living wage report - iseal alliance · 9/17/2015 · moving toward living wage globally, a...

08Fall

Series1,Report6

April,2017

Preparedfor:TheGlobalLivingWageCoalitionUndertheAegisofFairtradeInternational,ForestStewardshipCouncil,GoodWeaveInternational,RainforestAlliance,SocialAccountabilityInternational,SustainableAgricultureNetwork,andUTZ,inpartnershipwiththeISEALAllianceandRichardAnkerandMarthaAnker

PhotoCourtesyofPhotographerPierreLavioletteandcopyrightholderFairtradeBelgium

LivingWageReportNon-MetropolitanUrbanEthiopiaZiwayRegionContextProvidedintheHorticultureSectorJuly2015By:Ayelech(Ayu)TiruwhaMelese

LivingWageReportforNon-MetropolitanUrbanEthiopiawithfocusonZiwayFlowerFarmCluster

2©GlobalLivingWageCoalitionUndertheAegisofFairtradeInternational,ForestStewardshipCouncil,GoodWeaveInternational,RainforestAlliance,SocialAccountabilityInternational,SustainableAgricultureNetwork,andUTZ,inpartnershipwithISEALAllianceandRichardAnkerandMarthaAnker

ACKNOWLEDGEMENTS

Thisstudywasmadepossiblewithsupportandcooperationofmanyorganizationsandindividuals.IwouldliketothankFairtradeInternationalforprovidingthenecessaryresourcestoconductthisresearch.SpecialthanksgotoZacharyKiarieofFairtradeInternationalforhisfacilitationinundertakingthefieldwork.Mysincerethanksalsogototheflowerfarmthatopeneditsgates,assignedanexcellentfacilitatorandgenerouslyallowedparticipationofworkersintheresearch.Iwouldalsoliketoextendmygratitudetoworkerswhoparticipatedinthestudy,especiallythosewhowelcomedmeintotheirhomes,andprovidedguidanceinmarketsandneighborhoods.I’mverygratefultoMarthaAnkerandRichardAnkerfortheirtirelessadviceandsupportinapplyingtheAnkermethodologytoestimatethelivingwageofZiway.Atlastbutnotleast,Iwouldliketothankmyfamily(myhusband,mykidsandmyparents)fortheirusualsupportandlove.



FOREWORD

ThisreportforEthiopia,andtheareawhereitsflowerfarmsareconcentrated,ispartofaseriesoflivingwagereportsfortheGlobalLivingWageCoalition(GLWC)usingournewmethodologytoestimatelivingwagesinruralandurbanareasaroundtheworld.Thesereportsnotonlyindicatehowmuchworkersneedtoearntobeabletoaffordabasicbutdecentstandardoflivingforthemselvesandtheirfamilies,butalsodescribehowthislivingwagewasestimatedinatransparentway,sothatreaderscanunderstandwhatitmeanstoliveonlessthanalivingwage.Reportsalsomeasureprevailingwagessothatthegaptoalivingwagecanbedeterminedandusedasacatalystfortakingtheneedsofworkersintoconsiderationwhenwagesaresetinabetterwayinfuture.Ethiopiaisthe13thlargestcountryintheworldwithover100,000,000people,andisoneofthepoorestcountriesintheworldaswell,ranking173outof187countriesontheHumanDevelopmentIndex.ThefreshcutflowerindustryisanimportantsourceofforeignexchangeforEthiopia,aswellasanimportantcreatorofjobsinacountrywherejobsandforeignexchangearescarce.Inaddition,theflowerfarmshavebeenresponsibleforprovidingvaluablecommunitybenefitsfortheZiwayarea,sinceamajorflowerfarmbuiltanewschoolandanewhospitalthere.ThisreportisthethirdGLWClivingwagereporttofocusontheflowerindustryinAfrica.EarlierreportsfocusedonflowerfarmsaroundurbanLakeNaivashaKenyaandaruralareaofKenya(thathassomeflowerfarms).SinceKenyaandEthiopiaarethemainexportersoffreshcutflowerstoEurope,thereportsforLakeNaivasha,KenyaandZiway,EthiopiaprovideafairlycomprehensivepictureofwagesandlivingconditionsofworkersintheflowerindustryinAfrica,therebyfacilitatingpossiblecomprehensiveactionforthisindustrythatsuppliesEuropewithfreshcutflowersonadailybasis.FairtradeistobecommendedforhavingtheforesighttohavecommissionedlivingwagereportsforalloftheAfricancountriesthatsupplyfreshflowerstoEuropesinceitisclearlymoredifficulttoconvinceflowerfarmsandbuyerstoraisewagesinonecountryonlygiventheeverpresentpossibilityofmovingbusinesstoalowercostneighboringcountry.ItisinterestingthatmostflowerfarmsinbothKenyaandEthiopiaareconcentratedinasimilartypeoflocationandthatworkersinbothcountriesliveinsimilartypesofhousingandcommunities.Mostflowerfarmsinbothcountriesareclusteredclosetoalargelake(becauseofaneedforalargeandsteadysupplyofwater)thatisnottoofarfromamajorinternationalairport(sothatflowerscanbequicklyairfreightedwithoutwiltingtocountriesinEurope).Unlikemanyagriculturalproducts,flowerfarmsinbothcountriesprovidesteadyyeararoundemploymentbecauseproductionofflowersisreasonablysteadythroughouttheyear.Alsounlikemostagriculturalproducts,flowerfarmworkersliveinurbanareasthatsprungupin



lakesideareaswithformerlylowpopulationdensitytoaccommodatetheinfluxofmigrantsfromoftendistantruralareas.Unfortunatelyforworkers,theseurbanareasarebasicallyslumswithpoorhousingandalackofbasicinfrastructure,whichmeansthatmostflowerfarmworkersinbothKenyaandEthiopialiveinunacceptablehousing–typicallyonesmallroominasmallrowhouse.Asthisreportshows,thewagesofflowerfarmworkersinEthiopiaareextremelylow–similartotheWorldBankextremepovertylinewage-andsolowthatworkersandtheirfamiliescannotaffordabasicnutritiousdietevenifthisweretheironlyexpense.Notsurprisingly,manyEthiopianflowerfarmworkersrunoutofmoneyforfoodtowardstheendofthemonthandoftenhavetoresorttobuyingfoodoncreditatthattime.ThereisahugegapbetweenprevailingwagesofflowerfarmworkersinEthiopiaandalivingwage(2.5-3times).Thislargegapisfounddespitetheconservativenatureofhowtheauthorofthisreportestimatedthelivingwageandprevailingwage,anddespitethefactthatsheincludedcommoncashallowancesandthevalueofcommonin-kindbenefitsinherestimateofprevailingwages.Thissituationrepresentsadevelopmentdilemma.WagesofflowerfarmworkersinEthiopiaareunacceptablylowbyanymeasureofdecency,notbeingenoughevenfornutritiousfood.Atthesametime,sinceEthiopiaisaverypoorcountry,thereisalmostanunlimitedsupplyoflaborwillingtoworkatverylowwagesandtheflowerfarmindustryprovidesneededjobsandbringsinmuchneededforeignexchange.Butfreshcutflowersarenotyourusualagriculturalproduct.TheyareairfreightedeverydayfromEthiopiaandsoldtopeopleinEuropeasafeelgooditem.EuropeancustomerswouldbeveryupsettolearnthattheworkerswhohelpgrowtheirflowersinEthiopialiveinsuchpoorconditions.Wethereforefeelthatitisincumbentonflowerfarms,buyers,supermarkets,florists,andstandardsettingorganizationstotakeactiontoincreasewagestowardsalivingwageforflowerfarmworkersinEthiopia.Therearealreadysomehopefulsignsofon-goingdialoguebetweenEthiopianflowerfarmsandFairtradeaboutchartingwaysforwardtograduallyincreasewages.Itisourhopethatthiscompellingreportandthelightitshedsontheneedsofworkersleadstoconstructivedialogue,andactionandimprovementofwagesforflowerfarmworkersinEthiopia,sothattheycanliveindignity.RichardAnkerandMarthaAnkerApril,2017



ACKNOWLEDGEMENTS...........................................................................................................2

FOREWORD............................................................................................................................3

INTRODUCTION......................................................................................................................7

1. Background.....................................................................................................................8

2. LivingWageEstimate.......................................................................................................9

3. Context..........................................................................................................................103.1Ethiopia:growth,inflationandwages.........................................................................................103.2Ziway:livingconditionofflowerfarmworkers...........................................................................11

4. HowaLivingWageisEstimated.....................................................................................12

COSTOFABASICBUTDECENTLIFEFORAWORKERANDTHEIRFAMILY...............................15

5. Foodcosts.....................................................................................................................155.1Generalprinciplesofmodeldiet..................................................................................................155.2Modeldiet....................................................................................................................................155.3Foodprices...................................................................................................................................19

6. CostofHousingforWorkersinNon-MetropolitanUrbanZiwayArea............................226.1StandardforBasicAcceptableHousing......................................................................................236.2RentforBasicAcceptableHousing..............................................................................................246.3Utilitiesandotherhousingcosts..................................................................................................27

7. Non-foodandNon-housing(NFNH)Costs......................................................................27

8. Postchecksofnon-foodandnon-housingcosts.............................................................278.1Healthcarepostcheck.................................................................................................................288.2Educationpostcheck...................................................................................................................298.3Transportpostcheck...................................................................................................................31

9. Provisionforunexpectedeventstoensuresustainability..............................................32

LIVINGWAGEFORWORKERS...............................................................................................34

10. FamilySizeNeedingtobeSupportedbyLivingWage..................................................34

11. NumberofFull-timeWorkersinFamilyProvidingSupport..........................................34

12. TakeHomePay–AccountingforMandatorydeductionsandTaxes.............................35

ESTIMATINGGAPSBETWEENLIVINGWAGEANDPREVAILINGWAGES.................................37

13. PrevailingWagesinIndustryofFocusandOtherIndicators.........................................3713.1Basicwage,cashallowancesandbonuses,andovertimepay..................................................38



13.2In-kindbenefitsaspartialpaymentoflivingwage....................................................................3913.2.1Farmschoolandhospital....................................................................................................................3913.2.2CSRcommunityrelatedactivities.......................................................................................................40

14. LivingWageinContextandComparedtoOtherWages...............................................4014.1LivingWageinContext..............................................................................................................4014.2Wageladder...............................................................................................................................42

15. Conclusions.................................................................................................................42

BIBLIOGRAPHY.....................................................................................................................47

Annexes...............................................................................................................................50Annex1.ComparisonoflivingwagemodeldietwithotherdietsinEthiopia..................................50Annex2.CSReffortsofFarmXaccordingtoFairTradeauditorsreport(August,2015)...................52Annex3.EthiopiaLivingWageBenchmarkUpdatetoJuly2016.....................................................53



LivingWageEstimatesNon-MetropolitanUrbanEthiopiaZiwayRegionContextProvidedintheHorticultureSector

INTRODUCTION

Theimportanceoflivingwagewasrecognizedlongbeforetheindustrialrevolution,butactiontowardimplementationhasrarelymovedbeyondlipservice.Lackofagreementondefinitionandmeasurementoflivingwagearesomeofthereasonswhyitsimplementationfailedtotakeroot.However,atthemoment,thereseemstobearesurgenceofinterestinlivingwage:theGlobalLivingWageCoalition1(GLWC)emergedin2013tomaketherhetoricofunderstandingandmovingtowardlivingwageglobally,areality.TheGLWCbringstogethersevensustainabilitystandardssystems,inpartnershipwiththeISEALAllianceandRichardAnkerandMarthaAnker.TheGLWCpulledtogetherthesemembersandpartnersunderthesharedmissiontoseecontinuousimprovementsinworkers'wages,inthefarms,factoriesandsupplychainsparticipatingintheirrespectivecertificationsystemsandbeyond,andwiththelong-termgoalforworkerstobepaidalivingwage.EachlivingwagebenchmarkcommissionedbytheGLWCismadepublictofurtherthisaimandtoincreasetheopportunityforcollaborationtowardpaymentofaLivingWage.TheGLWCbeganbyworkingontheaforementionedconstraintsofwidespreadagreementondefinitionandmethodologyforcalculationoflivingwage,andhenceadoptedasharedmethodologythatcanbeusedtoestimatelocationspecificlivingwagesinawaythatenablesandencouragesinternationalcomparability.TheGLWCreachedouttorenownedinternationalexpertRichardAnker2,thefatheroftheAnkermethodology,andjoinedtogetherwithhimandMarthaAnkertosupporttheirground-

1GLWCMembers:FairtradeInternational,ForestStewardshipCouncil,GoodweaveInternational,RainforestAlliance(RA),SocialAccountabilityInternational(SAI),SustainableAgricultureNetwork(SAN),andUTZ2RichardAnkerisaneconomistretiredfromInternationalLabourOrganization(ILO)andanexpertonlabor,povertyanddevelopment.HehasworkedextensivelyonmeasurementoflivingwagesanddecentworkandwrittenacomprehensivereviewoflivingwagespublishedbyILO(2011).HeiscurrentlyaseniorvisitingscholaratthePoliticalEconomyResearchInstitute,UniversityofMassachusetts.



