living Wage" experts from B Lab, Fairtrade International, and SOKO, a women-led, people-first ethical jewelry brand, connecting artisans in Kenya with the global market.
In this episode, we highlight the importance of paying a real living wage, the potential complexities of implementing a living wage, and the growth opportunities that paying a living wage can provide for workers trying to break the cycle of poverty.
This episode aims to answer the following questions:
What constitutes a living wage?
Who is most impacted by wage gaps?
How can businesses provide a living wage, especially in the most impacted systems: the global supply chain?
Guests include:
Joanne Calabrese, CEO, SOKO
Wilbert Flinterman, Senior Advisor, Workers' Rights and Trade Union Relations, Fairtrade International
Bernard Gouw, Senior Manager Social Standards, B Lab Global
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Joanne Calabrese, CEO, Soko: You know, the average person living in Kibera is earning about $1 a day. And they're learning and they're basically living dollar to dollar. And I'm not exaggerating this point. They're figuring out how to do something to earn that dollar so that they have that dollar so that they can eat.
Bernard Gouw, Senior Manager Social Standards, B Lab Global: I really wish that minimum wages around the world were actual living wages.
Wilbert Flinterman, Senior Advisor, Workers’ Rights and Trade Union Relations, Fairtrade International: Minimum wage is often a political compromise. A living wage, on the other hand, is sort of an indication of value of what it costs to maintain a decent standard of living.
This is Forces for Good, a podcast from B Lab, the nonprofit network powering the global B Corp movement. Forces for Good takes a hard look at how businesses are helping to solve the biggest social and environmental challenges of our time. I’m your host Irving Chan-Gomez, joining from the Philadelphia offices of B Lab Global.
On our podcast, you’ll hear from B Corp leaders, industry experts, and changemakers. We’ll tell you about what companies are doing to move beyond buzzwords and change destructive practices across industries. We’ll ask tough questions to uncover how we can truly drive positive impact for people and the planet.
Every human being has a right to a decent standard of living, for themselves and for their families. This means that workers should be paid fairly for their labor. Most countries around the world have minimum wage laws. Yet working poverty remains a reality for hundreds of millions of people.
So what happens when workers receive payment that accurately reflects their needs and expenses — a fair living wage? In this episode, we speak to experts who help us understand the difference between a minimum and a living wage. We talk about the complicated process of calculating living wages, and showcase businesses that are working to ensure that every worker—throughout their entire supply chain—is fairly and ethically compensated.
Bernard Gouw, Senior Manager Social Standards, B Lab Global: : It's first mentioned in the Treaty of Versailles in 1919 already, and even with the words the living wage comes up. And so we're looking at 100 years ago. Implementation has been slow because for a long time the question has been, okay, if we agree people should build a decent standard of living. What is a decent standard of living? Who determines that? How do we measure it?
That’s my colleague, Bernard Gouw. He’s the Senior Manager of Social Standards at B Lab. He works to evaluate companies on their living wage practices and provide them with guidance for implementation. We’ll dive into the questions he’s describing in this episode. // Starting with how living wage benchmarks are determined for various locations.
Bernard: Rather than relying on government set minimum wages, let's actually research what a living wage is. Let's actually research what people need. And then based on that, companies can set wages and then they know that they're fulfilling the human right of a living wage. And they do this by visiting shops and interviewing people about, for example, the cost of food or the cost of their housing, cost of education. So it's a research and even evidence-based approach to determining how much of a wage is enough to meet this human right.
Bernard explains that Richard and Martha Anker are the experts known for developing some of the first living wage standards. They are an economist and statistician who have been researching the topic for decades. In 2020, they released a new standard methodology for calculating living wage, known as the Anker Reference Values.
Bernard: It's a very time intensive and costly methodology, you know, because they were really going into places all over the world and interviewing people. And that takes time and takes resources.
To create this methodology, the Ankers factored together things like housing, healthcare, and nutrition, as well as more nuanced needs people described in interviews.
Bernard: So they focused on supply chains and particularly agricultural supply chains. So a lot of the initial living wage work was done in the global south. They started off focusing on the agriculture sector and in recent times have also done a lot of research in, for example, the garment sector and also in China, for example, looking I think it was for the electronics industry.
