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Living Income
Friederike Martin
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
Webinar for Deutschland-Alumni
Bonn, Dec 14th, 2017
Reaching a decent livelihood for
smallholder farmers and their families
Agenda
1. Concept and calculation of
living wage and living Income
2. Case Study Malawi
3. Q&A Session
Dec 14th 2017 Deutschland Alumni Webinar: Living Income 2
Background and Definition
© ETP / Toby Richards
3
Why we need a living income benchmark
• A large share of the developing country populations being “non-
poor” do not earn enough income for a decent living
• Limited explanatory power of international poverty lines,
e.g. World Bank Poverty Line (1.90 US$)
• National poverty lines have no common calculation method
• Poverty lines and minimum wages are calculated for one
person only and can not be applied to a total household (thus,
incomplete)
Calculating cost of living on household level
Moving from poverty to decency
4Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Living income and
living wage aim to
achieve a decent
standard of living
for a family in a
particular region
© GIZ5Deutschland Alumni Webinar: Living IncomeDec 14th 2017
• is a benchmark for
one source of
income for a total
household
• Applied in the context
of hired workers
• Methodology
developed by Richard
and Martha Anker
• Framed by the ISEAL
Global Coalition on
Living Wage
© GIZ / Ursula Meissner6
Living Wage
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
• Applied to any income
earner and his/her family
• Several income sources
(incl. Hired labour)
• Focus agricultural
sector
• Framed by The
Community of Practice
on Living Income
© ETP / Toby Richards
7
Living Income
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Methodology
© ETP / Toby Richards
8
Cost of basic but decent
life for reference size
family
Number of average
family size
Cost of a decent standard of living for a household
9
Decent incomes are a fundamental human right
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Cost of
basic
but
decent
life for
a family
Number of
workforce
per family
Net
Living
Income
Net
living
income
Payroll
deduc-
tions
and
taxes
Gross
Living
Income
From net living
wage to gross
living income
From cost of
basic but decent
lifestyle to net
living income
17
From the cost of living to living income
… but calculating the
benchmarks is only half of
the battle.
It‘s the GAP that
matters!
18
1. Determining Household and Farm
Characteristics
2. Deriving a Living Income Benchmark
3. Determining the Actual Income
4. Compare Actual Against
Living Income (Gap Analysis)
12
Wrap-up of Methodological Steps
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Application
© ETP / Toby Richards
13
• Setting targets for specific interventions and
different actors of the supply chain
• Influencing policy such as minimum or industry
wage
• Informing dialogue between farmers and buyers,
workers and management
• Assessing risks and monitoring change in the
income or wage gap
• Modeling and strategizing about what
interventions could effectively raise net wages or
affect farmer income
14
How can living wage and living income
benchmarks be used?
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
What can national governments do?
• Right policy framework - from land rights to tax policy
• Basic services such as health and education
• Maintanence of infrastructure essential for market access
• Support resilience of farming and freshwater systems in
the face of climate change
• Delivery of effective agricultural exension and research
services
15Deutschland Alumni Webinar: Living IncomeDec 14th 2017
What can private companies do?
• As a buyer, either in existing markets or creating new
markets for crops
• Catalytic role, in partnership with other public or private
sector stakeholders to enable
• Trainings,
• Provision of better or cheaper inputs,
• To facilitate access to cheaper credit or local saving
and loans schemes
16Dec 14th 2017 Deutschland Alumni Webinar: Living Income
What can civil society do?
• Providing expertise on issues such as inequility,
community engagement, farming techniques and resilience
• Helping to bring farmers together into groups to
• Reduce transaction costs,
• Increase bargaining power,
• Build practical local collaboration and
• Share knowledge
17Deutschland Alumni Webinar: Living IncomeDec 14th 2017
What can donors do?