breakingworkinthedevelopmentofthisnewmethodologybasedonrigorousresearch(Anker2005,2006;2011)andextensiveempiricalworkinseveralcountries.3Themethodologyblendsnormativestandardswithcontextualfactorstogobeyondreproducingintergenerationalpovertyandtoactuallyprovidetheinformationtoreduceit.WiththerequestandsupportoftheGLWC,AnkerandAnkerblendedtheirexpertisetogethertodevelopanewmanualforestimatinglivingwage.Aftercompletingthedraftmanual,itwasintroducedtoresearchersfromseveralcountriesandRichardandMarthaAnkerpersonallytrainedtheseresearchersinthemethodology.Accordingly,theresearchersapplieditintheirrespectivecountriestoestimatelivingwagesforselectedareas.ThisstudyestimatesthelivingwageoftheZiwayareainEthiopiabyusingtheAnkermethodologyasdelineatedinthemanualdevelopedbyAnkerandAnker(2017).Ziwayishosttothelargestflowerfarmclusterinthecountry,hiringaround15,000people.OneofthefarmsinZiwaytown(hereafter,referredtoasflowerfarm-X4)hasprovidedimportantsupportinundertakingthisresearch,providingfarmleveldataaswellasallowingworkerstoparticipateintheresearchindifferentwaysasrequestedbytheresearcher.1. BACKGROUND“Everyonewhoworkshastherighttojustandfavourableremunerationensuringforhimself(herself)andhis/herfamilyanexistenceworthyofhumandignity’’UniversalDeclarationofHumanRights(1948).TheInternationalLabourOrganisationConstitution(1919)aswellasanAnnextoitsConstitution(1944)recognizeILOcommitmenttotheimportanceofworkersearningalivingwage,asdomanyvoluntarystandards.Livingwageconcernstherighttoreceiveanadequatewagethatenablesaworkerandher/hisfamilytoliveatabasicbutdecentstandardwithoutrequiringovertimeworktoachievethislevelofdecency.AsAnker(2011)highlighted,livingwageisnotanewconcept;ithasbeenraisedbyprominentscholarsdatingbacktothe18thcentury,suchasAdamSmith(1776)5andindividualslikePopeLeoXIII(1891).Moreover,aplethoraofvoluntarystandardshaveincorporatedlivingwageasarequirementintheirMarthaAnkerisastatistician,retiredfromWorldHealthOrganization(WHO),whohasextensiveexperiencewithrapidassessmentmethodologies,andhealthandgenderissues.3ForexampletheworkbyAnkerandAnker(2013;2013;2014)inKenya,DominicanRepublic,SouthAfrica,Malawietc.Thereportscanbefoundathttp://www.globallivingwage.org.4NotnamingtheflowerfarmisforconfidentialityandtorespectthepreferenceoftheGLWCtokeepthefarmspecificsanonymous.5Nosocietycansurelybeflourishingandhappy,ofwhichfargreaterpartofthemembersarepoorandmiserable.Itisequitybesidesthattheywhofeed,clotheandlodgethewholebodyofthepeopleshouldhavesuchashareoftheproduceoftheirownlaborastobethemselveswellfed,clothedandlodged.”(AdamSmith1776citedinAnker2011)



respectivecertificationschemes.ArecentILOreviewrevealedthatthereisageneralconsensusonthedefinitionoflivingwage(R.Anker,EstimatingaLivingWage:AMethodologicalReview,ILO2011)andthatsimilarconceptsdefiningtheparametersofalivingwageunderpinallofthesedeclarations,andvoluntarystandards:alivingwagemustbesufficienttosatisfybasicneedsofaworkerandher/hisfamilyandtoallowbasicdiscretionaryspending.Inaddition,theglobalagendaof‘decentwork’putsextraemphasisondecencyandcommunityvalues.DrawingonthisAnkerreport,andinconsultationwithexperts,includingRichardandMarthaAnker,TheGlobalLivingWageCoalitionadoptedthefollowingcommondefinitionforlivingwage.Alivingwageis:Theremunerationreceivedforastandardworkweekbyaworkerinaparticularplacesufficienttoaffordadecentstandardoflivingfortheworkerandherorhisfamily.Elementsofadecentstandardoflivingincludefood,water,housing,education,healthcare,transport,clothing,andotheressentialneedsincludingprovisionforunexpectedevents.Agreeingonashareddefinitionofalivingwageisanimportantstep,becausetheGLWCaimstocreateasharedunderstandingoflivingwagebasedonasingledefinitionandmethodologyofcalculationoflivingwage,toenableindustriesandcompaniestomovetowardspayingalivingwage.Currently,livingwageisgainingincreasingattentionfrombusinesses,governments,NGOsandtradeunionsasmanyacknowledgeitsinevitablerole,notonlytofightmultifacetedpoverty,butalsotopromotecompetitivenessofbusiness(Berenschot2012;Oxfam2014;MillerandWilliams2009;Wageindicatorfoundation2013).TheGlobalLivingWageCoalitionseesthecalculationandreleaseofLivingWagebenchmarksasthefirststepinalong-termprocess.TheGLWCdoesnotbelievethebenchmarkswillorshouldsupplantcollectivebargainingrights,butwillserveasareplicabletooltosupportsocialdialoguebetweenworkersandemployers.Formanydevelopingcountryproducers,wagesformanimportantpartofthecostsofproduction.Assuch,itisimportanttointroducewagerequirementsinthestandardssystemsofCoalitionmembersonlyincombinationwithdialogueandinvolvementofactorsatalllevelsofthesupplychain.FairtradeInternational,amemberofTheGlobalLivingWageCoalition,commissionedthisreport.TheworkoftheGlobalLivingWageCoalition,includingactivitiesleadingtothisbenchmark,isfurthersupportedbytheMinistryofForeignAffairsoftheNetherlands,Directorate-GeneralforInternationalCooperation(DGIS).2. LIVINGWAGEESTIMATETheestimateofalivingwageforEthiopiaflowerfarmsforJuly2015intheZiwayareaisBirr3,367(US$163)/month.Thisestimateisbuiltwithconsiderationofmandatorydeductionsfrom



payofBirr784(US$38)/month.Themajorcomponentsofthelivingwageestimateincludemonthlycostoffoodforthelocalfamilysizeoffive(twoadultsandthreechildren)ofBirr66.2/day,amountingtoBirr2,014(US$97);housingcostofBirr1,077(US$52);non-foodnon-housingcostofBirr978(US$47),andasmallmarginforunforeseeneventsofBirr203(US$10).Thesecalculationsaremadefor1.653workersperfamily,asistypicalintheregion.Alldetailsonthespecificsofwhatthesecostscover,andhowthatequatestoabasicbutdecentstandardoflivingasunderstoodfrominternationalnorms,areprovidedinthesectionsbelow.Itisintendedthatthisreportpresentatransparentlookattheinputsintothelivingwageestimateprovidedhere,sothatactiononwagesmaybebolsteredbyanunderstandingofwhatactuallygoesintoalivingwageestimate.3. CONTEXT

3.1Ethiopia:growth,inflationandwages

ForyearsthehighprevalenceofpovertyovershadowedthepositiveheritagesoftheancientAfricancountryofEthiopia.However,accordingtotheWorldBankandtheEthiopiangovernment,thisimageseemstobechanging(WorldBank2015).Althoughseveralscholarscontesttheclaim6,itismaintainedthatthecountryexhibitedcontinuousdouble-digitgrowthofGDPsince2004/5,whichestablishedEthiopiaasthe12thfastestgrowingeconomyintheworld(Geigeretal2013).TheWorldBankreportalsostatesthatthecountryachievedremarkableresultsinreducingthenumberofpeoplelivingunderthenationalpovertyline,from44%in2000to30%in2011(WorldBank2015).Similarsuccessisreportedinexpandingtheprovisionandavailabilityofhealthandeducationservices.Nonetheless,inmeasurementofmultidimensionalpoverty,Ethiopiastillstandsasthe14thpoorestcountryintheworld(Malik2013).ThegrowthofEthiopiahasbeenthreatenedbypersistentinflationsince20067.InflationhasaffectedtheeverydaylivesofthemajorityofEthiopia’spopulation,asitisheavilydrivenbyfoodpriceinflation.AccordingtoaWorldBankreportbyGeigerandGoh(2012),inflationreachedaclimaxinAugust2008andagaininAugust2011,reaching61.6%(foodinflation79.2%)and40.7%(foodinflation50%)respectively.Althoughfoodinflationappearstohave

6Forexample,detailonquestioningtheclaimofgrowthandpovertyreductionseeDevereuxandSharp(2003);Belaye,H.M.(2013);Geda(2016).7Annualaverageinflationrate,2007-2012YearGeneralFoodNon-Food2007-200824.934.212.32008-200938.748.624.12009-20103-518.12010-20111815.821.62011-201234.342.922.4Source:CentralStatisticsAgencycitedinWFPandCSA(2014).



remainedinthesingledigitssince2013,foodpricesremainhigherthantheaveragepricerecordedinthefiveyearsbetween2008-2012(WFOandCSA2015).Studiesshowthatthepooresthouseholdsarehardesthitbysuchfoodpriceinflation,andamongthose,urbanwageworkerswhosewagesfailedtoadjustforinflation8areparticularlystrained.AccordingtoHeadeyetal(2012),therewereactualnegativechangesinwagesofurbanwageworkersduringhighinflationyears:-15.50%in2007-2008and-15.80%in2010-2011.RegardingtheflowersectorofEthiopia,inmanyfarms,wagesarereportedtobefartoolowtocoverthecostsofbasicneeds(WWW2013;Melese20149).Wageworkersarealsosubjecttooutdatedtaxsystemsthatputtremendouspressureonworkersthroughmandatorydeductionsthatarehighwhencomparedtothelivingstandardofthecountry.Thetaxratesandbandshavenotbeenrevisedinthepastdecadestoaccommodatechangessuchasgrowth,purchasingpoweroftheBirr,andcurrencydevaluation.Incometaxstartsataverylowlevelofincome(i.e.Birr151)withminimaldeductions,whilstaprogressiverateisappliedstartingfrom10%(seesub-section4.3.2fordetail).Furthermore,theabsenceofastatutoryminimumwageinthecountryleaveswagesettingfullyatthediscretionofemployers.Wageshaveneverbeenpartofthecollectivebargainingagreements(CBA)offlowerfarmsandgenerallythecontentsofCBAsarealignedwiththelaborandpensionproclamationsofthecountryexceptforsomedetaileddescriptionsofdisciplinaryactions.

3.2Ziway:livingconditionofflowerfarmworkers

Ethiopiapromotesanexport-orientedstrategytoachievegrowthandreducepoverty.Althoughthecountryistryingtoattractinvestorsinmanysectors,theflowerindustryisoneofthemostsuccessfulindustriesandthegovernmentproudlypresentsitasoneofthe‘…realsuccessstories…’duetothelargeemploymentandforeignexchangegenerated(PASDEP2005/6-2009/10:14)10.ZiwayisoneoftheareasofEthiopiathatreceivedthelargestforeigninvestmentinitsflowerindustry.ThesmalltownislocatedinEastShewaZoneoftheOromiaregion,around160KMawayfromAddisAbabaontheroadconnectingtoNairobi.Itisknownforthehorticulture

8ToestimatethechangeinthewageofurbandailywageworkersofEthiopia,Headyetal(2012)deflatedthewageof2006bypoorperson’sfoodCPI2001-2011basedonCSA’s2011dataandtheresultshowedthatchangeinwagewas-15.5%for2007-2008and-15.8%and2010-2011.Theworkheremainlyincludesconstructionandotherdailylabour;notflowerfarms.However,jobsinurbanareasuchasconstructionofferbetterpaythanflowerfarms(SchaeferandAbebe2015).Thisisoneofthereasonsforhighlabourturnoverinmanyflowerfarms.9ThereportofMelese(2014)inthefileofHivos.Inthestudy147workersinsixflowerfarmsreportedtospendonaverageBirr1,154forsomebasicneeds(food,rentandutilities).Only1%oftheworkers(whoworkedformanyyears)earnedenoughnetwagetojustcoverthosecosts.10SustainableDevelopmentandPovertyReductionProgram(SDPRP)2002/03-2004/05;PlanforAcceleratedandSustainedDevelopmenttoEndPoverty’(PASDEP)2005/06–2009/10)



industry,fishingandforsometourism.Accordingtothecensusof2007,thepopulationofZiwayisestimatedtobearound43,660.However,atthemomentthisnumberisbelievedtobemuchhigherthankstothelargeinfluxofmigrantsfromdifferentpartsofthecountryaswellasexpansionofbusinessesinthelocality.Theemergenceofflowerfarmsisthemostimportantcauseofchangingdynamicsinthearea,withdirectimpactsoftheindustry,suchastheattractionofalargenumberofmigrantsresultinginsweepingchanges.Theindustryhascreatedjobsfor15,000people,mostlyinternalmigrants(>75%).Thisphenomenonhaschangedoverallsocio-economicaspectsofZiwaytown.Someoftheseresultingshiftsdirectlyinfluencethelivingcostsofworkers.Costofhousing,forexample,hasshiftedinpartduetothecreationofnewlivingareasknownas‘cherekasefer’(whichliterallytranslatesasmoonareasorconstructedinmoonlight).Mostoftheproductionworkers11liveinthosenewareasandinotherneighborhoods,butwithsimilarhousing.Althoughthosehousesareinpoorcondition,workersfindthemthebestalternativeavailable,astheyaretheonlyaffordableshelterincloseproximitytowork.Theabovebriefbackgroundinformationisintendedtosetthecontextofthestudy.ThenextsectiondiscusseshowthelivingwageofZiwayisestimated.4. HOWALIVINGWAGEISESTIMATEDAsmentionedearlier,livingwageintheZiwayareaisestimatedbasedontheAnkerMethodology.AnkerandAnker(2017)developedamanualthatprovidesathoroughexplanationontherationaleofeachcomponentoflivingwageandhowitisestimated.Thisstudywillprovideonlyabriefintroductiononhowtheestimationisdoneforeachpartasdepictedinfigure1below.Toestimatelivingwage,costsofabasicbutdecentqualityoflifeinaspecificplace,mustbeknown.Toattainthisbasicbutdecentqualityoflife,oneneedstohavenutritiouslowcostfood;abasichouseandutilities;afundtocoverotherbasiccosts(e.g.health,education);andalittleextramoneytoprovideabufferforemergenciesandunexpectedevents.Thisshouldbeestimatedforafamilybytakingintoconsiderationthenumberoffull-timeworkerspercoupleaswellastheaveragefamilysize.Thebelowdiagramdepictsthecomponentsanddeterminingfactorsoflivingwage.

11Thetermproductionworkersreferworkersingreenhousesandpackhousesofflowerfarmsthatareatthelowesthierarchyofwagebutmakethemajorityofthetotalworkforce.