Living wage is a complicated and evolving equation. It depends very much on time and location and there can be huge variations between urban and rural areas.
Bernard: We always say in the living wage space that living wage data is time and place specific, and that place could be as specific as that village and surrounding area. You there's a few exceptions in the U.K. they have a living wage rates for the whole of the country, and then they have a separate one for London. But there's no separation between rural and urban outside of this London exception.
When developing methodologies, living wage experts also have to balance perfection and specificity against creating a standard that provides global coverage. According to Bernard, the Ankers methodology is intensive and favors accuracy over coverage. // But the methodology the Ankers developed is still used by the Global Living Wage Coalition, with whom they work in close partnership. // The coalition combines research on living wage benchmarks with advocacy and action. In addition to the Anker Research Institute, it includes various non-profit organizations, including Fairtrade International.
In more recent years the coalition has put the ‘Anker Reference Values’ into use. They can help start a conversation about living wage in places where a full scale study has yet to be carried out.
Bernard: I don't think anyone within the living wage space thinks everything's right. We have the numbers. We're done. On the mathematical side, there's a need to constantly update the numbers to keep up with inflation, for example. But there's also a need to keep up with broader advances.
Bernard is talking about advances in living standards and methodologies for calculating living wage. The coalition continues to do research and release guidance to meet living wage benchmarks.
Bernard: Living wage work is always about two questions. The first is what should people be paid? And that's where we talk about living wage benchmarks, which we've spoken about quite a bit. And then the second bit is what are people actually being paid? Which is also quite complicated because most people who receive wages have a base wage. But then there's all these extra elements, things like bonuses, benefits, allowances, and there's it's quite complicated to determine of that complete package, what we call prevailing wage, what's fair and not fair to include.
Despite well-researched and publicized living wage standards, Bernard says the minimum wage in many countries remains far below their living wage benchmark.
Bernard: So in a lot of countries, what's happened is there's been living wage campaigners saying we need to increase wages. We need to make sure workers get a living wage. Governments have then said, okay, we hear you, we're going to increase wages. But it's a general increase or an arbitrary increase is not merely an evidence based increase to a living wage.
Other governments have chosen to ignore benchmarks all together in favor of more widespread employment.
Bernard: So if they increase the minimum wage, companies will go to other countries and therefore there will be fewer job opportunities. So there is a conscious decision to go for employment rate as opposed to higher wages.
Minimum wage is often a political compromise, according to Wilbert Flinterman, Senior Advisor of Workers’ Rights and Trade Union Relations for Fairtrade International. Wilbert agrees that a region’s minimum wage is rarely equal to the true living wage workers need to support themselves.
Wilbert Flinterman, Senior Advisor for Workers’ Rights and Trade Union Relations, Fairtrade International: A living wage is sort of an indication of value, of what it costs to maintain a decent standard of living.
He explains why countries with developing economic sectors feel pressure to keep wages low.
Wilbert: So if countries are not technically technologically advanced, they often rely on the availability of low cost labor. And that becomes their distinguishing feature in global competition. And that tends to prompt the governments of those countries to keep minimum wages rather low so as not to sort of deter companies, investors from putting their money in businesses of that country.
And he says companies know what they’re doing when they choose to place large portions of their supply chains in these places and take advantage of low wages.
Wilbert: In many cases, in countries that depend on low-cost labor to be competitive in the global marketplace, there is quite a big gap. And so that companies that source from those places in the world often are sourcing against inadequate wage conditions and poverty levels and precarious work that is involved in the production of a product. [00:13:02][31.2]
Inadequate wages make people extremely vulnerable. It can affect how long they live and the quality of their lives. Companies sourcing labour from these countries, without advocating for living wages, are complicit in this.
Wilbert: These are people like you and I. They are born with this with which certain innate skills are. Let's say a human potential capacity, capacity to learn, capacity to, uh, to perform all kinds of tasks and if they would be given the opportunity. But the issue for a lot of the limiting factor for most of those people is actually access, access to opportunity, including education, but also access to, um, to health care services. And simply put, access to adequate food and a healthy living environment.
Low wages keep workers stuck in a cycle of poverty. With every cent being used to meet their basic needs, they have nothing left-over to find new opportunities and learn new skills.
