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Global Living Wage Coalition Benchmark Presentation Series Sri Lanka SRI LANKA LIVING WAGE: ESTATE SECTOR (TEA) Institute of Policy Studies of Sri Lanka Study team: Manoj Thibbotuwawa, Priyanka Jayawardena, Nisha Arunatilake, and Neluka Gunasekera

Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

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Page 1: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Global Living Wage CoalitionBenchmark Presentation SeriesSri Lanka 

SRI LANKA LIVING WAGE: ESTATE SECTOR (TEA)

Institute of Policy Studies of Sri Lanka

Study team: Manoj Thibbotuwawa, Priyanka Jayawardena, Nisha Arunatilake, and Neluka

Gunasekera

Page 2: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Contents

Context: Tea plantations About the studyHow living wage is estimated? Cost of a basic but decent life for a family Net living wage per person Gross living wage per person

Estimating gaps between living wage prevailing wage Recent wage trends Summary and conclusion

Page 3: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Context : Tea Plantation 

Traditionally, tea has been a major export commodity in Sri Lanka 

Although, the importance of tea has reduced over the years, still it contributes significantly to the economy 

14.6% of the total exports was from tea

Plantation workers and their families who reside in the estates are called plantation community.  About 4.4% of the Sri Lankan population, lives in the estate sector Majority of the estate population, are descendants of families 

brought from South India to work during the British colonial period

Plantation community is socially, economically and politically isolated ‐‐due to historical, cultural, geographical and other reasons.

Page 4: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

About the Study

Estimates a living wage for the tea pluckers in Sri Lanka

Study uses the Anker methodology to estimate the living wage

Living wage is very basic and represents minimum levels of decency for the estate sector

Methodology is practical ‐ mix of critical analyses of secondary data and rapid assessment methods for collection of primary data.

Page 5: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Data

• HIES 2012/13• LFS 2013

Secondary data

• Housing information and expenses on health, education and market prices 

Field data

• Price variation data (Source: HARTI)• Model house cost (Source: PHDT)

Other

Page 6: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

How a living wage is estimated?

Page 7: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Three main steps

Cost of a basic but decent life for a family

Net Living Wage per person

Gross Living Wage per person

Step 1:

Step 2:

Step 3:

Page 8: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

FAMILY SIZE & FULL‐TIME WORKERS IN FAMILY

• 2 adults + 2.5 children                     (Estate sector TFR 2.5)Family size

• Probability of a full‐time worker =LFPR X (1‐Unemployment rate) X (1.0‐(Part‐time employment rate/2))

• 1.76

Number of full‐time equivalent 

workers per family

Page 9: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Key values and assumptions for a living wage estimate

Indicator Key values

Location (& industry if relevant) Tea industry workers inSri Lanka

Number of full‐time workdays permonth

25 days

Number of hours in normal workweek 40 hours

Number of workers per couple 1.76

Reference family size 4.5 people

Number of children in reference family 2.5

Page 10: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Cost of basic but decent

life for reference size family

Basic decent housing

Cost for a low cost nutritious

diet

Non-food Non-housing

Cost

Small margin for

unforeseen event

Step 1: How do you measure the cost of basic but decent life for a family?

Page 11: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

FOOD COST

Page 12: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Model Diet 

• Standard family with 2 adults + 2.5 children• Both adults with vigorous activity levels• 2408 calories per person per day (Poverty line 2030)

Calorie requirement

• Estate sector food consumption data (HIES 2012/13)• Lowest cost food items per edible gram with acceptable quality

Food selection

• WHO/FAO (2003) recommended standards• Nutritious ‐ acceptable quantities of proteins, fats, carbohydrates, and micronutrients

Nutritional adjustments

• The amount of each good * price• Food prices from the places workers typically shop; seasonal variations adjusted

• Miscellaneous food cost, 20% added

Food cost

Page 13: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Model Diet (per person per day)

Protein –12.2% (10-15%)

Carbohydrates64.5%

(55-75%)

Veggies & fruits264 g per day (400g)

Fats23.3%(15-30%)