Figure1:Costofabasicbutdecentlifeforafamily

Figure2:Fromcostofabasicbutdecentlifeforafamilytocalculationofanetlivingwage

Figure3:Fromnetlivingwagetogrosslivingwage

Source:Anker&Anker(2017)Toestimatecostsforeachcomponentofbasicneedssuchasfood,housing,andutilities,theresearchercollectedprimarydataintheZiwayareainJuly2015.Inaddition,literatureandsecondarydatawerereviewedtounderstandthetrendsofthecountryaswellastodrawstatisticalcomparisons.Forstatisticalcomparisons,theEthiopianHouseholdsConsumption-Expendituresurvey(HCES)2010/2011isprimarilyused.Unlessmentionedotherwise,thestudyalwaysreferstotheaverageofurbanandruralthirdquintileofHCESforcomparison.Thisisdonetoavoidreproducingthelivingstandardofthepooresthouseholds.Also,theaverageofruralandurbandataisusedtominimizethebiasesofruralareasandbigcitiesasZiwayisneitherruralnorabigcity,butanon-metropolitanurbanarea.Considerableeffortsweremadetocollectrichprimarydata.Initiallybetterunderstandingofthelocalcontextwasestablishedthroughfocusgroupdiscussions(FGDs)andunstructuredinterviewswithseveralworkersandindividualsinandoutsidetheflowerfarms.FGDswithworkersespeciallyhelpedtonotehabitsandpreferenceswithregardtoconsumptionpatterns



(typesoffood,quantity,qualityandfrequency),andmarketsandprices(dateandtimeofshopping).Anestimatedcostforbasicbutdecenthousingwasobtainedthroughvisitingvariousneighborhoodsandrentedhouses,andobtainingcostsofhousingforthosethatmeetabasicbutdecentstandard.Moreover,forsomeimportantexpensessuchaseducation,health,andtransport,weconductedrapidassessmentsthroughinterviewswithkeyinformants,andcollectedpricesonrespectiveserviceproviders(clinics,pharmacies,schooldirectors,anddrivers).Additionally,structuredinterviewswithover40workerswereconductedtoprovideacheckontheseexpenses.Aswillbeexplainedineachsection,Istrivedtomakeaveryconservativeestimationoflivingcosts.Bothrelativefoodpricesandlocalfoodpreferencesweretakenintoconsiderationinchoosingfooditems(e.g.usinglargeamountsofmaizeascerealandsmalleramountsofteff,eventhoughteffisthepreferredcereal).



SECTION1

COSTOFABASICBUTDECENTLIFEFORAWORKERANDTHEIRFAMILY

Thissectionwillpresenteachcomponentofabasicbutdecentqualityoflifeasdepictedinfigure1andestimateitscostfortheZiwayarea.Aswillbeexplainedinthelatersub-section,theestimationisdoneforafamilysizeoffive(5),asiscommoninthearea,with1.653full-timeworkers.5. FOODCOSTS

5.1Generalprinciplesofmodeldiet

Alowcost,nutritious,modeldietwasdevelopedinordertoestimatethecostoffood.ThemodeldietisdevelopedinaccordancewiththestandardsoftheWorldHealthOrganization(WHO)fornutritionalandcaloricneeds.Thisincludesmacronutrients(10-15%ofcaloriesfromproteins,15-30%caloriesfromfats,and55-75%caloriesfromcarbohydrates)andmicronutrients.Theattempthasalsobeenmadetokeepthemodeldietconsistentwithlocalfoodpreferences.Themodeldietcontains2,279caloriesperperson;assumingthatflowerfarmworkershavevigorousphysicalactivitywhileothermembersofthefamilyhaveamoderatelevelofphysicalactivity.

5.2Modeldiet

Inconstructingthemodeldiet,webeganwiththenationalpovertylinedietandadjusteditwherenecessary,toadheretothebasicnutritionalstandardsoftheWHO.ThepovertylinedietinEthiopiaisverypoorinnutritionandlackshighqualityproteinandincludesinsufficientquantitiesoffruitsandvegetablesthatareessentialsourcesofmacroandmicronutrients.Thebundleoffoodusedtoestimatethepovertylineisbasedon1995/96dataandderivedfromobservedconsumptionpatternsofthepoor.StudiesshowthatthecurrentdietofthepoorinEthiopiaisveryunhealthy(WFPandCSA2014).66%ofhouseholdsinthepoorestwealth(asset)indexquintilegetover75%oftheirdailycaloriesfromstarchyfoodsand53%ofthosehouseholdshavelowdietdiversity(<=3).Thisisreflectedinahighlevelofmalnutritioninthecountry12.Therefore,adjustingthepovertylinedietisnecessarytoavoidreproducingpoverty

12Around29%ofwomenaremalnourishedandover40%ofchildrensufferfromchronicundernourishment(CSAandICF(2012;CSA2014,USAID:http://www.usaid.gov/ethiopia/nutrition)

Foodcostperpersonperdayforafamilyoffive(twoadultsandthreechildren)=Birr13.24orUS$0.64



andtoensurethatanestimationoflivingwageforworkersincludesenoughmoneyforworkerstoaffordalowcost,butnutritiousdiet.ThemodeldietadjustmentwascarefullyexecutedbasedonempiricalstudiessuchasWFPandCSA(2014)thatreportedconsumptionpatternsofcertainfooditemsbypeopleindifferentwealthgroups.Thewealthiestquintileeatsmeat,onaverage,2.1daysaweek,whilethepoorestmayonlyconsumemeat0.5daysaweek.Thissituationistakenintoconsiderationand1dayaweekfish(muchcheaperthanbeefandcommonlyconsumedinZiway)hasbeenincludedinourmodeldiet.Regardingmilk13,thereisevidence(WFPandCSA2014)thatmilkconsumptionisnotnecessarilylinkedwithmonetarypovertyinEthiopia,butrather,withownershipoflivestock.Forinstance,householdsthatrelyonlivestockfortheirlivelihoodhaveahighconsumptionlevelofmilk(5timesaweek)whileotherhouseholdsconsumemilk,onaverage,between0.6to1.8timesperweek(ibid).Duetothisvariation,ImadeanextraeffortduringfieldworktounderstandthemilkmarketandtypicalexperienceintheZiwayareaaswellastheconsumptionpatternofworkers.Followingconsumptiontrendsandcosts(relativelylow),alargeamountofstarchyvegetablesisincludedinourmodeldiet,butthisamountislowerthantheextremelyhighamountinthepovertylinediet.A10%margintoallowacertainlevelofvarietyinthedietwasaddedtothecostofamodeldiet;anadditional3%wasaddedforminimalwastageandspoilage;and1.8%wasaddedforspicesandcondiments,whichisthemedianamountreportedinthehouseholdconsumptionexpendituresurvey(HCES)of2011(CSA2011).ThisresultsinamodeldietthatcostsBirr13.24(US$0.64)perpersonperdayforafamilyoffive(threechildrenandtwoadults)with2,279caloriesperpersononaverage.Considerationsonoverallcaloricrequirementsweremadeforlevelofactivityaswellasdifferencesincaloricneedsbetweenchildrenandadults.TheresearchercomparedthecostoftheAnkerMethodologymodeldiettocostoftheurbanpovertylinedietfoundinearlierstudies(DerconandTadesse,1999;Tadesse,1999;13AlthoughEthiopiahasthelargestquantityoflivestockinAfrica,milkconsumptioninthecountryisquitelowcomparedtomanyAfricancountries.Thisisaccountedforbyseveralsocio-economicfactorssuchaslowproductivityandqualityofmilk,lackofpropermarketoutlets,religiousfastingandsoon.However,thereisanongoingefforttoovercomethosechallengesformilkconsumptionthroughEthiopia’sNationalNutritionProgram.Thedataofthemid1990sshowsthat42%ofthetotalproducedmilkisconvertedtobutter(CSA2001citedinNetherlands-AfricanBusinessCouncil(NABC),FactsheetdairysectorEthiopia).Accordingtothesamesource,morethan82%ofmilkproducedfromcowsisconsumedorprocessedintobutteratthefarmlevel(GeertWestenbrink,DairyForumDec.2010,AddisAbaba).



GebremedihinandWhelan,2005;Alem2011)14.TheurbanpovertylinedietisestimatedtocostBirr12.94orUS$0.63,whichisveryclosetothecostofourlivingwagemodeldiet.SimilarcomparisonwasmadewiththedietofFAO’s(FoodandAgricultureOrganization)foodbalancesheet15,whichatBirr13.64orUS$0.66,carriesahighercostthanboththemodeldietusedhereandthepovertylinediets.Allofthesecomparisonsindicatethatthelivingwagemodeldietisinexpensivewhileprovidingpropernutrition.Annex1containsacomparisonofthelivingwagemodeldietwithotherdietsinEthiopia(inediblegramsperpersonperday).

Table1:ModeldietandfoodcostperpersonperdayusingfoodpricescollectedfromZiwaymarketswhereworkersshop

Fooditems Ediblegrams

Costperkg

CostComments(Dietisforaveragepersoninfamilyof5.Portionsforadultsarebiggerthanforchildren)

Maize 376 5.48 2.06 Over57%ofthetotalcaloriecomesfrommaize.Althoughmaizeisnotthemostpreferredcereal,itistheleastexpensive.

Teff 70 13.39 0.94 Teffisthemostpreferredcerealbyworkersbutduetoitsprice,onlyasmallamountisincludedinthemodeldiet.Teffisrequiredtomakeinjera(traditionalEthiopianbread)thatiseateninmostmeals.70gramsperpersonperdayallowsfor8piecesofinjeraperdayforafamilyoffiveifmixedwith60%maizemealtoreducefoodcosts.

Potatoes 200 4.86 1.30 Itisthecheapestandalsopreferredroot.

SplitPeas 15 29.76 0.45 SplitpeaispreferredforShiro1oversplithorsebeans,butduetothepricedifference,morehorsebeansareincluded.

SplitHorseBeans

25 24.72 0.62

Milk 132 13.67 1.80 Onecupforages0-14;½cupforages15-18ofmilkperdayforchildrenand1/8cupforadults

14Theurbanpovertydietisdrawnfromtheconsumptionpatternofthefooditemsmostfrequentlyconsumedbyhouseholdsinthelower50percentofthepercapitaconsumptionexpenditure(Alem2011:11).15Itisestimatedbasedonavailabilityoffoodinacountryforhumanconsumption.




Costperkg


ChickenEggs 7 68.97 0.56 Oneeggperweek

Fish 12 42.37 0.86 12gramsoffishperday(itisestimatedtobe1portionoffishperweek).Eventhoughthemajorityofworkers(migrants)donothaveadominanthabitofeatingfish(theypreferbeef);themodeldietincludesfish,sinceitismuchcheaperthanbeefinZiway.

Vegetable1 63 6.44 0.66 189gramsofvegetableperdayarerequiredtogainthenecessarynutrition.

Kalewastheleastexpensivegreenleafyvegetable.

Vegetable2 63 3.48 0.27 Cabbagewastheleastexpensivevegetable.

Vegetable3 63 6.21 0.43 Tomatoesweretheleastexpensivenon-greenleafyvegetable.

Mango 63 5.79 0.51 Mangowastheleastexpensivefruit.

PalmOil 14 39.67 0.56 14gramsoraround1tablespoonofcookingoilperday

WhiteSugar 12 23.35 0.28 12gramsor3teaspoonsofsugarperday

Coffee 3 79.1 0.25 Twocupsofcoffeeperdayperadult

Total

Br11.54orUS$.056




Costperkg


Totalwith14%miscellaneousfoodcostsd

Br13.24orUS$0.64

10%forvariety,3%forwaste&spoilage,1.8%forsalt,spicesandcondiments

Source:TheAuthors

5.3Foodprices

Toestimatethecostofthemodeldiet,apricesurveywasconductedatallmarketsthatwerepointedoutbyworkersascommonlyused.Withguidanceofworkers,thebi-weeklybigopenmarket,thedailyopenmarket,andseveralkiosksindifferentneighborhoodswerevisited.Moreover,butcheriesandlakesidesellerswerevisited.

Image1:MainMarketinZiway

Source:TheAuthorTheaveragepriceofeachfooditemfromeachmarketwascalculatedtoarriveattheaveragepricepergramofeachfooditeminthediet.Thismethodhelpedinchoosingtheleastexpensiveyetnutritiousandculturallyacceptablefooditems.Whenselectingfooditemsfromthecerealgroup,selectingthecheapestitemssuchasmaizeandsorghumiscontrarytothepreferenceoftheworkers.IngeneralteffisthemostfavoredcerealinEthiopiaespeciallyinurbanandsemi-urbanareas(DemekeandDiMarcantonio2013).



AccordingtoBerhaneetal(2011)HICES2004/05showsthatpercapita,urbandwellersreceive601.70caloriesfromteffconsumptiondailyintheformofInjera,whileinruralareas,teffonlyaccountsfor196.69dailycalories.Consumptionofmaizeandsorghuminurbanareasisverylimitedwhereasittendstobepredominantinruralareas.Thisisoftenduetoeconomicconditionsoftheruralpeopleratherthanpreference(FEGConsulting,2010).AstudybyFAOalsoarguesthattheincomeelasticityofteffisthehighestamongcerealsandgreaterthanone(1)inbothurbanandruralEthiopia(DemekeandDiMarcantonio2013).Thisisnotonlyduetoculturalpreference,butalsoteff’snutritionalvalues(ibid).AccordingtoFAO,twothirdsofthedailyproteinintakeoftheEthiopiandietcomesfromteff16.Similarly,evidencefromFGDwithworkersindicatedthat;eatingmaizewasasignofpoverty,soworkersappeareduncomfortabletoreportmaizeastheirmaincereal.Asworkersinflowerfarm-XcamefromdifferentpartsofEthiopia,theyreflectedadiversedegreeofpreferenceforcertaincereals,butteffisfavoredbyall.SomeworkersespeciallyfromthesouthernregionofEthiopia17tendtousemoremaizeforhomemadebread,whichisacheaperalternativetoinjera.However,theworkersoffarm-Xcamefromdifferentpartsofthecountryandasthedirectorofthefarmindicated,thefarmconsciouslymakesanefforttoreflecttherealityofthecountry(intermsofmulti-ethnicity)inthefarm,byhiringfromfivemajorethnicgroups.Hencethemodeldietshouldmirrorthisreality.Despitethesefactsonthepopularityofteff,itiskeptminimalinthemodeldiet,constitutingonly16%ofthecerealgroupduetoitshighprice.Asamoreaffordablealternative,maizeismadeamajorfooditemofthecerealgroupinthemodeldiet.18Theotherdilemmapresentedbytheconstructionofthemodeldietisrelatedtochoosingbetweenfishandbeefforinclusion.ZiwayisoneofafewareasinEthiopiawherefishisregularlyconsumed,thankstoZiwayandotherriftvalleylakes.However,flowerfarmworkerscomefromdifferentregionswherebeefismorecommonthanfish.InZiway,fishisconsiderablycheaperthanbeefsoacompromisehasbeenmadeforthisdiet,includingfishaspartofthemodeldietinsteadofbeef.