Bernard: This isn't just about addressing poverty for an individual, but it's also about addressing poverty for that family. And crucially, the third step is it addresses intergenerational poverty, helps break the cycle of families that are in-work poverty. Or in-work poverty, rather. So that's why living wages are a game changer.
That’s Bernard from B lab again.
Bernard: If you take a broader definition of poverty, lack of education, lack of decent housing, if you take it in a broader sense, then living wage absolutely is an important tool for tackling poverty, because living wage benchmarks assume the cost of those important things like education, housing and health care. So you're actually directly enabling people to finance those things.
Bernard says that globally, the number of people who live in poverty while working is staggering - over 20 percent.
Bernard: So who's holding those minimum wage jobs? It's often people in marginalized groups, people with lower levels of experience of lower level, lower levels of education, people with disabilities, people who generally in life have less privilege or less flexibility. Now these people are being paid minimum wage. They're not receiving a living wage, which means they're not receiving a wage that allows them to afford a decent standard of living. So we use the term Jedi. People have justice, equity, diversity, inclusion. So there's a very clear link between living wage and Jedi. By implementing living wages, companies can benefit people who are traditionally marginalized and could transform economies into inclusive economies.
It may not be a simple fix. But large corporations have the power to pay their workers a living wage — and the responsibility to influence other companies to meet the same standard.
Bernard: I would say that companies think if I follow the law, I'm doing everything right. So I'm paying minimum wage. I should pay more. That's enough. And it's interesting cause a lot of times you'll also see companies, they'll have supplier code of conduct that'll say that'll be divided into sections and they'll say fair wages. But then you read what it says underneath and it just says, We promise to pay the minimum wage in all countries where we source from. That's neither a fair wage nor a living wage. So a lot of companies are still grappling with. This idea of needing to go beyond the legal minimum.
By engaging in these efforts, companies can take an important step to improve the lives of the people who create their products. That’s a more than fair exchange for the products and services they produce. Economies would be much more inclusive if minimum wages were replaced by living wages.
Bernard: That's why we often talk about living wage as not just a human right, but it's an enabling right. It's a human right in itself. It allows people to live with dignity, but it also allows other human rights to be fulfilled, like the right to education or the right to decent, decent housing.
Back to Wilbert on how companies and employers can start to increase pay and influence supply chains.
Wilbert: Basically they want to have the best possible quality against the lowest price. They could then add to that that they want to make sure that the product has a certain certification, for instance, from fair trade, to ensure that there is not a lot of sort of social risks involved in the production of and the sort of purchase of that product. But yeah, so they carry much of the power in supply chains. [00:08:38][29.6]
According to the International Labor Organization, a global supply chain is a cross-border organization of activities that are required to bring goods and services to consumers. That means exporting, importing, shipping and selling raw materials. In the case of food, Wilbert describes the supply chain as how product makes its way from “farm to fork.” In certain supply chains, Wilbert says there’s very low elasticity of demand. That can make it hard to increase wages.
Wilbert: That means that when the producer would raise the price, there will be an automatic impact on the demand. And so there is a very low tolerance for price increases that would be necessary to improve social conditions.
Supply and demand is incredibly important to an organization’s bottom line. But large companies still have the opportunity to make a difference. Fairtrade and other organizations have created guidelines to help them. That are stepping stones to providing a living wage, like encouraging bargaining and feedback from workers and reducing gender pay gaps.
Wilbert: But of course, it could also create higher costs for employers if the standards that we set are economically prohibitive. So that is what we try to avoid. Do not set the standards in the blind, but understand how we can make them work for all parties concerned.
One of the goals of Fairtrade is to give workers at the very beginning of the supply chain more autonomy and power.
Wilbert: Fairtrade also believes that people that are marginalized and disadvantaged by conventional trade can ultimately develop the capacity to take more control over their work and their lives if they're better organized and resourced and supported.
For example, one woman working at a Fairtrade Certified flower farm was able to improve her whole life because she had access to resources from the premium paid by sourcing companies.. By charging just a little bit more per flower, the farm was able to increase wages in a way that was life changing.
Wilbert: She was previously working at a flower farm, plucking flowers, packing them, cleaning, etc.. Then she had the opportunity to advance herself by going to college through a scholarship that was available to her from the premium that is paid to producers. And if they sell for the price on the fair trade terms, this premium is paid for by consumers of 30 products. And now that lady is a human resources manager in another flower farm. So it all has to do with access to opportunity.
