German Retailers Working Group Publishes First Wage Gap Report for Ecuador

The members of the German Retail Working Group on Living Wages ALDI Nord, ALDI South Group, Kaufland, REWE Group and dm-drogerie markt have conducted the first wage gap analysis in the banana sector in Ecuador. The participating producers reported small wage gaps of less than 1 per cent of the workers. This underscores Ecuador's pioneering role in paying living wages in the banana sector. However, a solid verification of the data on the ground remains essential. The working group plans to explore suitable approaches this year. Ecuador serves as an important blueprint for the WG's first project to transfer best practices to other producing countries of the retailers' banana assortment.

Wage Gap Analysis creates Transparency in Living Wage Project in the Banana Sector

The first joint project of the German Retail Working Group aims to promote living wages and decent work in the banana sector. By 2025, each member is to source at least 50% of its total banana volumes for the German market as "Living Wage Banana". Due to complex supply chains, mostly indirect business relationships and the lack of functioning tools to collect and compare wage data, retailers had limited transparency on the wage situation of workers* in their banana supply chains. Therefore, an analysis of prevailing wages and potential living wage gaps was an essential step to create transparency, understand the social risks in the supply chain and find solutions to improve the wage and labour situation of workers.

The working group decided to start its implementation activities in Ecuador because of the country's importance as a sourcing country for the participating retailers as well as for the German market as a whole (15% of German banana imports came from Ecuador in 2020, FAO 2021). Other factors for selection were the sector's strong organisations and progress towards living wages as a result of Ecuador's salario digno policy. In Ecuador, farms are required to comply with the salario digno, which means paying their workers a living wage for a 40-hour week. The lessons learned in Ecuador will serve as a blueprint for transferring best practices to other sourcing countries and commodities in the coming years.

Wage Gap Analysis Another Important Milestone of the Project

Conducting a wage analysis is one of the key milestones of the project's roadmap, which serves as a guide for the AG to promote living wages and decent work in the banana sector. Using the IDH Salary Matrix, wages were recorded by the producers themselves in order to compare them with the Living Wage benchmark. The Living Wage is the wage that a worker should receive for a normal working week to ensure a decent standard of living for him/herself and his/her family.

78 farms participated in this analysis. The quantities sourced from these farms correspond to 64% of the total quantity of bananas sourced from Ecuador by participating retailers for the German market. All participating farms were either Rainforest Alliance and/or Fairtrade certified at the time of data collection. It is important to note that neither the sample of farms nor the results of this wage analysis should be considered representative of the Ecuadorian sector, as only farms supplying the participating German retailers were included.

Ecuador Leads the Way: Only a Few Workers do not Earn a Living Wage

The participating 78 farms represent a total number of 5,932 employees, including 812 women. 35 of the 78 salary matrices submitted by the farms themselves were checked for plausibility, but not verified on site. Overall, less than 1% of the workers were below the Living Wage. When a wage gap was identified, it averaged 9.62%, with a slightly higher average for men (9.81%) than for women (8.31%).

In addition to the wage gap results, an important finding of the analysis is that more transparency and on-site verification of self-reported wage data by interviewing workers and reviewing documents are crucial to ensure valid results. This is particularly important for a successful extension of the project to other countries of origin. In addition, valuable insights were gained from the wage analysis on how to further improve the process of collecting and validating wage data.  

The IDH Salary Matrix proved to be a useful tool for self-reporting. During this salary analysis, useful learning experiences and improvement opportunities for the tool were identified and shared with IDH to be taken up in the upcoming version of the salary matrix.

Next Steps for Even More Transparency

The working group aims to develop a robust approach to verifying self-reported wage data on the ground, based primarily on the existing verification mechanisms of certification organisations such as Rainforest Alliance and Fairtrade. In addition, the working group will explore complementary solutions, such as additional audits and the involvement of workers' representatives. As the next step is to extend the circle of countries beyond Ecuador, further wage analyses and an extension of the wage matrix to 100% of the banana volumes of the working group members are planned.

When wage gaps to a living wage are identified on a plantation, retailers want to help close these gaps by paying an individual price premium according to sourcing volumes. However, to adequately analyse wage gaps and ensure that they are fully closed in the long term, a concerted effort by the entire supply chain is required. Retailers are aware of this additional workload for supply chain partners and will explore options for additional support, especially for producers, as a first step. In addition, the working group wants to find solutions to better adapt its living wage roadmap to the situation of smallholder farmers.

For any inquiries, please contact: Nina Kuppetz nina.kuppetz@giz.de