16http://www.fao.org/traditional-crops/teff/en/accessedSeptember172015.Besides,teffisrichwithiron,calciumandothernutrients(DemekeandDiMarcantonio2013).17AccordingtothestudyofWorldFoodProgram(2014),thesouthernnationalandnationalitiesofpeople(SNNP)havethepoorestqualityofdiet.Thepeopleeatunvariedfoodwithveryhighlevelofstarchandoftentheamountisinadequatetokeepthehouseholdabovepoverty.18Itisassumedthatafamilyoffive(5)needseight(8)injeraperdayforlunchanddinner.Basedontheresearcher’sexperiment,oneinjeraapproximatelyrequires109.8gramsofflouror8injerarequires879gramsofflour.Sointhemodeldietforafamilyoffive,176gramsofflourisrequiredtomakeaninjera.Toreducetheamount;hereinjeraisassumedtobemadeupof40%teffand60%maizeflourwhichgives70gramsofteffperpersonperday.



DuringFGDmostworkersunderlinedtheirefforttobuy½literofmilkperweektoconsumeitwithcoffee.Intheirwords‘…itisalmostamusttorevivefromsuchheavyworkweek…’.Onecupofmilkadayisincludedinthemodeldietforchildrensinceitisbelievednecessarygivenitsirreplaceablenutritionalcontentforthehealthygrowthofchildren.Althoughmilkisalsoimportantforthewell-beingofadults,averysmallamountofmilk(1/8cup)isincludedinthemodeldiettousewithcoffee.DuringFGDworkershighlightedthatthebestwayofgettingtrustedqualitymilkistoobtainitfromindividual/householdswhorearcattle(livestock).Milkisoftendifficulttoaccessunlesssomeoneentersintoarelativelylong-termcontract(>=onemonth).Theothercommonbutpoorerqualitymarketoutletformilkiskiosks.Asmentionedearlier,preferencesinconsumptionofmeatarenotnecessarilyreflectedinthemodeldiet.FishisinfactwidelyconsumedinZiway,butbeefispreferredbyworkersbothfromZiwayandelsewhere(internalmigrants).However,beefisfourandahalftimesmoreexpensivethanfish.Forthisreason,themodeldietincludes12gramsoffishadayoronemealoffishperweekforafamilyoffive.Oilandsugarwerefoundtobetheleastavailablefooditemsinthemarket.DuetoinflationinEthiopia,theavailabilityofoilandsugarhasbeenevenmoreunpredictablethanotherfoodgroups.Technicallythegovernmentdistributesoilandsugaratsubsidizedprices,yetinpracticesmallnumbersofpeoplehaveaccesstotheseessentialgoodsatsubsidizedrates.Asaresult,shopkeepersestimatedsomeofthecollectedprices,asproductswerenotavailable.Itisinterestingtonotethatatthemomentflowerfarm-XisconsideringprovidingtheseproductstoworkersatasubsidizedpriceusingaFairtradepremiumprovidedtothefarm.InflationinEthiopiagreatlyinfluencesfoodprices(Hirvonenetal2015),butitisnottheonlyfactortoconsider.Seasonalityisalsoapossiblefactorinthepriceofthemodeldiet.AsthisstudycollectedfoodpricesonlyforthemonthofJuly2015,itneedstobeverifiedwhetherthepriceisrepresentativefortheannualaverageprice.Literatureandsecondarydatawerereviewedtoaddressthispotentialvariability.AccordingtoHirvonenetal(2015)whoanalyzedthemonthlyfoodpricechangeinEthiopia(2001-2011),foodpriceislower(-0.9to-2.3%)thantheannualaverageduringandrightafterharvestseason(November-March)19andhigherintherestofthemonths(0.2to2.3%).InJulythefoodpriceforurbanandruralareasincreasesby1.7%and0.5%respectively.Fromthistrend,theannualnetchangeappearstobeminimal.Moreover,theauthorsarguethatreligiousfestivalsandOrthodoxChristianfastingseasonsareknowntoinfluenceprice,aswellaswhichfoodsareconsumed.Inadditiontothenationalchallengesfacedrelativetofoodpricesassociatedwithseasonalityandinflation,flowerfarmworkersinZiwayaresubjecttounreasonablyhighmarketprices.19SeptemberisthefirstmonthinEthiopiancalendar



Duringfocusgroupdiscussionsandinformalconversations,workerswithdifferentjobpositionsexplainedthatthepriceoffoodincreaseseverymonthintheweektheyreceivetheirsalary.TheyalsoreportedthatpricesofsomefooditemsincreasedduetothenationalelectioninMay2015andhavenotdecreasedsince.Apartfrominflation,theworkerstendtopayhigherpricesforfoodduetothecommonpracticeofpurchasingoncredit(priceplusinterest).Itisreportedthatworkersoftenrunoutoffoodstockintwoandhalfweeks,sotheytendtodependonpreparedcereal(pasta,breads)thatarepurchasedfromkiosksoncreditbasis.6. COSTOFHOUSINGFORWORKERSINNON-METROPOLITANURBANZIWAY

AREAToestimatecostsforbasicdurablehousingandutilities,severalhouseswerevisited,andsemi-structuredinterviewswereconductedwithseveralworkersinvariousemploymentpositions,aswellaswithafewlandlords.AsEthiopiaisundertakingahugehousingprojecttoimproveslumsettling,secondarydatawasreviewedtogaininsightsonminimumstandardsoflowcosthouses.Housingcostsconstituteasubstantialshareofhouseholdexpenditure.AccordingtoHCES2010/11,theaverage(ruralandurban)housingcostswereover29%ofthetotalexpendituremadebythirdquintilehouseholds.AccordingtoWorldBank’srecentreport(2015),theshareofspendingonrentincreasedfrom22%in2005to25%in2011.

Costforbasichouseandutilitiesforafamilyoffive(twoadultsandthreechildren)=Birr1,077orUS$52permonth



Image2:WorkerHousinginZiway

Source:TheAuthor

6.1StandardforBasicAcceptableHousing

Thisstudyconsideredhousingdecentandyetbasicbasedonsomeminimumcriteriathatensurethehealthandsafetyofthedwellers.Thosecriteriaareconsistentwithinternational(AnkerandAnker2017)andnationalstandards(UN-HABITAT2010)ashighlightedinthesubsequentdiscussion.Thebasichousingstandardforafamilysizeoffiveasidentifiedinthisstudyisasfollows:

§ Wall,roofandfloorareconstructedfromdurablematerialssuchascementorstoneforwalls;cementorcorrugatedironsheetforroof;cementforfloors.

§ Sufficientnumberofwindowsforventilationandadequatelight§ Electricity(intownsandcities)§ Pipedwaterincloseproximitytothehouse§ Kitchenareaseparatefromsleepingareas§ About30-35squaremetersoffloorspace§ Pitlatrineingoodconditionincloseproximitytohouseandusedbyatmost15persons§ Safeoutsideenvironment



Intendingtoenablepoorpeopleaccesstoimprovedhousing,Ethiopiahasundertakenapro-poorhousingprogram(IntegratedHousingDevelopmentPrograms(IHDP))andisbuildingthousandsofcondominiumhouseswithdiversesizesofhousingunits(seetable1below).Thehousesareconstructedfromdurablematerialsandeachunitisfullyservicedwithashower,flushtoilet,basinandseparatekitchen.Theconstructionisfullysubsidizedbythegovernmentbutinthelongrun,itisexpectedthatcostswillbefullyrecovered.Thisdesiretoeventuallyrecovercostscreatesascenariowhereintargetedbeneficiariesareexpectedtohaveacertainlevelofmonthlyincometobenefitfromtheprogram,asindicatedinthetablebelow.

Table2.Standardofpro-poorhousesEthiopianinIHDP20Houseunits Flooraream2 Monthlyincomeof

targetedbeneficiariesinBirr

Studio <20 300

1bedroom 20-30 600

2bedrooms 30-45 1200

3bed-rooms >45 1800

Source:UN-HABITAT2010AccordingtothenationalstandardinIHDP,theworkersinflowerfarmswhoearnamonthlyincomeaboveBirr600areentitledtoownatleastaone-bedroomhousewith20-30m2(UN-HABITAT2010).

6.2RentforBasicAcceptableHousing

TheexpansionofflowerfarmsinZiwayhasledtotheemergenceofnewresidentareasandmorehouses.Theproductionworkersliveinthosenewareasaswellastheoldareasthatareclosetotheirworkplace.However,regardlessoftheirlocation,housesoccupiedbyproductionworkerspresentasimilarstandardandconditions.Mostaresingleroomhomes(16squaremetersorless)andconstructedfrommudandwoodmaterials.Theoverallsanitationlookspoorwithundesirabletoiletandcookingspace.Althoughthereisgarbagecollectionserviceinthetown,productionworkerscannotaffordtopaythemonthlyfeenecessarytobenefitfromthisservice.Asaresult,garbageisoftenburnednearthehomeordiscardedonthegroundaroundthecommunity.WiththeseprevailinghousingconditionsinZiway,findingbasicbutdecenthousingandestimatingitscostsrequiredvisitingofhousesoccupiedbyworkersinhigherpaidpositions.Hence,theresearchervisitedseverallocationsandhouseswhereworkersindifferentjob

20TheconstructioncostofacondominiumhousingunitontheprivatemarketisestimatedtobeETB2,000/m²(USD154/m²)ThetargetcostonsomeoftheIHDPprojectswasETB800/m²(USD61/m²)andtheactualfigureachievedwasETB886/m²(USD68/m²)(UN-HABITAT:18).



positionslive.Overallproductionworkersliveinpoorhousesasdescribedabove.Housesofsomesupervisorsandlinemanagersappearbetterastheyarefromdurablematerials,butthesizetendstobeverysmall(<=16m2)andserviceslikekitchenandtoiletaresometimesbelowacceptablestandards.Thosehousesareoftenlocatedrelativelyfarfromflowerfarmssothedwellersusebicyclestogotowork.Table3describesthehousesthatwevisited.Wefoundsomeoneroomhousingunitsbuiltfromacceptablematerials,buttoosmallandrelativelyfaraway,thatcostBirr470permonth,andconcludedthattworoomsofthistypewouldbeacceptableandcostBirr940permonth.Thisisaveryconservativeestimateofhousingcostsastheleastexpensive2roomunitwesawwasBirr1,150.

Table3.Characteristicsofhousesvisitedandassociatedrents

Tenant’sEmploymentInformation

Acceptablestandard?

RentinBirr

Sizeinsq.meters&#ofrooms

Comments

Greenhouseworker(3HHmembers)

no 270 4x4,1room

Poorquality(mudwall&floor,noproperfoundation).Birr100r/mforfirewood.Severalhousesofthiskindwerevisitedsothiscanbetakenasastandardhouseformostproductionworkers.Workersinsuchhousescannotaffordgarbagecollectionservice.

Packhouse(3HHmembers)

no 400 5x3.5,2rooms

Poorquality(mudwall,badtoilet).Birr120br/mforfirewood.Nogarbagecollectionfee

Manager(1HHmembers)

no 285 3x4,1room

Toosmall,noproperkitchenNogarbagecollectionfee

Manager(1HHmember)

no 470 4x4,1room

Durableandacceptablestandard(fromcement)buttoosmall.Relativelyfararea(20minbycycle)wherehousesarecheaper.Nogarbagecollectionfee.

Manager(1HHmember)

no 470 4x4,1room

Toosmalllivingspaceandkitchen.Otherwisedurableandacceptablequality.



Tenant’sEmploymentInformation

Acceptablestandard?

RentinBirr

Sizeinsq.meters&#ofrooms

Comments

Neighbourofamanager(1HHmember)

no 500 3x4,1room

Acceptablestandardbuttoosmall.Herethetenantgetsadditionalservices

Manager(3HHmembers)

no 700 5x5,1room

Mudwall;poortoilet

Manager(1member)

yes 1,150 8x4,2rooms

Acceptablestandard,outsidepittoiletbutnofunctioningkitchenasthetenantdoesn'tcookbutthehousehastwowindowsforventilationandlargespaceinthecompoundforoutsidecooking.

Neighborofamanager(2HHmembers)

yes 1,320 10x5,4rooms

Acceptablestandard,insideflushtoilet,insideandoutsidepittoilet(shared)andsharedoutsidekitchen(toosmallthough).Thereisinsidekitchenspaceforelectricstoves.

Manager(5members)

yes 1,300-1,500

10x43rooms

Thehouseisowned;butthereareotherrentedroomsinthecompound.Sothepriceisestimatedmarketpricebythelandlordexcludingutilities.AdditionalBirr650/mispaidforutilities.

Manager(3) yes 2,130 14x5,5rooms

Acceptablestandard,outsidepitandflushtoilet;kitchenbothinsideandoutsideThehousehastwowindowsforventilationandlargespaceinthecompoundforoutsidecooking.