Other businesses and individuals are working to disrupt the supply chain in entirely new ways. One of them is Joanne Calabrese at jewelry company, SOKO, a Certified B Corporation.
Joanne Calabrese, CEO, SOKO: I think it takes the CEOs of some of these very, very big brands to look at some of the smaller brands and say how if a small brand could do it, how could we do it? And it is to me, it is looking outside of just those two powerhouse supply chain countries and looking at areas like Latin America, like Africa, and saying these things can be done and they can be done in ethical way and humans can be treated in an ethical way and they can be paid a fair living wage to be able to do that.
SOKO is a jewelry company that sources pieces from artisans in Kenya.
Joanne: The idea really was born out of this serendipitous meeting between two American women who met in Kenya when they were working on sustainable development projects through urban systems and through mobile technology.
They use a platform that Joanne calls a “virtual factory.” It can be accessed from a smartphone to connect local artisans with buyers around the world.
Joanne: They had a shared passion for products being made in Kenya because they're living in the local market. They're seeing all of this product being made by Kenyan artisans at the same time. And by the way, all of what we're talking about is product that is manufactured in the informal sector. So we manufacture it in the largest urban slum on the continent of Africa. And, you know, their idea was, you know, how do we get how do we empower people in marginalized communities in the developing world to get access to a global market?
The SOKO platform pays a living wage that is five times what most craftsmen would make selling their products locally. Retailers from Neiman Marcus to Nordstrom to Madewell place orders for SOKO jewelry.
Joanne: So I might get an order from Nordstrom and we put it through the platform, which we refer to as a virtual resource planning tool. And that tool actually allocates the order to the right artisan who uses those materials to manufacture, who have those skills, who have high readings on performance and delivery timelines and all of that kind of stuff.
Joanne says SOKO’s goal is to provide an example of what’s possible in the living wage space, especially with new technologies.
Joanne: We created the SOCO brand in order to validate that the technology could work so that we could eventually, you know, let other people use the technology and manufacture in Kenya. We want people to consider Africa as the next frontier to manufacturing. And we created the SOKO brand. Exactly. To do that, to show people that you can manufacture in Kenya, you can do it with beautiful aesthetic, you can do it with beautiful quality, and it can be all handmade.
Most importantly, SOKO is not only pushing for people to consider Africa as a manufacturing center, but to also do it differently by ethically sourcing and manufacturing. In a bigger picture, this is critical considering the ongoing history of exploitation of the African continent from the Western world. The ethical sourcing of SOKO’s products is a major selling point.
Joanne: Ithink really genuinely the reason that some of our buyers that are in the retail stores want to buy is not just because the jewelry's beautiful — and it is beautiful. We've gotten to a place where we know how to make jewelry really well. We gold plate. We have our own equipment to do that. People are buying our product because we're B Corp certified and we're doing something good.
And Joanne has tons of examples of the positive impact making a living wage has had on SOKO’s artisans.
Joanne: Veronica is probably about 33 years old. She was doing administrative work in a workshop in Kenya. And, you know, she would just keep looking at these guys making jewelry and kept thinking, you know, I could do that. I bet I could do that.
Joanne says women are rarely taught to make jewelry and most craftsmen, even at SOKO, are male. Although, SOKO does have initiatives in the works to give more opportunities to women.
Veronica had to ask one of the men in the factory to teach her how to make the jewelry.
Joanne: And she kept practicing, practicing. And then she came back to the owner of one of the workshop and said, I want to do this. I want to be an artist.
Joanne says now Veronica runs her own workshop of artisans and fulfills SOKO orders.
Joanne: She was persistent and, and she's actually probably one of our best quality artisans and she's constantly, you know, bringing — she's trying to get girls to come in to learn the trade because she wants to pass on this trade to other women.
Another SOKO artisan named DIxon was able to use the money he earned at SOKO to reinvest.
Joanne: He bought a space in Kibera, where the workshop is above and then down below, it’s like a 7-Eleven. It sells like soda and potato chips and everything. So he's earning money from his shop. Right. Then he used money to buy some livestock. And because of that livestock, he's been able to employ people to milk his cows.
