Fair Trade: Does It Help Poor Workers?

Fair Trade: Does It Help Poor Workers?

♪ [music] ♪ – [Don] As part of Everyday
Economics, we asked you to tell us what topics
you want us to cover. You voted,
and from this last round, the second most popular suggestion
comes from Elizabeth, who asks, “How does the purchase
of fair trade goods affect wages in developing countries?” It’s an excellent question. Fair trade is one of several types
of activities aimed at increasing living standards
in the poorest countries. So let’s step back
to discuss these issues broadly. Most importantly,
it’s worthwhile to remember that, although working conditions
in poor countries are distressing from a Western vantage point,
the jobs that we find objectionable are voluntarily chosen
by the workers in those countries. That awful factory job
is the best available option for that person. When that job disappears,
then that poor peasant must take his second best option,
a job that he judged to be worse than the awful factory job. While we might
the working conditions intolerable, that’s because we now
have better options. If our goal is to help that worker,
we surely don’t want to destroy that job. That said, let’s look
at fair trade. To use the fair trade label,
one must comply with the standards and certification requirements
of one of a handful of fair trade organizations. Importantly, large producers
and producers in more wealthy countries
are better equipped than smaller producers
to meet fair trade requirements. For example, fair trade coffee comes from relatively wealthy
countries like Costa Rica, as opposed to from the poorest of the poor countries
like Ethiopia. So by choosing fair trade coffee,
you choose not to buy from the poorest producers. Is that fair? How about the workers
who are able to produce fair trade coffee. Do their wages improve? Studies so far show
no conclusive evidence that fair trade workers
receive any higher wages. These studies find that retailers
capture most of the extra money paid for fair trade coffee. So to answer the question. Fair trade lowers the demand
for coffee produced by the poorest workers, and so it forces many
of these workers into jobs that are worse than the ones
that they’d have without fair trade,
and for those workers who can thus produce
fair trade coffee, the extra money doesn’t get back
to them via the supply chain. So what can help poor workers? First, competition, for labor
is key to increasing wages. So rather than shrinking
employment options, which is what fair trade
policies do, it would make sense for us,
instead, to call for practices that maximize employment options
for poor workers. Of course, no employer
will pay any worker more than the value
that that worker can produce. So, while competition is necessary,
increasing worker productivity is the main path
to high and rising wages. And how do we do that? Answering that question
is part of an entire branch of economics,
Development Economics, that explores why some countries
are rich while others remain poor. Check out our MRU course
on that topic to learn more. Until then, please continue
to send us suggestions on what other questions
you’d like answered and vote on your favorites here. Here’s the current leader-board. Go vote and tell us what topics
you want covered next. ♪ [music] ♪


52 thoughts on “Fair Trade: Does It Help Poor Workers?”

  • I would appreciate sources for your claims about Fair Trade benefiting relatively rich countries and that retailers (rather than workers) benefits from the price premiums of Fair Trade products.Thanks!

  • Julia Spangler says:

    I think it's important to note that this video addresses the specific question of whether fair trade increases wages for workers, which is a completely different question than "does fair trade help poor workers?" Fair trade as a model includes several goals related to safe working conditions, the elimination of harmful forms of child labor, and empowerment for women. Those benefits aren't addressed in this video, so it's not a full assessment of the value of the fair trade model, just a look at one aspect.

    I'd be interested in looking at the source studies you mention to back up your claims about wages not increasing and retailers pocketing the majority of fair trade prices.

  • thirteendays13 says:

    This guy is horrible. There are plenty of fair trade coffees from Ethiopia. He provides no actual studies at all to back his point. And who the hell is he to call anyone a peasant? That's more than a bit offensive.

  • Unconvincing. What if I decide to buy from Ethiopia instead of Brazil, and what if I order direct from the producer? Then we are limited only by the access to information, but more and more information is available exponentially. By changing the argument to "wages" it's easy to say that people should stay working in the crappy factory, but it is not true.

  • wakeupinwinter says:

    What about working conditions like the Rana Plaza collapse? Doesn't fairtrade at least ensure some level of decent conditions for the workers versus other sourcing? I'm trying to wrap my mind around the possibility that fairtrade does more harm than good, I can't believe that completely uncontrolled out-sourcing is better. The current working conditions are abhorrent in most places.