6.3Utilitiesandotherhousingcosts

Allvisitedhousesinthisstudyhadaccesstoelectricityandpotablewaterandthoseutilitiesareoftenincludedintherent.Tenantswholiveinindependenthouses(workersinhigherjobpositions)donotbenefitfromtheprovisionoftheseutilitiesasincludedinrent.Whereutilitiesareincludedintherent,electriccookingstovesarenotpermitted.Asaresult,thesetenantsincurhighcosts(aroundBirr160/month)forfirewood/cookingfuel.Insomehouses,waterconsumptionisalsolimitedtoonejerrycan(25liters)perdayandbeyondthatcostsBirr0.50foreachadditionaljerrycan.ThetotalutilitycostwasestimatedtobeBirr137permonth.7. NON-FOODANDNON-HOUSING(NFNH)COSTSNon-foodandnon-housingcosts(NFNH)wereestimatedusingavariantofEngel’slawwhichstatesthatthepercentageofhouseholdexpenditurespentforfooddecreasesashouseholdincomeincreases(AnkerandAnker2017).ThisstudyobtainedtheratioofNFNHexpendituretofoodexpenditurefromtheHCESof2010/2011withavaluefortheratioof0.47.Inordertoreducebiasesofbigcitiesandruralareas,theaveragevalueofruralandurbanwastaken.TakingthevalueofthethirdquintileinHCESalsominimizedthetrendtowardpoorestconsumption.This(0.47)NFNHexpendituretofoodexpenditureratioisrelativelylow.Forexample,AnkerandAnker(2014)used0.87forLakeNaivasha,Kenyaand0.40forruralKenya.ItisalsolowerthantheNFNHratioofthenationalCPIof2011,whichis0.58.(TheNFNHratiooftheNationalCPIisnotusedinourlivingwageestimateasitoverestimatesNFNHvaluefortypicalworkersduetoitsabilitytobegreatlyinfluencedbyrichpeople’sspending.)SomeadjustmentsareincludedinthisstudytovaluesobtainedthroughHCEStoeliminateexpensesthatareunnecessaryforbasicqualityoflife.Theseincludeexpensesfortobaccoandnarcotics.Alsotheroleof‘mealawayormealatrestaurant’ininfluencingtheratiohasbeentakenintoconsideration.Asaresult,theNFNHtofoodratiofellfrom0.47to0.43,whichmakesthecostofNFNHBirr978permonth.8. POSTCHECKSOFNON-FOODANDNON-HOUSINGCOSTSItisimportanttoassurethatfundsincludedinthenon-foodnon-housingcategorycovertheprevailingcostsofhealthandeducation,asessentialuniversalhumanrights.Transportmustalsobeadequatelycoveredasitconstitutesasignificantshareofhouseholdexpenses;evenmorethanhealthandeducation(e.g.inthecaseofEthiopia).Tothisend,rapidassessmenttacticswereimplementedinthefieldwithregardtoexpensesofhealth,educationandtransport;andnecessaryadjustmentsweremadetopreliminaryNFNHcostswheneveritis

NFNHcostforafamilyoffive(twoadultsandthreechildren)=Birr978orUS$47permonth



foundthatHCESdataeitheroverorunderstatedthesecosts.ItwasfoundnecessaryafterthesepostcheckstoincreasethepreliminaryNFNHexpensebyBirr109.

8.1Healthcarepostcheck

Ethiopiahasexhibitedsubstantialimprovementinexpandingaccesstohealthservices.From2006to2013healthcoverageincreasedby159%,whichhasledtoadecreaseinmortalityratesandanincreaseinimmunization(WorldBank2015;CSAandICF2012).Still,percapitahealthcareexpenditureremainslowcomparedtotheaverageofotherAfricancountries(WHO2010citedinEMH2014).AccordingtoHSUES2010/1121(EMH2014),ofthe14%ofindividualswhoreportedillnessduringthelastfourweeks,64.25%(urban)and62.21%(rural)soughthealthcareservices.Variousreasonsweregivenfornotseekingmedicalassistancewithanillness,withlackofmoneyreportedbythemajority(40.7%)followedbyconsiderationoftheillnessasnotsevereenoughtowarrantmedicalassistance(24.82%).Thereportalsoshowsthatalargernumberofurbandwellersvisitprivatehealthcareserviceproviders(34.5%)thandopeopleinruralareas(18.23%).Technically,Ethiopiaprovidesfreehealthcareforthepoor.However,empiricalstudiesshowedthatinefficienciesandcomplicatedbureaucraticproceduresrequiredtoaccessfreehealthcareservicespreventmanyfromdoingso(BarnettandTefera2010).Similarly,workersofflowerfarm-Xmentionedthatalthoughhealthcarecostsarelessingovernmentcenters,thequalityoftheserviceislowandwaitingtimeislong.Thosecomplaintsmightexplaintheverylowshareoffeewaiverbeneficiaries(4.73%)amongthetotalindividualswhousedoutpatientservices,whereas,59%ofthempaidoutofpocket(EMH2014).Accordingtothesamesource,inyear2011/2012percapitaoutofpocket(OOP)expenditureonhealthcarewasBirr132(US$7.49).Workersofflowerfarm-Xareprovidedwithhealthcareservicesatarelativelygoodhospital,yetalsosometimeschooseprivateclinicsduetodissatisfactionwiththeprovidedservice.Workersinterviewedreportedcasualdiagnosisandprescriptionofdrugswithoutpropermedicalexamination.Keyinformants(amongthemdoctorsandmanagers)explainedthatthebiggestchallengethehospitalfacesintreatingflowerfarmworkersisdeterminingwhetherworkersarereallysickorsimplyfeigningillnesstoobtainsickleave.Somedoctorsbelievethatworkersoftencometothehospitalwith‘hysteria’sotheytendtogivethemapainkillertokeepthemcalm.However,anotherkeyinformantreportedthattheso-called'hysteria'isobservedusuallyinthelast1-2weeksofthemonthandisoftenrelatedtohunger.Workerstendtorunoutofmoneybeforethenextpayday,andassuch,eatlessattheendofapayperiod,leavingthemtooweaktoworkproperly.Theresultisthattheworkersoftenfaintattheworkplace,andthisfaintingisreferredtoas‘hysteria’.

21HouseholdHealthServiceUtilizationandExpenditureSurveyEFY2003(2010/11).

Healthcostforafamilyoffive(twoadultsandthreechildren)=Birr40.44orUS$1.9permonth



ThisstudymadeanestimationofhealthcareexpensesbasedoncommonillnessesoftheZiwayarea22thatwereidentifiedbasedonakeyinformantinterview(hospitaldirector).TwotofiveprivateandgovernmentclinicsandpharmaciesinZiwaywerevisitedtocollectpricesfordoctor’sconsultation,laboratorytests,andmedicinesrelatedtothesecommonillnesses.Theaveragecostofeachcomponentwasestimatedbasedonthelowestpriceavailable.Atprivatehealthcareproviders,theconsultationfee(cardfee)isestimatedtobeBirr10andisestimatedatBirr7inpublicclinics.Forlaboratorytests,thecostaveragesBirr29inprivatefacilitiesandBirr12.7inpubliclaboratories.Formedicine,theaveragelowestpriceisBirr14.5inprivatepharmaciesandBirr12.4inpublic.Giventheabovestatisticalevidenceandtheviewsofworkers,thisstudyassumedthatworkersandtheirfamiliessplittheiruseofservicesbetweenprivate(50%)andpublic(50%)facilities.Itwasassumedthatlabtestsareincludedduringeveryothervisitandthatmedicineispurchasedonlyfrompublicpharmacies.BasedontheseassumptionsthecostofhealthcareservicesisestimatedtobeBirr32.05perpersonpervisitpermonth.Accordingtothegovernmentrecord(EMH2014);inreportedillnesseswithinfourweeks(14%),itispresumedthatapersonwholivesinanurbanareaofEthiopiaseekshealthcareservice1.7timesayear.ThereforethecostofhealthcareforafamilyoffiveisestimatedtobeBirr269.22peryearorBirr22.44permonth.ThisestimateisclosetothepreliminaryNFNHestimatesonoadjustmenttotheoriginalvaluewasmade.

8.2Educationpostcheck

Ethiopiahasmadeprogressinreducingilliteracylevelsandimprovingaccesstoeducation.AccordingtoWorldBankreports(2015;2015),thepopulationinEthiopiawithouteducationhasfallenfrom70%in2000to50%in2011.Inthesameperiod,thenetattendancerateforprimaryeducation(7–12yearsofage)hasgrownfrom30.2%to62.2%.Amongstotherthings,thisachievementwasaccountedforbyabolishingschoolingfees.Yet,alargenumberofchildren(7-18years),including40%ofboysand37%girls,arestillnotinschool(Ibid),andenrollmentforsecondaryeducationremainsverylow(aboutfivepercentofthetotalenrollment,whichis64%).DespitethesefactsonthoseactuallyreceivinganeducationinEthiopia,asacoreprincipleoflivingwage,alivingstandardconsideredatabasiclevelofdecencyshouldallowchildrentoobtainuptoasecondaryeducation.AccordingtoHCES2010/11,Ethiopianhouseholdexpenditureoneducationislow.Educationconstitutes0.66%(urban)and0.04%(rural)ofthemedianhouseholdexpenditure.Still,householdscarrysubstantialcosts(directandindirect)ofeducationthatoftenleadto

22ThecommonillnessesinZiwayareaarewaterbornediseases,respiratoryinfections,andgastritis.TypicalandcommonillnessesofEthiopiaaremalaria,childvaccination,reproductivehealthservices,Tuberculosis(TB),respiratorydiseases,andgastricdiseases(EFMH2014).

Educationcostperthreechildrenforafamilyoffive=Birr46.50orUS$2.25permonth



increaseddrop-outs(WorldBank2015andUNICEF2009;UNESCO23).Thosestudiesarguedthatabolishingschoolfeescouldreachitsgoalonlyifitiscarefullyplanned,consideringdirect(e.g.schoolmaterials)andindirectcosts(opportunitycostse.g.children’shelpingeneratingincome).Duetoalackofcarefulplanningandlimitedresources,manyAfricancountries,includingEthiopia,havefailedtosustaintheinitialboomofschoolenrollmentortoalleviatetheburdenofparentsinsendingchildrentoschool(Ibid;UNESCO).Interviewswithworkersinflowerfarmsconfirmedthefactthatparentsincursubstantialcoststosendtheirchildrentoschool.Theburdenofschoolcostsonafamilywasalsoreflectedinoneunexpectedeventduringthefieldwork.Inthiscase,ahumanresourcesofficehelpedtoselectworkerswhopayfortheeducationoftheirchildren.TheseworkersvoicedtheirdesperationattheHRofficebymentioningthattheyexpectedhelpfromthefarmsothattheirchildrenwouldnotneedtodrop-outofschoolinthecomingyear.SinceschoolsareclosedinJuly,thestudyfounditdifficulttofindkeyinformantsfrompublicschoolsfromwhomtoobtainestimatedexpenses.Thecostforprivateandcharityschoolswerefoundtoberelativelyhigh,sointerviewingpurposefullyselectedworkersassistedincompletingtheestimation.TheseworkersreportedtospendBirr225-505peryearforelementaryandBirr665-1255peryearforsecondaryeducation.Theirtypicalexpensesareformaterials(exercisebooks,pen),uniformandcontributiontoschool.Additionalcostsarereportedforsecondaryeducationsuchasbooks,printing,photocopy,andexamfees.Itisworthnotingthatworkerswhoreportedlowerexpensesoftendidn’tbuyuniforms(re-useduniformsfromneighborsorrelatives)and/orschoolbags(usedplasticbags).Thecostforprimaryandsecondaryeducationisroughlyestimatedforthepurposeofthisstudybyraisingthelowestbandby50%,whichproducesacostofBirr337.50forelementaryeducationandBirr997.50forsecondaryeducationperyear.Theseresultsaremultipliedbynumberofyearsatprimary(8)andsecondary(4);anddividedbythe18yearsofchildhood.ThisgivesBirr371.67peryearperchild.Duetotheassumptionofthreechildrenperfamily,thisestimationisequivalenttoBirr93permonth,whichindicatesmuchhighercostsofeducationthanreportedinHCES2010/11(i.e.Birr17).ButgiventhattheCOICOPinternationalclassificationofhouseholdexpendituresusedbyEthiopiaincudesmanyeducationcostsinotherexpendituregroups(forexample,costsofuniformcanbeinclothingexpenditureandbooksinculture),itwasdecidedtoreducethisBirr93byhalftoBirr46.50andaccordingly,thepreliminaryestimateinNFNHincreasedbyBirr29.5.Althoughnurseryeducationisagrowingtrendinthecountry,peopleatthelevelofflowerfarmworkersoftenhireanannyathomeorleavetheirchildrenwithrelatives.However,itwasnot

23Thisistheweblinkforthedocumentbutthedateisnotgiven.AccessedonAugust17,2015http://unesdoc.unesco.org/images/0018/001825/182523e.pdf



possibletoestimatethecostofanannyinthisproject,soithasnotbeenincludedinthecostofeducation.