The ripple effect of adequate income goes beyond just the single earner. It affects a whole community.
Joanne: This impact is not just on 2000 artisans. It's actually on, you know, ten or 11,000 artisans, artisans, people in Kenya that are being impacted because and then they're also teaching, you know, their siblings and their kids, you know, this skill that can last a lifetime and can be intergenerational because it's a great it's a great way to do business.
When SOKO started, its founders realized they could do more for the community in Kibera, Kenya beyond just increasing income for their artisans. They helped with startup costs to buy materials and tools and held seminars for workers on topics from healthcare to banking…
Joanne: We know the pulse of what's going on in Kibera. We know our artisans very well with many of them. We work for them. We work with those artisans for five, six, seven years, and we rely on them to help us know what the climate is in the environment. So if there are corrections and, you know, things that we need to make, that we can make those.
Joanne wants SOKO’s mission, as well as its business plan, to serve as an example for other businesses and influence the broader industry.
Joanne: The artists and craft industry is the second largest employer in the developed world. But most of those people don't have access to a global market. So how do companies all over the world today understand that distributed manufacturing is something that could be good for people?
For other companies interested in the social impact space, Joanne’s advice is to find investors who are eager to work with them and who want to make a difference. She also suggests partnering with retailers who are willing to take a chance on the challenges a small brand might face, if it means having a positive impact on the world.
Joanne: At the end of the day, this company was founded on, you know, doing the right thing for people. And you have to make the decision and you have to stick to it.
For other, more established companies with supply chains that have yet to incorporate living wages, Wilbert from Fairtrade has advice.
Wilbert: They have access to those living wage benchmarks, and they've access to the wage figures so they can find out if there is a huge discrepancy. And then they can have a discussion with their business partners, with their suppliers, for instance, or their trading partners about what it takes to improve wages over time.
He says there are major advantages to paying workers fairly.
Wilbert: There are companies that that have decided they they want to purposefully pay a living wage to to make sure that they can retain the workforce that they have recruited, that the workers are able to, you know, look after themselves, that their health and their their family and that they they are they are they are happier. And this essentially creates a more stable and productive workforce,
Employers who are unconcerned with living wage can undermine their own business by devaluing their workers — or subjecting them to human rights violations.
Wilbert: Workers are struggling to make it to the end of the workday because they're so hungry, they cannot stand much longer on their feet or they fall asleep where they sit and they get ill and they don't show up. And they essentially dislike their job so much and their situation so much that they look for the first opportunity out of it.
The task of establishing living wages can be challenging in the face of entrenched global supply chains. But WIlbert says making a difference is about taking meaningful steps forward that in the long term will lead to fair compensation for work forces around the world.
Wilbert: [00:39:09] So if then a company says, well, you know, we cannot work on the living wages because it's too, too hard, then I would go back to that company and ask, How are you promoting social dialogue? Is there actually such a process happening in your supply chain? And what do you do to support that and promote that understanding that that may not yield immediately a living wage, but at least it offers a way, a good pathway to take meaningful steps towards that goal. [00:39:41][32.0]
The private sector talks a lot about how it is capable of getting things done more efficiently than other actors, like governments. The business sector has proved very successful at increasing profits. What would our economic system look like if companies put that same energy and effort toward improving the livelihoods of the people that work to create the goods and services they profit from?
If you'd like to learn more about B Corps and purpose-driven companies visit BCorporation.net. And listen to the rest of our season! We have more episodes on how business can drive positive impact and be a Force for Good. Please subscribe, rate, and review the podcast on Apple Podcasts, Spotify, or wherever you listen. Your ratings and reviews help Forces for Good reach new audiences, so we thank you for your support.
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The views and opinions expressed are those of the interviewees and do not reflect the positions or opinions of the producers or any affiliated organizations.
The podcast was brought to you by B lab. Our team includes Sherri Jordan, Jude Wetherell, and Hannah Munger. Forces for Good is produced by Hueman Group Media.
For this episode, I’d like to thank Joanne Calabrese(cal-ah-bray-see), Wilbert Flinterman (Flynn-ter-mann) and Bernard Guow (GOW).
I’m your host, Irving Chan-Gomez. Thanks for listening. And I look forward to catching you in the next episode!