  • I love your videos but as it pertains to “fair trade lowers the demand for coffee produced by the poorest workers” I think that’s a
    flawed and/or erroneous statement. This assumes all coffee is the same (commodity).
    As a marketer, by defining and labeling coffee as fair trade, you’ve actually created a whole new niche market and thus new demand that didn’t exist before by consumers willing to buy and pay for fair trade coffee. From the consumers standpoint, fair trade coffee and non-fair trade coffee are perceived as 2 different types of coffee. So fair trade coffee won’t lower demand but create new demand for a new product (fair trade coffee) that never existed.

    An analogy would be like when Nike once only sold running shoes. To increase sales and demand for shoes they invented/created new niche segments and categorized it as basketball shoes, cross training shoes, tennis shoes,
    etc. As a result of this improved labeling and perception, it created new segmented shoe markets and thus new demands for these new markets.


    This is actually a pretty good little video that explains a lot but fails to address the most salient issues of unfair trade practices. I do not ascribe to Trump's positions on blocking free trade nor do I believe Hillary's positions that completely free trade without restraint as diagramed in the TPP are the only answers. These two opposing plans do not appear to be good for the US and a middle ground should, I believe, be sought. That is why I ask the following questions:

    1) Since many third world and developing countries rely heavily on what is essentially slave labor, how can we hold best limit the ability of this type of unfair labor practice without hurting the economies of those countries which allow this to occur by rebranding slavery as something else when it is still slavery?

    2) How do we limit their ability to bring their goods to market when they are manufactured by child labor in unsafe working conditions?

    3) Finally, how do we limit a country such as China from setting up artificial financial supports for their industries and manipulating their currency to keep the cost of their good below that of what other countries can compete against?

  • Kolja investiert says:

    great Video! Also, even IF a fair-trade worker receives a higher wage, that still doesn't say much about the real issue of poverty. Because it still poses the question of wether it would be better to employ, say 10 workers for a wage of 1$ an hour, or 20 workers for a wage of 50 cents an hour

  • Fair Trade has its flaws. And I was hoping to find a video that illustrated that to show my students. But this video incorrectly assumes that the goods protected by fair trade and the workers planting/growing/harvesting them are getting paid at all. He didn't mention anything about the child slavery that happens in relation to cacao production in West Africa. And I'm not even against children working. I grew up on a farm and worked on it plenty. I'm against children and parents being told one thing (the child will be provided an education and be well taken care of) and then another thing happens in reality (40% of children on West African plantations receive no wages or education and are barely provided enough food to keep working, AND they can't decide to quit and do something else…which is by definition slavery. You didn't address the real elephant in the room, which really shows your bias.

  • wouldn't a high enough adoption of fair trade regulations, maybe in the form of a domestic 'tax' on certain types of goods to funds foreign & domestic development, lead to an end to 'race to the bottom' economics in the long term?

  • It's funny how you never see any movement for fair trade in commodities such as gold, for example. If a gold mining company can't produce and sell gold for a profit because the market price for gold is too low, they will have to suffer losses. Where is all the sympathy for the gold producers who can't mine at a profit? Why exactly is it that when you replace "gold miner" with "coffee farmer" all of a sudden there is moral pressure to make sure the farmer is paid a fair wage despite what the market price of coffee beans are??

  • I'm interested to see sources for this video. Equal Exchange, one of the largest Fair Trade coffee importers, offers single origin coffee from Ethiopia as well as various other places in Africa along with their options from South America. In many cases the point of Fair Trade is not to replace big factories (Although that would be great, look to Patagonia for an example of big companies who just do it right), but to give socially undermined people (i.e. women) safe, empowering employment opportunities in societies where it is believed that women should not work, or if they do, should work for less.

    Also, I'm no economist but it seems to me that boycotting Nike would not mean Nike and their factories going away, it would just force them to think about the people who are producing our things, and force the western world to pay a fair price for our products.

    Interested to hear thoughts and opinions.

  • So true. The smallest and poorest producers get left behind, as Fair Trade goods are often preferred. Yet their poverty is not enough to pay for the seal, nor all the requirements that require it.