• Underwriting risks of loans from banks to farmers
• Shaping national agricultural policies and systems
• Support local governments to invest in agricultural
development
18Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Challenge
• Coordinated action by the right actors cannot will not soley
reach a decent standard of living for farming families
• Challenges: Limited land, large farmily size and / or
distance to market
• Need: Discussions for agricultural transition
and development of non-agricultural sectors
for other employment opportunities
19Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Case Study Tea Sector Malawi
© ETP / Toby Richards
20
Malawi tea industry
• Africa’s second largest tea
producer
• One of the poorest countries
in the world
• 62% of Malawians live
below the poverty line
• The tea industry is the
largest formal employer in
Malawi
• Jobs on the tea estate pay
above the national minimum
agricultural wage
Mulanje
Thiolo
Deutschland Alumni Webinar: Living Income
• Country: Malawi
• Region: Thylo and Mulanje (main tea growing regions)
• Number of Household Members: 5
• Work force in a smallholder household: 1.59 / 370 person days of
labour per year
• Owns 0.61 hectares of land on which they grow tea (0.40
hectares) and maize and pigeon peas (0.21 hectares)
22
Determining Household and farm composition
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
The Workfoce – Family members Income triangle
Living Income (LI) vs. Actual Income (AI)
Source: GIZ 2017; Icons by Blake Stevenson and Gan Khoon Lay, Noun Project
Total Annual Net Income per HH
LI: 5,999 US$ PPP
AI: 2,557 US$ PPP
Daily Net Income Earned
per Workforce
LI: 15.04 US$ PPP
AI: 6.41 US$ PPP
Daily Net Income
Available per HH
Member
LI: 3.59 US$ PPP
AI: 1.53 US$ PPP
Dec 14th 2017
Comparison of actual income and living
income benchmark of a tea household per day
0,00 USD
2,00 USD
4,00 USD
6,00 USD
8,00 USD
10,00 USD
12,00 USD
14,00 USD
16,00 USD
Actual Income
Living Income
Benchmark
World Bank Extreme
Poverty Line
National Poverty
Line
US$PPP
Deutschland Alumni Webinar: Living Income
Comparing Actual against Living Income
Smallholder Farm Models – Income per Person
Part-Time Full Time
Farm Size: 0.6 ha 1.39 ha
0
100
200
300
400
500
600
Pigeon Peas
Maize
Tea
337.86 World Bank Extreme
Poverty Line 364.91
MKW
Living Income 620.41
MKW (adjusted from
Ankers)
MKW
146.15
Source: GIZ 2016
0
100
200
300
400
500
600
Pigeon
Peas
Maize
Tea
Modeling from Actual Income to a Living Income
MKW
Part-
Time
Full
Time
Produc-
tivity
Increase
Tea
Price
Increase
Produc-
tivity
Increase
Tea
Price
Increase
Farm Size: 0.6 ha
Living Income
MKW 620.41;
US-PPP 3.23
(derived from
Ankers)
World Bank
Extreme
Poverty Line;
MKW 364.91;
US-PPP 1.90
146
222
263
337
515
Off-farm
Income
620.41
1.39 ha
Living Income can be achieved
• Farmers with less than 1 ha:
• Increase yield by at least 40%
• Tea estates increase tea price by at least 40%
• Employ excess labour in high returns activities wage
employment (if living wage is paid) off-farm income
generating activities.
• Farmers with more than 1 ha:
• Allocates all land to tea production;
• Increases yield by at least 40%
• Tea estates increases tea price by at least 40%
27Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Towards reaching a living income
• „Classic“ capacity development activities to increase farmers
agronomic productivity by 33%
 Conducting farmer field & business schools to improve
technical and entrepreneurial knowledge of smallholder
farmers
 Supporting village savings and loan groups (VSLs) to
increase capital base
• „Alternative“ promotion activities to increase tea prices by
22%
 Introducing sustainable procurement practices (at the
moment being tried out throug IDH/Oxfam activities
 Introducing sustainable consumption practices (making
consumers aware/faire pricing)
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
www.living-income.com
29
Would like to know more?