8.3Transportpostcheck

HCES2010/11showsthatthemedianurbanandruralhouseholdsspendBirr416and249respectivelyontransportperyear.Whereas,aWorldBankreport(2015)showedthatinsmalltownsofEthiopiahouseholdsspendBirr56permonthontransportation,andinruralandlargetowns,thereportshowedhouseholdsspendBirr30and113ontransportationrespectively.InZiway,poorerpeopleoftencommutebyfoot,inclusiveofflowerfarmworkers.Marketdaysandfamilyvisitsinthesametownorelsewherepresentanexception.However,someoftheworkersraisedsecurityissuesduringcommutingbackfromworktohomeafterover-timework,whichoftenrequiresthemtoworkuntil10to11p.m.Atthattimethereisverylimitedtransportserviceinthetown,andcostsarehigherthanthetransportallowanceworkersreceive.Thisstudyfounditdifficulttoestimateaccuratelythefrequencyofovertimeworkasdifferenttrendsarereported,butIobservedthatsecurityisaseriousconcern,especiallyforfemaleworkers.Workersdoreceiveaddedpaywhentheyworkovertime.Horsecartandbajaj(threewheelcar)arethemainmeansoftransportationforthepeoplewhodonotownabicycleorprivatevehicle.HorsecartsarecheaperthanbajajcostingBirrsix(6)to12perroundtrip.However,thepricecanincreaseonmarketdays(2daysaweek).Asthediscussionwithworkersanddriversindicated,thereisnodifferentpricerateforchildren;anypricedifferentialdependsonthepersonaljudgmentofthedriver(whetherachildtakesspaceornot)andthecurrentmarketcondition.Thisstudythereforeassumedthatoneadultgoestomarketonceaweekandpaysforloads(doubleprice)onceamonth(6x3plus12x1),whichamountstoacostofBirr30permonth.WorkerswhohavefamilyinZiwayvisittheirfamilyfromonetofourtimesamonthandspendBirr12perroundtripperperson.WhereasworkerswhosefamilyareelsewhereoftentravelonetotwotimesayearspendingfromBirr50to400perroundtripperperson.However,asindicatedbytheHRofficeoffarm-X,alargenumberofworkerscomefromthesouthernregionofthecountry,aroundWoliytaarea,whichisabout220kmawayfromZiway.Accordingtointerviewswithworkers,publictransporttoWoliytaareacostsaroundBirr200perroundtripperperson.Itisassumedthataworkerandhis/herfamilyvisittheirfamilyintheirhomeareaonceperyear.

Transportcostforafamilyoffive(twoadultsandthreechildren)=Birr155orUS$7.50permonth



Severalassumptionsweremadetokeepthetransportestimationasconservativeaspossible(seetable3below)leadingtoanestimationofBirr155permonthforafamilyoffive.Likewisewithothercosts,thecostoftransportisalsounderstatedinthepreliminaryNFNHestimate,whichincludesacostoftransportofBirr76permonth.NFNHisthereforeraisedinthisestimatebyBirr79.

Table4.MonthlycostsoftransportforaworkerwithafamilysizeoffiveReasonfortravel #tripspmper Cost

perRTCostpm

Remarks

Adults children Commuteto/fromwork

0 0 6 0 Assumeworkerswalkallthetime

Market/Bank 4 0 6 30 Assumeonly1adulttoshopand/orbankonetimeperweek.ExtraBirr6totransportloadsfrommillinghousetohome

Church/mosque/Recreation

4 3 6 42 Assume2tripspermonthperadultand1permonthperchild

Visithomearea&family

0.0833 0.0833 200 83 Assumevisitfamilyonceperyear

Total 155

9. PROVISIONFORUNEXPECTEDEVENTSTOENSURESUSTAINABILITYUnforeseenorunexpectedeventsareoneofthemajorreasonsformillionsbeinginchronicpovertyaccordingtotheChronicPovertyResearchCentre(2009).InEthiopia,increasesinfoodpricearereportedtobethedominantshockeffectingworkers,followedbyillnessoffamilymembers(Headeyetal2012;WorldBank2015).Near-poorfamilieseasilydescendintopovertyduetotheseorothershocksastheylackcopingmechanismssuchasinsuranceorsocialsecurity.Thesefamiliesrelyheavilyonborrowing,sellingassets,usingpersonalsavings,andsocialties(Ibid;).Forexample,duringfieldwork,workersreportedthatincreasesinfoodpricearenotjusta‘shock’anylonger,butadaytodaystruggle.Duringthelastweeksofthemonth,foodintakedecreasesbothinquantityandquality.Inadditiontoburdensomefoodcosts,workersdescribedtomethepressureofan

Fundforsustainabilitypermonthforafamilyoffive(twoadultsandthreechildren)=Birr203orUS$10permonth



endlessdebtcycleastheyareforcedtoshoponcreditfromnearbykiosksandtothenpaythekiosksoncetheyobtainfunds,withinterest.Thereforeifonewantstoalleviateorpreventpoverty,itiscriticaltoassurethathouseholdscanhavesomediscretionaryincomeforemergencies.GiventhesituationinEthiopia,aconservativemarginof5%isapplied,ashasbeenusedintheAnkerMethodologyinothercountries.



SECTIONII

LIVINGWAGEFORWORKERS

10. FAMILYSIZENEEDINGTOBESUPPORTEDBYLIVINGWAGETodetermineanappropriatefamilysizeforalivingwagefortheZiwayarea,weuseddatafromnationalstatisticalsources(CSAandICF2012;MOFED2013).Weestimatedpossiblereferencefamilysizeintwodifferentwaystohelpdeterminethis.First,weestimatedaveragehouseholdsizeforhouseholdswith2+persons(sincesinglepersonhouseholdsdefinitelydonotincludechildren)fortheZiwayarea.Thiswasaround5persons.Second,welookedatthetypicalnumberofchildrenbornperwoman(totalfertilityrate)andreducedthisbytypicalchildmortality(under5mortalityrate)togetanestimateofthenumberofsurvivingchildrenperwoman.Theaverageofthismortalityadjustedtotalfertilityrateforruralareasandurbanareaswas3.34,whichimpliedafamilysizeofaround5.3(i.e.2adultsplus3.3children).WeusedanaverageofvaluesforruralareasandurbanareasbecauseworkersintheZiwayareagenerallycomefromruralareaswithrelativelyhigherfertilitybuttheyarenowlivinginanurbanareawherefertilityratesarelower.Thesetwowaysoflookingatfamilysizebothimplythatanappropriatefamilysizeforalivingwageisaround5.

11. NUMBEROFFULL-TIMEWORKERSINFAMILYPROVIDINGSUPPORTWhencalculatingthenumberoffulltimeworkersinafamily,thisstudyfocusesonempiricalfactsandrefrainsfromtheconventionalassumptionofothermethodsusedtoestimatelivingwage.Manystudiestendtopursuethetraditionalviewofasingle‘breadwinner’ortaketwofull-timeworkersinafamily(Anker2011).However,AnkerandAnker(2017)suggestatechniquethattakesintoconsiderationtherealityontheground.Globaldatashowthatthelaborforceparticipationrate(LFPR)ofyouth(ageof15-24)islower(48.5%)thantherateofadultsaged25andabove,whichis68.8%.Inclusionofyouthandadultsabove60yearsofageinacountofworkersperfamilycanleadtounderestimationofLFPR,asmanyyouthareinschool,andhencemaynothavejoinedthelabormarket,whileolderadultshaveoftenalreadyleftthelabormarketduetoretirement.ThereforethisstudyusesLFPRoftheprimeworkingage(i.e.25-59)asmoreappropriatetoestimatethenumberoffull-timeequivalentworkerspercouple.Weestimatedthenumberoffull-timeworkerspercouplebyusingratesfortheurbanOromiaregionforages25-59totheextentthiswaspossible.LFPRwas0.87andunemploymentrate

Numberoffulltimeworkersinafamily=1.653



was0.10.24Forpart-timeemploymentweusedthenationalurbanpart-timeemploymentrateof0.33,25sinceagedisaggregateddatawerenotavailableforOromiaregion.Usingthesevaluesindicatedthatpersons25-59have0.653offull-timeworkonaverage.Thisimplies1.653full-timeworkerspercoupleafterassumingthatonepersoninourreferencefamilyisafull-timeworkeronafarmsuchasaflowerfarm.26Thisestimationof1.653full-timeworkerspercouplewasusedtocalculatethelivingwageofZiway.12. TAKEHOMEPAY–ACCOUNTINGFORMANDATORYDEDUCTIONSANDTAXESEmployeesinEthiopiahavetopaymandatorytaxandpensiondeductionsinaccordancewithlaborandpensionproclamations.EmployeeswhoearnaboveBirr150permontharesubjecttopaytaxatprogressiveratesstartingat10%andincreasingtoamaximumof35%27withsomedeductionsallowed.Thepensionfundisadministeredbythestate,andboththeemployee(5-7%)andemployer(7-11%)mustmakecontributions.Thesedeductionsforincometaxandpensionfundcontributionsaretakenintoconsiderationwhencalculatinggrosslivingwagetoensuresufficienttakehomepayforthenetlivingwage.

24AccordingtothereportofMOLSA(2013),femaleunemploymentrateinEthiopiaisgenerallyhigherthanformalesinfourdifferentyears(1994,1999,2005and2007).Unemploymentratesweremuchhigherinurbanareasthanruralareas.Thedifferencewasthesamein2013,whenthenationalunemploymentratesofmalesandfemaleswererecordedat2.7and6.5respectively.Inurbanareas,theratewas10.5formalesand23forfemales,whileinruralareastheunemploymentratewas1.1formalesand2.9forfemales.25Thereisnoagreedorofficialdefinitionforpart-timeemploymentinEthiopia,soweestimatedthepart-timeemploymentratebytaking30workinghoursasacut-off,whichgivesapart-timeemploymentrateof0.41.InEthiopia,formaljobsarealmostalwaysfull-timeandinformaljobsareoftendeterminedbythelabormarketorbyindividualsthemselves.Notethat,accordingtothelaborlawsofEthiopia,themaximumnumberofworkinghoursperweekis48hoursbuttheaveragenumberofworkinghoursofaworkersage25-59forurbanandruralareasstandsat40and32hoursrespectively(CSA2014).30hoursperweekseemedlikeareasonablecut-offforestimatingpart-timerate.26Analternative–andverysimilar–estimateoffull-timeworkersinthereferencefamilyisfoundusingdatafromtheaverageofruralandurbanvaluesfromthelaborforcesurveyof2013(CSA2014)whichprovidesdisaggregateddata(byageandsex)forruralandurbanareas.Thisstudyindicatedthattheaverageofvaluesforruralandurbanareaswas:(i)LFPR(0.88);(ii)unemploymentrate(0.09);and(iii)part-timeemploymentrate(0.41).Whenusedinourformula,theyindicate1.637full-timeworkerspercouple.27Wagerange(Birr)Taxratedeductions(Birr)<=150 0 0151-650 10% 15651-1400 15% 47.501401-2350 20% 117.502351-3550 25% 2353551-5000 30% 412.50>5000 35% 662.50



Workerswhomaintainmembershipinalaborunionmustalsopay1%oftheirsalaryasamembershipfeetotheunion.Thisdeductionisnotconsideredhereasitisnotmandatoryandiscontributedonavoluntarybasis.



SECTIONIII

ESTIMATINGGAPSBETWEENLIVINGWAGEANDPREVAILINGWAGES

13. PREVAILINGWAGESININDUSTRYOFFOCUSANDOTHERINDICATORSThisstudyprovidesageneraldescriptionabouttheexperienceofwagesettingintheindustryandpresentswagelevelsofflowerfarmsasdocumentedintheavailablebodyofliterature.Wagelevelsofonelargefarmarepresentedinordertodrawcomparisonwiththeestimatedlivingwage.InEthiopiathereisnostatutoryminimumwage,butitisintendedthatinthefaceofthisabsentpolicy,wagesshouldbenegotiatedbetweentheworkerandemployer.Theresearcher’spreviousexperiencesintheindustryrevealedthatwagesarenotpartofcollectivebargainingagreements(CBA).Overall,CBA‘stendtohavethesamestructurewithafewfirmspecificdifferences.Thecontentingeneralfocusesonreinforcingthelaborlawandpensionproclamation28.ThisabsenceofwagesinindustryCBAsispartlyduetoalimitedcapacityofworkerstonegotiatetheirowntermsofemployment.UnionleadersinEthiopiathatrepresentflowerfarmsarelargelydependentontheabilityofthenationalfederationtotrainthemonnegotiationandbuildingaCBAagreement.Thefederationitselfalsostrugglestoexertthenecessarystrengthtonegotiatewages,creatingascenariobywhichworkersarenotabletosuccessfullynegotiateasalaryaspartofthecommonCBA.Addingtothisdifficultyisthepoliticalsphere,asnationalpoliticsoftenexertinfluenceontheunionmovement.Consequently,insettingwages,manyflowerfarmsappeartomakeareferencetoaminimumwagethatisapplicabletoacertainsegmentofpublicservants:aroundBirr600(US$29)permonth.Thissalaryscaleisnew(fromJuly2014),asthegovernmentwasforcedtoincreasewagestocurbtheenormouspressurecausedbyon-goinginflation.Despiteasignificantincrease(46%),thegovernmentadmittedthattheraiseisnotbelievedtobesufficientforstillrisinglivingcosts.TheEthiopianGovernmentpromisedtominimizethegapthroughsubsidizedprovisions29.28Ethiopiahasratified22ILOconventionsincludingalloftheeightfundamentalones.ThelaborlawofEthiopiahasconsiderableoverlapwithlaborstandardsoftheILO.Someofthesesharedareasare:paidleave(annual,maternity,sick,emergency),andmedicalcoverageforworkrelatedaccidents.Apartfromthat,thelawdetailsconditionsunderwhichtemporarycontractsarepermittedandhowaworkerwhohasundertakenthesamejobformorethan45daysorbeenrehiredforthesamefunctionmustbeclassified.Thelawtreatsaworkerinthiscaseasapermanentemployee,entitledtojobbenefits,severancepay,andapensioncontributionbytheemployerandemployeeasrequiredinthepensionproclamation.Furthermorethelawregulatesworkinghours,overtime,andassociatedpayments,whichalmostallfarmsclaimtoasabasisforremuneration.29http://ethiopiavid.com/ethiopia-government-announces-33-46-salary-increment-civil-servants/orhttp://www.2merkato.com/news/alerts/3167-ethiopia-government-announced-civil-servants-salary-adjustment



Withregardtowagelevelsintheflowerfarmindustry,theinitialbasicwageinmostflowerfarmshasbeenbetweenBirr400and600(Melese2014;Bardout2012;Hanan2011).Anotherstudywithlargersamplesshowedthatin2013theaveragemonthlywageatflowerfarmswasBirr760(SchaeferandAbebe2015).ThissuggeststhattheaveragewageintheindustryisclosetotheaveragewageoftheoverallagriculturesectorinEthiopiareportedatBirr697permonth(CSA2014).However,theseestimatesmaynotnecessarilyincorporatethevalueofin-kindbenefits.Likeinmanyflowerfarms,wagesinflowerfarm-Xdifferdependingonthenumberofyearsofemploymentwiththefarm.AccordingtoflowerfarmX’sHRrepresentatives,thewagescaleforproductionworkersisfixed,andsoarethein-kindbenefitsandallowances.Theonlyvariationinwageoccursduetothenumberofyearsthataworkerhasbeeninservicetothefarm.