  • I support fair trade as if all countries implemented a democratic system where their government represent their own citizens, then there would be no problem for all workers participating in the economy of their own counties nor struggling to survive in their own countries as right now while under free trade deals, our own countries business interests exploit lower wage workers/unlivable wages elsewhere with the worst regulations ending up harming the workers with unsafe working conditions, environment more often than necessary, and increasing profits for the business owners. Free trade does not benefit the workers more than fair trade, it benefits the business owners through producing the most productivity and paying the least amount of wages (least pay) to workers. Once every country develops to becoming equally developed, all countries can definitely support fair trade and live comfortably. Until then, the problems of less job availability, lower wages, lower regulation on purpose for causing more unnecessary harm to the environment and for paying workers least amount of wages/unlivable wages, etc. are all on the fault on injustice practices among all undemocratic nations who don't represent their citizens, not fair trade. Free trade is worse and needs to be eradicated effectively immediately.

  • ..fair trade increases quality of life tho, you can't be so money minded that u can honestly defend sweatshops against fair trade

  • Subcomandante T says:

    What kind of hack is this?

    "the employed of course cannot pay the worker more than he produces"

    As if that's how wage is determined. Like there is no profit margin!? Of course they are paid less than what they produce. By definition.

    He is also blatantly wrong on Ethiopia, which has a long standing tradition of fair trade cooperatives.

  • God, there are an awful lot angry Liberals in the comment section who have absolutely no understanding of logical, constructive discussion, and who immediately feel the need to jump to irrational conclusions about your ideology if you do not agree with their specific policy.

    News flash, simpletons, there is more than one way to achieve the same goal and just because two people disagree on policy doesn't mean they disagree on ideology.

    "This makes me sick". WHY? The individual in this video is providing logical options we have to support people from poor countries.

    "This is pure ideology, without any scientific and empirical evidence."

    Says the person who is not willing to provide any EVIDENCE as to why this 'pure ideology' and not fact-based. It is 100% proven that retail establishments capture more of the financial benefits from 'fair trade' than farmers in poor countries. This is absolutely undebatable.

    It is also absolutely undebatable that fair trade causes overproduction of crops and harms non-fair trade farmers, which, as this video accurately pointed out, usually come from the poorest countries due to the higher barriers to entry in fair trade production. This can even be historically backed up by events that occurred in Vietnam during the 1980s when coffee producers were paid artificially inflated prices.

    As any economist will tell you, NOT just right-wing 'free marketers', countries benefit from having access to global markets at the 'world price' of a good or service because while this means receiving less money for a given amount of a given crop, it generally means much greater volume. You are not benefiting farmers in poor countries by inflating the value of a good they provide if it means decreasing the amount of that good sold on the world market.

    "voluntarily chooses" – voluntarily?? You got to be joking!! Your analysis and suggestions are sarcastic at best!"

    What does this even mean? Please, learn to speak proper English. Yes, many workers in poor countries voluntarily choose jobs that people in this country would consider unsatisfactory. Clearly, you (like many other young, Liberal Millenials) have never traveled very far outside of the U.S. metropolitan center you comfortably live in. Canadas Temporary Foreign Worker program is an excellent example of this. In Canada, where there are strict minimum wage laws and a struggling agricultural sector, farmers are allowed to hire temporary foreign workers at significantly reduced wages. These temporary foreign workers, who often come from Mexico and other central/south American Countries, jump on this opportunity because although wages are low to Canadian Standards, they are very high compared to the standards in these countries.

    The arguments about blatantly INHUMANE working conditions are invalid because Fairtrade doesn't prevent these conditions from occurring, it simply prevents them from occurring on Fairtrade certified farms. We should be focusing on changing the socioeconomic structure of these countries that allow these working conditions to exist in the first place. Just because something is not fair trade certified, does not mean it is produced under unethical conditions. It should be illegal to hire child slaves, 'Fairtrade' certified, or not. Is that such a difficult concept?

    The simple fact is, there are better ways to help farmers, producers, and laborers in foreign countries, like better trade agreements. Please note that 'Fairtrade' isn't a trade agreement, but a private charity scheme invented by 'non-profit' organizations. Also, we should be looking more towards programs like Dairy Hubs which help improve small farmers access to large national, and international markets. A huge percentage of what small, independent farms produce, especially in these poorer countries, NEVER even gets the chance to make it to the global market because there isn't the necessary infrastructure in place. This is especially true for dairy farmers as dairy requires extensive refrigeration to avoid spoiling during transportation.