Deutschland Alumni Webinar: Living IncomeDec 14th 2017
Friederike Martin
Advisor
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
Programme Sustainable Value Chains and Standards
E friederike.martin@giz.de
30
Contact
Deutschland Alumni Webinar: Living IncomeDec 14th 2017

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AGEP slides "Living income"

  • 1. Living Income Friederike Martin Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) Webinar for Deutschland-Alumni Bonn, Dec 14th, 2017 Reaching a decent livelihood for smallholder farmers and their families
  • 2. Agenda 1. Concept and calculation of living wage and living Income 2. Case Study Malawi 3. Q&A Session Dec 14th 2017 Deutschland Alumni Webinar: Living Income 2
  • 3. Background and Definition © ETP / Toby Richards 3
  • 4. Why we need a living income benchmark • A large share of the developing country populations being “non- poor” do not earn enough income for a decent living • Limited explanatory power of international poverty lines, e.g. World Bank Poverty Line (1.90 US$) • National poverty lines have no common calculation method • Poverty lines and minimum wages are calculated for one person only and can not be applied to a total household (thus, incomplete) Calculating cost of living on household level Moving from poverty to decency 4Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 5. Living income and living wage aim to achieve a decent standard of living for a family in a particular region © GIZ5Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 6. • is a benchmark for one source of income for a total household • Applied in the context of hired workers • Methodology developed by Richard and Martha Anker • Framed by the ISEAL Global Coalition on Living Wage © GIZ / Ursula Meissner6 Living Wage Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 7. • Applied to any income earner and his/her family • Several income sources (incl. Hired labour) • Focus agricultural sector • Framed by The Community of Practice on Living Income © ETP / Toby Richards 7 Living Income Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 8. Methodology © ETP / Toby Richards 8
  • 9. Cost of basic but decent life for reference size family Number of average family size Cost of a decent standard of living for a household 9 Decent incomes are a fundamental human right Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 10. Cost of basic but decent life for a family Number of workforce per family Net Living Income Net living income Payroll deduc- tions and taxes Gross Living Income From net living wage to gross living income From cost of basic but decent lifestyle to net living income 17 From the cost of living to living income
  • 11. … but calculating the benchmarks is only half of the battle. It‘s the GAP that matters! 18
  • 12. 1. Determining Household and Farm Characteristics 2. Deriving a Living Income Benchmark 3. Determining the Actual Income 4. Compare Actual Against Living Income (Gap Analysis) 12 Wrap-up of Methodological Steps Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 13. Application © ETP / Toby Richards 13
  • 14. • Setting targets for specific interventions and different actors of the supply chain • Influencing policy such as minimum or industry wage • Informing dialogue between farmers and buyers, workers and management • Assessing risks and monitoring change in the income or wage gap • Modeling and strategizing about what interventions could effectively raise net wages or affect farmer income 14 How can living wage and living income benchmarks be used? Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 15. What can national governments do? • Right policy framework - from land rights to tax policy • Basic services such as health and education • Maintanence of infrastructure essential for market access • Support resilience of farming and freshwater systems in the face of climate change • Delivery of effective agricultural exension and research services 15Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 16. What can private companies do? • As a buyer, either in existing markets or creating new markets for crops • Catalytic role, in partnership with other public or private sector stakeholders to enable • Trainings, • Provision of better or cheaper inputs, • To facilitate access to cheaper credit or local saving and loans schemes 16Dec 14th 2017 Deutschland Alumni Webinar: Living Income