Table5.Monthlywagesofproductionworkersatflowerfarm-XYearofbeginningemployment

Basicwagepluscashallowancesandin-kindbenefitsofproductionworkers(1)=(2)+(3)+(4)

Basicwageofproductionworkers(2)

Cashallowance(CA)(3)

In-kind(cashvalue)(4)

2006 1,233 841 207 1852009 1,163 777 201 1852012 1,103 723 195 1852014 1,058 682 191 185Notes:in-kindbenefit(Birr185)isforhealth,educationandmeals.Cashallowancesincludetransport(Birr90),holidaybonus(Birr33)andattendancebonus(10%ofbasicwage).

13.1Basicwage,cashallowancesandbonuses,andovertimepay

Inthesampleflowerfarmvisited,allworkersreceiveseveralcashallowances.TheyareprovidedacashallowanceofBirr90permonthfortransport.WorkersalsoreceiveaholidaybonusfourtimesayearofBirr100(whichworksouttobeBirr33permonthonaproratedbasis).Thereisalsoanattendancebonusforall,amountingto10%ofthewage,butonecanlosethisbonusifshe/heisabsenttwiceamonthwithoutpermission.Nonetheless,itisreportedthataround95%ofworkersreceivethemonthlyattendancebonus.Productivitybonuses(piecerate)areprovidedforcertaintypesofworkerssuchaspackhouseworkerswhoconstituteonlyaround30%oftotalfarmworkersinthiscase.Greenhouse



workersthatconstituteabout60%ofthelaborforcearenotentitledtoproductivitybonuses.Assuch,productivitybonusesareexcludedfromouranalysis.

13.2In-kindbenefitsaspartialpaymentoflivingwage

Manycompaniessuchasflowerfarms,providein-kindbenefitstoworkers.However,notallthoseprovisionscanbeconsideredaspartialpaymentoflivingwageforseveralreasons,asdiscussedinAnkerandAnker(2017).Appropriatenessandfairnessofthoseprovisionshavetobereviewedcarefullybeforeconsideringthemaspartialpaymentoflivingwage.Forexample,oneoftheconditionscouldbewhetherthemajorityofworkersenjoythosebenefitsandallowances.Inthisregard,thefollowingin-kindbenefitsareconsideredaspartoflivingwagepayment:

§ Health:Birr65permonthin-kindbenefit(foraworkerandher/hisfamily)30§ Education:Birr37permonthin-kindbenefit31§ Meal:Birr83permonthin-kindbenefit32

Itisimportanttodiscussthetypicalin-kindbenefitsprovidedbyfarm-Xinthebroadercontextofthefarm’sactivitiesrelatedtocorporatesocialresponsibility(CSR),whichnotonlyconstitutesbenefitstoworkers,butalsotothecommunityofZiwayasdiscussedbelowandindicatedinAnnex2.

13.2.1FarmschoolandhospitalAccordingtoinformationobtainedfromfarmXandasconfirmedonourfieldvisit,farmXestablishedaschoolandhospitalaround2005immediatelyuponitsarrivaltoZiway.Thoseservicecentersarerelativelyhighqualityandsawanongoingexpansionineachsubsequentyear.Theschool,whichstartedaskindergarten(KG)with200children,nowreacheshighschoollevelwithatotalof4,500students.FarmXreportedthattheschoolprovidesthenecessaryeducationmaterials(stationaryandtextbooks)freeofchargetoallstudents.Furthermore,KG30ThisisestimatedbyusingreportedmedicalcostofthefacilityaccordingtocompanyxofBirr8,598,507in2015.Sothecalculationformonthlyhealthcostis:Totalannualcost(Birr8,598,507)dividedbytotalnumberofworkers(11,000)dividedby12months(8,598,507.04÷11,000=782.Then782÷12=65.14).NotethatthisoverestimatesthecostofmedicalcareperworkerbecausethisfacilityalsoprovidesmedicalcarefortheentireZiwaycommunity.31Farmxsaidthat80%ofchildrenofworkersattendtheirfreeschool.IfweassumethatschoolforthreechildrencostsBirr46.5(asestimatedintheeducationpostcheck),thenthereplacementcostofthein-kindbenefitoffreeeducationwouldbeBirr37(46.5×0.8).Thisisundoubtedlyanoverestimate,becausemanyworkersaremigrantswhosechildrenliveawayfromthemintheirhomevillage.32Provisionoflunchforchildrenisforsomegrades.Wemultipliedthemodeldietfoodcostperpersonperday(Birr13.24)by0.4assumingthatthelunchis40%offoodcostsperday.Sincechildrentypicallyrequirearound70%ofthenumberofcaloriesoftheaveragepersoninthefamily,theseassumptionsindicatethatthereplacementvalueofaschoolmealforchildrenisBirr3.71(i.e.13.24×0.4×0.7=3.71).Ifthereare180schooldaysintheyear,thismeansthatthereplacementvaluepermonthofschoolmealsisBirr55.6.Ifwefurtherassumethathalfthechildrenofworkersreceiveafreelunchatschool,thisresultsinamonthlyreplacementvalueofBirr83.



levelandchildrenage4-10areprovidedwithanutritiouslunch.Thefarmreportedthat50%ofthetotalstudents(i.e.2250)arechildrenofworkersinthefarmwhiletheotherhalfisfromthecommunity.ItisalsoreportedbyfarmXthataround80%ofworkers’childrenbenefitfromtheeducationservice.Unfortunately,thisstudydidnottakeastatisticallyrepresentativesampletoverifythisclaim,butduringinterviewswithworkers(around30)difficultyinaccessingtheservicewasreportedduetolimitedavailabilityofspaceattheschool.33ThefarmXschoolwasconsideredtobeanin-kindbenefitworthBirr37permonth.34.Healthcarewasconsideredasanin-kindbenefit.TheHospitalprovidedbythefarmistheprincipalproviderofhealthcaretoworkers.Itisreportedtobetheonlyfully-fledgedhospitalwithina100kmradiusofthearea.Itprovidestreatmentsandemergencycareincludingmajorandminorsurgerythatarenotavailableinanyotherprivatehospitalorclinicwithinthearea.Thehospitalprovidesservicetothesurroundingcommunityatsubsidizedprices.However,workershavefreeaccesstotheserviceswithoutlimitoncost.Inaddition,aworkercanget(ifdeemednecessary)referralservicetootherhospitalsinAddisAbabatogetfurthertreatmentwithfullcostscoveredbythefarm.Thefarmreportedthatthefamiliesoftheworkersalsohavefreehealthcareservicesprovidedatthehospital,thoughthiscouldnotbeconfirmedduringfieldwork.AlthoughFairtradepremiumwasfinancingmuchofthecurrentcostsofhealthcare,itwasfeltthatthisbenefitshouldbeincludedasanin-kindbenefitbecausesomuchoftheinfrastructurehadbeenpaidforbythefarminpreviousyears–butthisissomewhatcontroversial.Thestudyreliedonthedataprovidedbythefarmtoestimatehealthcarein-kindbenefits.

13.2.2CSRcommunityrelatedactivitiesAnnex2includesexcerptsfromFairtradeauditorreportsconcerningtheCSReffortsoffarmX.

14. LIVINGWAGEINCONTEXTANDCOMPAREDTOOTHERWAGES

14.1LivingWageinContext

Thissectionsetstheestimatedlivingwageandtheprevailingwagesincontextbycomparingthemwithnationalandinternationaleconomicbenchmarkssuchaspovertylinewagesandfoodpovertylinewages.

33Astheschoolisconsideredtobeofhighqualityinthearea,itisquitepackedallthetimeandonceenrollednooneseemstoleavetheschool.Onceaccepted,childrencancontinueintheschoolregardlessofwhethertheirparentscontinuetobeemployedbythefarm.Accordingtoworkers,childrenagefourhaveabetterchancetoenrollintheschoolthanolderchildrenduetolimitedspace.Olderchildrenhavetoapplyinalotterysystemtogetadmission.Thismeansthatworkerswhotakeupemploymentthathavechildrenolderthanfourhaveadifficulttimeobtainingadmissionoftheirchildrentothefarm’sschool.34Notethatformanyyearsthefarmhasbeenfinancingitshospitalaswellasitsschoolalone.Howeverrecently,italsousedFairtradepremiummoneytoprovidetheseservices.Forexample,forthepastsixmonths(January-June2015),42%ofeducationand94%ofhealthcareserviceswerefinancedbytheFairtradepremium.NotethatintheAnkermethodology,benefitspaidforbyFairtradepremiumsareusuallynotconsideredasin-kindbenefits,sincethecompanydoesnotprovidethem.



AccordingtothegovernmentofEthiopia,thenationalfoodandpovertylinesfor2010/11aredeterminedtoberespectivelyBirr1,985andBirr3,781peryearperperson(MOFED2013).Thisamountwasupdatedforinflationbyusingannualaverageratefortheyear2012-2014andusingaveragerateofforsevenmonths(JanuarytoJuly)35for2015.TheresultshowsthatthefoodpovertylinestoodatBirr3,241perpersonperyearwhilethepovertylinereachedBirr5,923.Whenthesepovertylinesareconvertedtowagesforafamilysizeoffivewith1.653workers,theybecomepermonthBirr817andBirr1,493respectively.TheWorldBankpovertylinesof$1.25PPPand$2PPPadayareusedasinternationalbenchmarks36.Usingafamilysizeoffivewith1.653full-timeworkers,theinternationalpovertylinewageisestimatedtobeBirr1,206for$1.25PPPandBirr1,930for$2PPP.Theestimatedlivingwageisclearlymuchhigherthantheotherwagecomparators.PartofthereasonforthisisthelargeamountofmandatorytaxesworkersinEthiopiamustpay.Thesemandatorydeductionsarenottakenintoconsiderationinotherwagesincludedinthewageladder.AnotherimportantreasonwhytheestimatedlivingwageismuchhigheristhatitisbasedonlivingcostsforanurbanareawhiletherearenoseparateruralandurbanestimatesofthenationalpovertylineforEthiopiaortheinternationalpovertylines.Evidencepresentedinthispaperindicatesthatitisnotthattheestimatedlivingwageistoohigh,butthatprevailingwagesonflowerfarmsaswellasotherwagecomparatorsareappallinglylow.Manyflowerfarmworkersliveinmudandstickhousesandrunoutofmoneytopayforfoodbeforetheendofmonth.Thispovertyisevidentinthefactthat40%ofchildrenlessthanagefiveinEthiopiawerestuntedin2014.Itisimportanttonotethatformostworkers,prevailingwagesareevenlowerthantheinternationalextremepovertylineandournetlivingwageisonly60UScentsperhour.

35ThedatawereobtainedfromthewebsiteoftheWorldBankandtheCentralStatisticsAgency(CSA)ofEthiopia.LastaccessedonSeptember17,2015.36AsofOctober2015,theWorldBankreviseditspovertylinesof$1.25PPPand$2PPPadayin2005PPPto$1.90PPPand$3.10PPPadayin2011PPPrespectively.Theoldpovertylinesareusedhere,becausetheprimarydataforthisstudywerecollectedjustbeforetheserevisions.ThenewandoldWorldBankpovertylinesarefairlysimilarinBirr.ThenewWorldBankpovertylinewagesforJuly2015wouldhavebeenBirr1,376andBirr2,245.



14.2Wageladder

Notes:AllvaluesareinBirr.Themandatorydeductiononlivingwageshouldbetakenonlyasindicative.TheexactamountcouldbealittlebithigherorlowerthanBirr784,whichistheamountusedinthiscalculation.15. CONCLUSIONSThispaperhasestimatedlivingwagesfortheZiwayareainEthiopia,withparticularfocusonworkersofflowerfarms.ThestudyappliedtheAnkermethodology,whichisgroundbreakingworkthathasbeendevelopedbasedonrigorousresearchandextensiveempiricalwork.Todotheestimation,primarydataonlocallivingcostswerecollectedinZiwaywherethereisaclusterofflowerfarms.Inadditiontothecollectionofprimarydata(onlocalfoodprices,foodpreferences,housingcosts,educationcosts,healthcarecosts,transportationcostsaswellasonprevailingwagesandin-kindbenefits),extensivereviewofliteratureandsecondarydatahavebeendoneinordertomakeasaccuratealivingwageestimateaspossible.Thisstudyhasoftenusedtheaverageofurbanandruralthirdquintileforsecondarydatatoavoidreproducingthelivingstandardofthepooresthouseholds(also,tominimizethebiasesofrural

