201712 living income fmartin

Living Income

Friederike Martin

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)

Webinar for Deutschland-Alumni

Bonn, Dec 14th, 2017

Reaching a decent livelihood for

smallholder farmers and their families

Agenda

1. Concept and calculation of

living wage and living Income

2. Case Study Malawi

3. Q&A Session

Dec 14th 2017 Deutschland Alumni Webinar: Living Income 2

Background and Definition

© ETP / Toby Richards

3

Why we need a living income benchmark

• A large share of the developing country populations being “non-

poor” do not earn enough income for a decent living

• Limited explanatory power of international poverty lines,

e.g. World Bank extreme poverty line (1.90 US$)

• National poverty lines have no common calculation method

• Poverty lines and minimum wages are calculated for one

person only and can not be applied to a total household (thus,

incomplete)

Calculating cost of living on household level

Moving from poverty to decency

4 Deutschland Alumni Webinar: Living Income Dec 14th 2017

Living income and

living wage aim to

achieve a decent

standard of living

for a family in a

particular region

© GIZ 5 Deutschland Alumni Webinar: Living Income Dec 14th 2017

• is a benchmark for

one source of

income for a total

household

• Applied in the context

of hired workers

• Methodology

developed by Richard

and Martha Anker

• Framed by the ISEAL

Global Living Wage

Coalition

© GIZ / Ursula Meissner 6

Living Wage

Deutschland Alumni Webinar: Living Income Dec 14th 2017

• Applied to any income

earner and his/her family

• Several income sources

(incl. Hired labour)

• Focus agricultural

sector

• Framed by The Living

Income Community of

Practice

© ETP / Toby Richards 7

Living Income


Methodology


8

Cost of basic but decent

living

Number of average

size family

Cost of a decent standard of living for a household

9

Decent incomes are a fundamental human right


Cost of basic but

decent life for a family

Number of workforce per family

Net Living Income

Net living

income

Payroll deduc-tions and

taxes

Gross Living Income

From net living

wage to gross

living income

From cost of

basic but decent

lifestyle to net

living income

17

From the cost of living to living income

… but calculating the

benchmarks is only half of

the battle.

It‘s the GAP that

matters!

18

1. Determining Household and Farm Characteristics

2. Deriving a Living Income Benchmark

3. Determining the Actual Income

4. Compare Actual Against Living Income (Gap Analysis)

12

Wrap-up of Methodological Steps


Application


13

• Setting targets for specific interventions and

different actors of the supply chain

• Influencing policy such as minimum or industry

wage

• Informing dialogue between farmers and buyers,

workers and management

• Assessing risks and monitoring change in the

income or wage gap

• Modeling and strategizing about what

interventions could effectively raise net wages or

affect farmer income

14

How can living wage and living income

benchmarks be used?


What can national governments do?

• Right policy framework - from land rights to tax policy

• Basic services such as health and education

• Maintanence of infrastructure essential for market access

• Support resilience of farming and freshwater systems in

the face of climate change

• Delivery of effective agricultural exension and research

services


What can private companies do?

• As a buyer, either in existing markets or creating new

markets for crops

• Catalytic role, in partnership with other public or private

sector stakeholders to enable

• Trainings,

• Provision of better or cheaper inputs,

• To facilitate access to cheaper credit or local saving

and loans schemes

16 Dec 14th 2017 Deutschland Alumni Webinar: Living Income

What can civil society do?

• Providing expertise on issues such as inequility,

community engagement, farming techniques and resilience

• Helping to bring farmers together into groups to

• Reduce transaction costs,

• Increase bargaining power,

• Build practical local collaboration and

• Share knowledge


What can donors do?