  • 17. What can civil society do? • Providing expertise on issues such as inequility, community engagement, farming techniques and resilience • Helping to bring farmers together into groups to • Reduce transaction costs, • Increase bargaining power, • Build practical local collaboration and • Share knowledge 17Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 18. What can donors do? • Underwriting risks of loans from banks to farmers • Shaping national agricultural policies and systems • Support local governments to invest in agricultural development 18Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 19. Challenge • Coordinated action by the right actors cannot will not soley reach a decent standard of living for farming families • Challenges: Limited land, large farmily size and / or distance to market • Need: Discussions for agricultural transition and development of non-agricultural sectors for other employment opportunities 19Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 20. Case Study Tea Sector Malawi © ETP / Toby Richards 20
  • 21. Malawi tea industry • Africa’s second largest tea producer • One of the poorest countries in the world • 62% of Malawians live below the poverty line • The tea industry is the largest formal employer in Malawi • Jobs on the tea estate pay above the national minimum agricultural wage Mulanje Thiolo Deutschland Alumni Webinar: Living Income
  • 22. • Country: Malawi • Region: Thylo and Mulanje (main tea growing regions) • Number of Household Members: 5 • Work force in a smallholder household: 1.59 / 370 person days of labour per year • Owns 0.61 hectares of land on which they grow tea (0.40 hectares) and maize and pigeon peas (0.21 hectares) 22 Determining Household and farm composition Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 23. The Workfoce – Family members Income triangle Living Income (LI) vs. Actual Income (AI) Source: GIZ 2017; Icons by Blake Stevenson and Gan Khoon Lay, Noun Project Total Annual Net Income per HH LI: 5,999 US$ PPP AI: 2,557 US$ PPP Daily Net Income Earned per Workforce LI: 15.04 US$ PPP AI: 6.41 US$ PPP Daily Net Income Available per HH Member LI: 3.59 US$ PPP AI: 1.53 US$ PPP Dec 14th 2017
  • 24. Comparison of actual income and living income benchmark of a tea household per day 0,00 USD 2,00 USD 4,00 USD 6,00 USD 8,00 USD 10,00 USD 12,00 USD 14,00 USD 16,00 USD Actual Income Living Income Benchmark World Bank Extreme Poverty Line National Poverty Line US$PPP Deutschland Alumni Webinar: Living Income
  • 25. Comparing Actual against Living Income Smallholder Farm Models – Income per Person Part-Time Full Time Farm Size: 0.6 ha 1.39 ha 0 100 200 300 400 500 600 Pigeon Peas Maize Tea 337.86 World Bank Extreme Poverty Line 364.91 MKW Living Income 620.41 MKW (adjusted from Ankers) MKW 146.15 Source: GIZ 2016
  • 26. 0 100 200 300 400 500 600 Pigeon Peas Maize Tea Modeling from Actual Income to a Living Income MKW Part- Time Full Time Produc- tivity Increase Tea Price Increase Produc- tivity Increase Tea Price Increase Farm Size: 0.6 ha Living Income MKW 620.41; US-PPP 3.23 (derived from Ankers) World Bank Extreme Poverty Line; MKW 364.91; US-PPP 1.90 146 222 263 337 515 Off-farm Income 620.41 1.39 ha
  • 27. Living Income can be achieved • Farmers with less than 1 ha: • Increase yield by at least 40% • Tea estates increase tea price by at least 40% • Employ excess labour in high returns activities wage employment (if living wage is paid) off-farm income generating activities. • Farmers with more than 1 ha: • Allocates all land to tea production; • Increases yield by at least 40% • Tea estates increases tea price by at least 40% 27Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 28. Towards reaching a living income • „Classic“ capacity development activities to increase farmers agronomic productivity by 33%  Conducting farmer field & business schools to improve technical and entrepreneurial knowledge of smallholder farmers  Supporting village savings and loan groups (VSLs) to increase capital base • „Alternative“ promotion activities to increase tea prices by 22%  Introducing sustainable procurement practices (at the moment being tried out throug IDH/Oxfam activities  Introducing sustainable consumption practices (making consumers aware/faire pricing) Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 29. www.living-income.com 29 Would like to know more? Deutschland Alumni Webinar: Living IncomeDec 14th 2017
  • 30. Friederike Martin Advisor Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) Programme Sustainable Value Chains and Standards E friederike.martin@giz.de 30 Contact Deutschland Alumni Webinar: Living IncomeDec 14th 2017