    You braindead pillocks make me sick to call myself a Liberal. Quite literally, all you can do is throw around mindless personal attacks making assumptions about peoples character because they disagree with what you think is sound policy. Please. 95% of you retards don't even understand the basic structure of your own country, let alone complex international relations. This man makes you sick because he wants to help poverty-stricken countries in a different way than you want to help poverty-stricken countries? Seek psychiatric care. Seriously.

    Its really no wonder Trump won the U.S. election with these toxic, mentally ill, uneducated people destroying left-wing politics. Please stop calling yourselves liberal. Marxism–Leninism ≠ Liberalism.

    You want to support farmers and producers in poor countries? Support responsible free trade agreements and pressure your government to sponsor effective programs like dairy hubs, micro-loans, direct trade, etc. Also, work on improving the socioeconomics of these countries, which is where the root of the problem lies.

    Stop spending absurd amounts of money for 'artisan', 'fair trade' coffee. 95% of people who buy this crap couldn't care less about the producers. If they did, they would donate to organizations that actually make a difference and not put money in the pockets of American owned fair trade coffee suppliers.

  • I guess that perspective has changed now , increasing productivity requires more AI technology than man power and so far i haven't heard of a real salvation up to now, the best idea which has been presented is to switch career paths towards artificial intelligence and innovation which sounds reasonable until you ask yourself how many jobs can it actually provide and how many people will have the right qualifications and the right capabilities ? And therefore only time shall reveal what's really gonna happen i think it's too soon to predict anything even though the causes and the reasons are clear

  • What utter rubbish. If everybody was buying fair trade coffee, all farmers would produce only that, even in the poorest countries.
    And there is fair trade coffee from Ethiopia.
    And there are many other benefits for the farmers from doing fair trade, apart from wages.
    And of course fair trade coffee increases the incomes to the farmers, and most crucially it makes the income more PREDICTABLE and set a MINIMUM INCOME, so farmers can plan their future.
    Does this guy even know what fair trade is??

  • You hear about some company taking an initiative, approaching farmers directly with better money for their coffee…
    Then you never hear about it again. Here's why:
    Inevitably the fair trade initiative has upset some local coffee kingpin, who either threaten or cut off the farmers from the market, and the whole thing rapidly collapses.

  • This is a red herring. Fair Trade's goal was never to increase wages, but improve political stability, environmental impact, and help business survive volatile market downturns and so fourth.

  • You undermine your status as an institution of education by including Taiwan in your map of China. They are not the same country.

  • He argues like he knows what his talking about, and his arguments seem like well founded based on facts and research. But a closer look it is flawed from start to finish. Poor people in poor countries don’t have the choice, multinational corporations brought their factories in poor countries because of cheap labor. Key word is ‘choice’. If you are smart and intellectual you will spot his flawed argument right away.

    He criticized Fair Trade, and uses the logo and principles of World Fair Trade Organization (WFTO). WFTO is not into raw materials certification and their principles are not the standards used for product certification. Check their website before you believe his argument. Now I am questioning the veracity of his facts. He seems to talk about a different Fair Trade system. Fair Trade is an approach and there are organizations that uses this approach and each has their own verification system. In short there are different Fair Trade systems. This video did not mention that. That is another flaw.

    Like WFTO, they are a community of social enterprises that are mission-led with different models of business. They have a different system, definitely not the one described in this video. Another flaw.

    Remember the caveat that Trump popularized: beware of fake news. Or in this case fake argument. Have fun!

  • detoxbvigilant52 says:


  • charlotte vegan says:

    I wonder how much he got paid to say such nonsense.
    If no one tolerated to buy anything but fair trade, or ad least, if everyone with a decent earning did that, then fair trade would become the norm, everywhere.
    And don't feed me the "many can't afford" because when I see how many people go out with 3-4 huge bags, full of clothes by primark, they could have bought just a few fair trade items. Better have a few quality items you can wear for years rather than a closet full of clothes that have to be replaced frequently because the quality is shit.
    When people boycott a brand for a specific reasons the brand prefers to change their ways rather than losing customers.

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