Living Income Reference Prices
![Living Income Project Indonesia](https://images.fairtrade.net/_articleFull/Living-Income-Project_-Indonesia.jpg)
When farmers are trapped in poverty, they can’t afford to invest in more efficient or sustainable production methods to improve their income. They can’t pay their workers a decent wage, or worse, they may resort to using children for cheap labour.
A sector can never be sustainable if the farmers at the beginning of the supply chain aren’t able to make a decent living from the sales of their crop. That's why going beyond the Fairtrade Minimum Price and Premium, we developed the concept of a Living Income Reference Price.
What is a Living Income Reference Price?
This is the price a typical farmer household with a viable farm size and a sustainable productivity level needs in order to earn a living income from the sales of their crop. We currently have Living Income Reference Prices available for:
- Coffee: Nicaragua (2024)
- Coffee: Peru (2024)
- Cocoa: Côte d’Ivoire and Ghana (2023 update of Ivorian price to euros)
- Coffee: Ethiopia (2023)
- Coconut: Sri Lanka (2022)
- Coffee: Colombia (2022 updated)
- Coffee: Indonesia (2022)
- Coffee: Honduras (2022)
- Coffee: Uganda (2022)
- Vanilla: Madagascar (2024 updated; see report)
- Vanilla: Uganda (2019)
How do we calculate a living income reference price?
Fairtrade Living Income Reference Prices are calculated based on four key parameters:
- Costs to support a decent living (independent Living Income benchmarks)
- Sustainable target yield (stakeholder agreed productivity benchmark)
- Costs of sustainable production (investment required to attain the target yield)
- Viable land size (to fully absorb the available household labour)
The costs of decent living (or ‘living income benchmark’) are established for an average household in a specific country or region, and include: food expenditures (other than food that is produced on the farm for home consumption), decent housing, education, healthcare, clothing and other essentials, as well as a small provision for unexpected events.
The production costs are based on the adoption of sustainable agricultural practices required to reach the target productivity level, such as replacing old trees on a regular schedule and using adequate inputs. If besides the farm work by the household members external workers need to be hired, the costs to pay those workers a living wage are also included.
Productivity parameters are based on agreed assumptions for realistically attainable yields, and a farm size on which the adult household labour can be fully employed.
With these variables, we calculate Living Income Reference Prices to indicate the price that a full-time farmer meeting the target yield would need to earn to have a living income.
Contact us for more information on working with Fairtrade along the shared path towards living incomes for farmers. It’s the right thing to do – for farmers, for rural communities, and for a more just and sustainable world.