207 201 195 191 191185 185 185 185 185

841 777 723 682 2208

784

1233 1163 1103 1058

3367

Na|onalfoodpovertylinewage,817

Na|onalpovertylinewage,1,493

$2.00povertylinewage,1,930

$1.25povertylinewage,1,206

MeanwageinAgriculturefor2013,

697

0

500

1000

1500

2000

2500

3000

3500

startedworkin2006

startedworkin2009

startedworkin2012

startedworkin2014

LivingWage

CashAllowance ValueofIn-KindBenefits BasicWage Mandatorydeducfons



areasandbigcitiesasZiwayisneitherruralnorabigcity).Basedonthatsecondaryanalysis,thelivingwageestimatewasdoneforafamilysizeoffive,with1.653full-timeworkerspercouple.Asdiscussedthroughoutthisreport,thisstudymadeanefforttokeepthelivingwageestimateasconservativeaspossiblebutwithoutcompromisingbasicdecencyasdeclaredbyuniversalhumanrightsandreinforcedbymanyvoluntarystandards.Yet,theestimatedlivingwageisnone-the-lessmuchhigherthantheprevailingwages.ThegrosslivingwageisestimatedtobeBirr3,367permonthtakingintoconsiderationtaxesandothermandatorydeductionsfrompayandBirr2,584permonthisthetakehomepayneededfordecency.ThesenetlivingwagesareonlyUS$125permonth,US$4.8perday,andUS$0.60perhour.Thedetailedcalculationofeachcomponentoflivingwageispresentedintable6below.Oneimportantreasonwhyourlivingwageestimatesarethishigh,isthatworkersoftheflowerfarmmustliveinurbanareasthatarerelativelyexpensive.Thisisnecessitatedbythelocationsofflowerfarmsthemselves.ThisAnkerMethodologygrosslivingwageestimateis2.5-3.0timeshigherthantheprevailingwagespaidbyflowerfarms,whichareestimatedtobebetweenBirr1,058andBirr1,233($51and$60)permonthincludingcommoncashallowancesandvaluesforin-kindbenefits.PrevailingwagesonflowerfarmsaresimilartotheWorldBankextremepovertylinewageandlessthanourestimateofthecostofabasicmodeldietthatmeetsminimuminternationalnutritionalrequirements,despitethisdietincludinginjeramadewithonly40%teff.Ourmodeldietalsoconsistsofonly1eggeveryweek,1meatmealorfishperweek(fishistakenasitismuchcheaperalternativethanothermeat),and1/8cupofmilkperdayforadultstoaddtocoffee,whichisthenationaldrinkofEthiopia.Theresearchfoundthatmanyworkersliveinhousesmadeofmudandsticksandmanyworkersindicatedthattheyoftenrunoutofmoneyforfoodafter2½to3weeksintothemonthandsooftenhavetoborrowtobeabletoaffordfoodbeforetheirnextpaycheck.Inordertoexplainpartofthis,oneneedstounderstandthecontextofEthiopiawithregardtoinflation,wagetrendandwagesettings.Ethiopiaisoneofthepoorestcountriesintheworld,standingat173rdoutof187countriesaccordingtotheHumanDevelopmentIndexof2012.However,inthepastdecade,thecountryclaimedcontinuousgrowthinGDPalongwithalargeinflowofforeigndirectinvestment.Thisisparticularlyevidentintheflowerindustrywhereanextraordinaryboomwasrecordedthatmadethecountry,inlessthantwodecades,thesecondlargestexporterofflowerstotheEUmarket.Theindustryhasbeenpraisedforgeneratinglargeemployment(over50,000jobs)andmuchneededforeignexchangeinthispovertystruckcountry.Nevertheless,despitetheGDPgrowthandthelargeemploymentofflowerfarms,workersarenotenjoyingreasonablewages,letalonealivingwage,partlyduetopersistentinflationinthecountry.Asinflationismainlydrivenbyfoodpriceincreases,poorerpeople,suchaslowskillwageworkers,areamongthehardesthit.



Tosomeextent,lowwagesinflowerfarmscanbeattributedtothepoorcapacityofworkerstonegotiateforbetterpay,thepresenceofunionsthatlackthepowertooperateeffectively,andtheabsenceofastatutoryminimumwage,coupledwithalackofpoliticalwilltoempowerworkersandtocreatevibrantunions.Asaresult,theprevailinghighpowerimbalanceconstrainsworkersfromengaginginrealbargainingwiththeiremployer,especiallygiventhataveragewageinagricultureisonlyBirr667($32).Ourestimatedgrosslivingwages(Birr3,367)ismuchhigherthanthenationalaswellastheinternationalpovertylinewages.Ourgrosslivingwageis2.3timeshigherthanthenationalpovertylinewage(Birr1,493);2.8timeshigherthantheextremepovertylinewageoftheWorldBank(Birr1,206);and1.7timeshigherthantheWorldBankpovertylinewage(Birr1,930).DespitethecommendableCSRactivitiesoftheflowerfarmwevisitedtowardsthewidercommunityandtotheworkers(seeAnnex2),theprevailingwageistoolowtoenableworkersandtheirfamiliestoliveanywherenearabasicbutdecentlife.Withoutasignificantincreaseinwages,thereisnowayformostflowerfarmworkerstoescapefromthepovertytrap.Thereisanobviousneedtoraisewages–keepinginmindthatpaymentofalivingwagemaynotbepossibleforsometimegiventheconcurrentneedtoprotecttheviabilityoftheflowerfarmindustryinEthiopiaandtheessentialemploymentitcreates-thecurrentverylowwagesandverypoorlivingconditionsofflowerfarmworkersaremuchtoolowtobeconsideredacceptable.Theentireflowervaluechainneedstogetinvolvedinimprovingwages.

Table6.CalculationoflivingwageforruralEthiopia,July2015Expensesandlivingwage(exchangerateUS$1=20.679BirrasofAugust2015)

Birr USD Remark

PARTI.FAMILYEXPENSESFoodcostpermonthforreferencefamily(1)

2,014 97Lessexpensivefoodsusedbasedonlocalmarketsurvey

Foodcostperpersonperday 13.24 0.64 Housingcostpermonth(2) 1,077 52 Around32m2,basicbut

decentRentpermonth 940 45 Utilitiespermonth 137 7 Non-foodnon-housingcostpermonth(3) 978 47 Seethetextforsteps

followedPreliminaryNFNH 869 42



Healthcarepostcheck 0 0 Educationpostcheck 30 1.5 TransportationPostCheck 79 4 Emergenciesandunforeseeneventspermonth(4) 203 10

Totalhouseholdcostspermonthforbasicbutdecentlivingstandardforfamilyof5(5)[5=1+2+3+4]

4,272 207

PARTII.LIVINGWAGEPERMONTHNetlivingwagepermonth,nettakehomepay(6)[6=5/1.653fulltimeworkersperfamily]

2,584 125

Incometax(7a) 561 27 Mandatorydeductionsareapproximate.

PensionDeductions(7b) 223 11 Grosslivingwagepermonth(8)[8=6+7](1.653fulltimeworkersperfamily) 3,367 163

PARTIII:CASH(BASIC)LIVINGWAGEININDUSTRYCONSIDERINGVALUEOFTYPICALIN-KINDBENEFITS,CASHALLOWANCES,ANDBONUSESINFLOWERFARMS

Valueofcommonin-kindbenefits(9A) 185 9 Approximatevalues

Valueofcommoncashallowances(9B) 199 10 Variesslightlybyseniority

Netcashbasiclivingwageassumingworkersreceivetypicalin-kindbenefitsandcashallowances(10=6-9A-9B)

2,200 106

Grosscashbasiclivingwageassumingworkersreceivetypicalin-kindbenefitsandcashallowances(11=8-9A-9B)

2,984 144

Table7.Keyvaluesandassumptionsforalivingwageestimate

KEYVALUESANDASSUMPTIONS Comments

Location(&industryifrelevant) Non-MetropolitanUrbanEthiopiawithFocusontheZiwayFlowerFarmCluster

ExchangerateoflocalcurrencytoUSD US$1=20.679Birr(asofAugust2015)

Numberofhoursinnormalworkweek 48hours



KEYVALUESANDASSUMPTIONS Comments

Numberofworkerspercouple 1.653

Referencefamilysize 5

Numberofchildreninreferencefamily 3

PreliminaryratioofNon-FoodNonHousingtoFoodCosts 0.43

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50

ANNEXES

ANNEX 1. COMPARISON OF LIVINGWAGEMODEL DIETWITH OTHER DIETS INETHIOPIA

TableAI.ComparisonofthemodeldietwithotherdietsinEthiopia(inediblegramsperpersonperday)Foodgroup FAOfood

balancesheetNationalpovertyline

Urbanpovertyline

ModeldietusedtoestimatelivingwageinZiway

Cereals 421 470 431 446Bread 0 18 0 0Roots/tubers 170 270 37 200Pulses 44 51 114 40Milk 124 10 40 132Chickeneggs 1 10 10 7Meat/Fish 24 4 0 12Vegetables 38 111 54 189Fruits 14 3 60 63Palmoil 9 3 9 14Whitesugar 18 12 27 12Coffee 2 14 10 3Other 48 0 0 0Caloriestotal 2279 2279 2279 2279%ofcaloriesfromprotein

10.57% 10.34% 14.02% 11.03%

DailyCost(Birr) 13.64 9.97 11.28 11.54Notes:Forthepurposeofcomparability,thetotalcaloriesofeachdietintableareadjustedsotheyhavethecaloriesrequiredforafamilyoffive(twoadultsandthreechildren)whichis2279caloriesperperson.Someofthedietscontainseveralfooditemsineachfoodgroup(e.g.theFAOfoodbalancesheetdietandurbanpovertydiet)butthenationalpovertylinedietincludesonlyfoodgroupsbutnotspecificfooditems.Sotocomparemylivingwagemodeldiettothetwopovertylinediets,Iusedtheleastexpensivefooditemforeachfoodgroupforthepovertylinedietsexceptforthecerealgroup.Fortheurbanpovertylinediet,teffaccountedfor48%ofcereals,andmaize(theleastexpensivecereal)accountedforonly20%ofthetotalcerealgroup.Othercerealsaccountedfortherest.Fortheurbanpovertylinedietinthistable,Ididnotchangetheshareofteff,butusedmaize(theleastexpensivecereal)torepresentallothercereals.Asaresult,despitetheabsenceofmeatorfishintheurbanpovertydiet,theshareofcaloriesfromproteinishigherthanotherdiets(14%).Partlyduetotheinfluenceofteff,whichisexceptionallyrichinproteinsandothermicronutrientsascomparedtoothercereals(DemekeandDiMarcantonio2013),themodeldietusedtoestimatemylivingwageappearstohaveabithigherproteinforthe



51

developmentlevelofEthiopia.Otherwise,mylivingwagemodeldietkepttheshareofproteinsfromanimalproductstoaminimum.



52

ANNEX 2. CSR EFFORTS OF FARM X ACCORDING TO FAIRTRADE AUDITORS’REPORT(AUGUST,2015)ThefollowingareexcerptsfromareportofFairtradeauditors:NotethatinthislivingwagereportvaluesfortheeducationandhealthcareprovidedbycompanyXtoworkersandtheirfamiliesareincludedintheestimateofprevailingwageonflowerfarms.FarmXhasputinplaceanumberofCorporateSocialResponsibility(CSR)measures.Theseinclude:“Averyimpressiveschoolcateringforfreeeducationforapproximately3,000childrendrawnfromtheworkersandthesurroundingcommunity.Theschoolhasaworkforceof162staffs,whichincludewelltrainedandqualifiedteachers.”“Astateoftheartmodernhospitalprovidingfreemedicalservicestoalltheworkersandsubsidizedratestothecommunity.Thehospitalhasaworkerforceof143staffscomprisingof7doctors(includingonesurgeonandonegynaecologist),4clinicalofficers,32nurses,1dentist,1physiotherapist,1radiologist,2radiographers,2anaesthetists,2laboratorytechnologists,7laboratorytechnicians,1pharmacistand6druggists.Thehospitaloffersfreemedicalservicesto(farmX)workers.”“Modernastadiumandafootballteamfullysponsoredbythecompany.”Aspartofcommunitysupportactivities,FarmXhas:“Builtamodern‘courthouse’andapolicepostfortheregionalgovernmentinZiway”“DonatedETB25milliontowardstheBlueNiledamgovernmentproject”“DonatedandassistedinupgradingthesupplyofdrinkingwatersystemtoZiwaytownanditsenvirons.”“Recreationclubaccessibletothe“(farmX)family”(i.e.theDirectors,managementandemployeesof(farmX)Ethiopia)”“Supporttothelessfortunateinthesociety.““SupporttotheorphanedChildreninBlenfarm.”“Quality,freefeedingprogramforthechildrenunder10yearsinfarmXschool”“Freemedicalserviceat(farmX)hospitalformalnourishedchildren,HIVandTBpatients”“Freeserviceat(farmX)hospitalforbothantenatalandpostnatalcare.”



53

ANNEX3.ETHIOPIALIVINGWAGEBENCHMARKUPDATETOJULY2016Thenetlivingwage(i.e.requiredtakehomepayfordecency)forZiway,Ethiopia(anon-metropolitanurbanarea)wasBirr2,584($125)forJuly2015.Thegrosslivingwage(i.e.payrequiredfordecency)forJuly2015,thattakesintoconsiderationmandatorydeductionsfrompay(pension)andincometax,wasBirr3,367($163).37ToupdatethenetlivingwagetoJuly2016,weincreasedournetlivingwageforJuly2015bythenationalinflationratebetweenJuly2015andJuly2016(5.95%)sothatthenetlivingwagewouldretainitspurchasingpower.ThisresultedinanetlivingwageforJuly2016ofBirr2,738($124).Thereasonwhythedollarvalueofthenetlivingwagewasvirtuallyunchangedbetween2015and2016($124in2015comparedto$125in2016)isbecausetheBirrtoUSdollarexchangeratefellmorethantheinflationincreasedduringthisperiod.ToupdatethegrosslivingwagetoJuly2016,wetookintoconsiderationinflationsinceJuly2015andthenewtaxrateschedule.38ThisresultedinagrosslivingwageforJuly2016ofBirr3,272($148).ThisislessthanthegrosslivingwageforJuly2015(Birr3,367in2015comparedtoBirr3,272in2016).ThereasonwhythegrosslivingwageinBirrwaslowerinJuly2016thaninJuly2015,despiteinflation,isbecauseofachangeintheincometaxrateschedule,whichresultedinabigreductionintheamountofincometaxthataworkerearningalivingwagewouldhavetopay.ThegrosslivingwageinUSdollarsfellfrom$163in2015to$148in2016.

37Pensionratedeductionwas7%.IncometaxratesforJuly2015wereasfollows:

Wagerange(Birr) Taxrate Deductions(Birr)<=150 0 0151-650 10% 15651-1400 15% 47.501401-2350 20% 117.502351-3550 25% 2353551-5000 30% 412.50>5000 35% 662.50

38Pensionratedeductionwas7%.IncometaxratesforJuly2016wereasfollows:Wagerange(Birr) Taxrate Deductions(Birr)0-600 0 0601-1,650 10% 601,651-3,200 15% 142.503,201-5,250 20% 302.505,251-7,800 25% 5657,801-10,900 30% 955>10,900 35% 1,500

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