• Underwriting risks of loans from banks to farmers

• Shaping national agricultural policies and systems

• Support local governments to invest in agricultural

development


Challenge

• Coordinated action by the right actors cannot will not soley

reach a decent standard of living for farming families

• Challenges: Limited land, large farmily size and / or

distance to market

• Need: Discussions for agricultural transition

and development of non-agricultural sectors

for other employment opportunities


Case Study Tea Sector Malawi


20

Malawi tea industry

• Africa’s second largest tea

producer

• One of the poorest countries

in the world

• 62% of Malawians live

below the poverty line

• The tea industry is the

largest formal employer in

Malawi

• Jobs on the tea estate pay

above the national minimum

agricultural wage

Mulanje Thiolo

Deutschland Alumni Webinar: Living Income

• Country: Malawi

• Region: Thylo and Mulanje (main tea growing regions)

• Number of Household Members: 5

• Work force in a smallholder household: 1.59 / 370 person days of

labour per year

• Owns 0.61 hectares of land on which they grow tea (0.40

hectares) and maize and pigeon peas (0.21 hectares)

22

Determining Household and farm composition


The Workfoce – Family members Income triangle

Living Income (LI) vs. Actual Income (AI)

Source: GIZ 2017; Icons by Blake Stevenson and Gan Khoon Lay, Noun Project

Total Annual Net Income per HH

LI: 5,999 US$ PPP

AI: 2,557 US$ PPP

Daily Net Income Earned

per Workforce

LI: 15.04 US$ PPP

AI: 6.41 US$ PPP

Daily Net Income

Available per HH

Member

LI: 3.59 US$ PPP

AI: 1.53 US$ PPP Dec 14th 2017

Comparison of actual income and living

income benchmark of a tea household per day

0,00 USD

2,00 USD

4,00 USD

6,00 USD

8,00 USD

10,00 USD

12,00 USD

14,00 USD

16,00 USD

Actual Income

Living IncomeBenchmark

World Bank ExtremePoverty Line

National PovertyLine

US

$ P

PP

Deutschland Alumni Webinar: Living Income

Comparing Actual against Living Income Smallholder Farm Models – Income per Person

Part-Time Full Time

Farm Size: 0.6 ha 1.39 ha

0

100

200

300

400

500

600

Pigeon Peas

Maize

Tea

337.86 World Bank Extreme

Poverty Line 364.91

MKW

Living Income 620.41

MKW (adjusted from

Ankers)

MKW

146.15

Source: GIZ 2016

0

100

200

300

400

500

600

PigeonPeas

Maize

Tea

Modeling from Actual Income to a Living Income MKW

Part-

Time

Full

Time

Produc-

tivity

Increase

Tea

Price

Increase

Produc-

tivity

Increase

Tea

Price

Increase

Farm Size: 0.6 ha

Living Income

MKW 620.41;

US-PPP 3.23

(derived from

Ankers)

World Bank

Extreme

Poverty Line;

MKW 364.91;

US-PPP 1.90

146

222

263

337

515

Off-farm

Income

620.41

1.39 ha

Living Income can be achieved

• Farmers with less than 1 ha:

• Increase yield by at least 40%

• Tea estates increase tea price by at least 40%

• Employ excess labour in high returns activities wage

employment (if living wage is paid) off-farm income

generating activities.

• Farmers with more than 1 ha:

• Allocates all land to tea production;

• Increases yield by at least 40%

• Tea estates increases tea price by at least 40%


Towards reaching a living income

• „Classic“ capacity development activities to increase farmers

agronomic productivity

Conducting farmer field & business schools to improve

technical and entrepreneurial knowledge of smallholder

farmers

Supporting village savings and loan groups (VSLs) to

increase capital base

• „Alternative“ promotion activities to increase tea prices

Introducing sustainable procurement practices (at the

moment being tried out throug IDH/Oxfam activities

Introducing sustainable consumption practices (making

consumers aware/faire pricing)


www.living-income.com

29

Would like to know more?


Friederike Martin

Advisor

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)

Programme Sustainable Value Chains and Standards

E [email protected]

30

Contact


mailto:[email protected]

Date post:	22-Jan-2018
Category:	Education
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201712 living income fmartin

Education