Edible gramsRice 234Wheat flour 72

Bread

57 (2 servings per 

week)Cassava 18Vegetables 180Dhal 56Milk 150

Eggs6

(1 egg per week)Chicken 4Fish 43Dried sprat 11Coconut 75

Banana 

84(2 bananas per 

day)Coconut oil 14Sugar 34Tea 2 cups per adult

Page 14: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Item LKR

Total food cost for per person/day 133

Total Food costs for a family of 4.5people per day

598

Adjusted Monthly food costs for afamily

18,190

Food Cost Calculations

Page 15: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

HOUSING COST

Page 16: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Standards of Housing

Cement floor Cement block walls Corrugated metal (takaran) sheet roof without leaks Ceiling at least 2m at lowest point At least 3 rooms (living room, 2 bedrooms)  ‐ more than 1 window per room Piped water for drinking within house, inside premises, or in close proximity to house Water seal latrine in good condition within house, inside premise, or in close proximity to house Electricity as source of lighting  Separate kitchen with windows or chimney At least 50 square meters of floor space Housing structure is in reasonable condition

Page 17: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Housing Costs

• Depreciated value of PHDT house (worth Rs. 1.2 million) assuming 50 years life time

Rental equivalent value of a basic acceptable 

dwelling

• Water, lighting (electricity) and cooking fuel (either electricity, gas or fuel woodUtility costs 

• 2% of construction cost annually Repair and maintenance cost

Page 18: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Housing Cost Calculations

Item Cost (LKR)

Rent 4,000

Utilities and other housing costs 1,003

Monthly Housing Costs for a family 5,003

Page 19: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Non‐Food Non‐Housing (NFNH) Cost

• Using HIES 2012/13, based on Anker methodology

• 50th percentile income distribution• Exclude some unnecessary expenditure ‐‐tobacco 

NFNH expenditure

• Preliminary  NFNH cost = NFNH / food ratio X Cost of model dietNFNH cost

• For Health and Education• Cross checked with rapid assessment data• Adjustments were  done to ensure that sufficient funds available for decent living

Post‐check adjustment

Page 20: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

NFNH Cost

Cost itemHIES based estimate of 

costs*

Rapid Assessment of costs*

Post check adjustment

Health 512 872 360

Education 566 1,670 1,100Total NFNH cost(preliminary) 7,406Total adjusted NFNH costs

8,866*For a reference family

Page 21: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

ESTIMATING GAPS BETWEEN LIVING WAGES AND PREVAILING WAGES

Page 22: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Living Wage (December 2015)

STEP Item LKR

1

(1) Food cost per month for reference family 18,190

(2) Housing costs per month 5,003

(3) Non‐food non‐housing costs 8,866

(4) Additional 5% for sustainability and emergencies 1,603

(5) Costs/month for basic but decent living standard  33,661

2 (6) Net Living wage per month, net [6=5/1.76] 19,126

3(7) Mandatory deductions1 from pay  2,459

(8) Gross wage required per month for Living Wage [8=6+7] 21,585Notes: 1Mandatory deductions include worker contribution for EPF (10%), Kovil fund (LKR 150/month) 

and union fund (LKR 150/month)

Page 23: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

How to calculate the prevailing wages

Overtime payment not included Allowances and benefits: granted to majority of

workers on regular basis In-kind benefits: of value to workers and their

families; of minimum standards; provided on regular basis

Page 24: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Prevalent wage (December 2015)

STEP Item LKR

1 Basic wage (Rs. 450/day) 11,250

Mandatory allowances1 4,772

2 Take home pay 16,022

In‐kind benefits2 949

3 Total  16,971Notes: 1Common cash allowances and bonuses include attendance incentive (LKR 140/day), price       

share supplement (LKR 30/day), attendance bonus (LKR 850/annum), and over kilo payment after deducting employees EPF contribution (LKR 18.40/kg)

2Common in‐kind benefits include imputed cost for housing based on HIES 2012/13

Page 25: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Living Wage Update

2015 December 1

2016October2

2017   July3

NCPI 113.2 114.7 122.4NCPI change (%) 0 1.33 8.13Net Living Wage (per month) 19,126 19,380 20,681Mandatory deductions 2,459 2,488 2,635Gross Living Wage (per month) 21,585 21,868 23,315

Notes:  1 Study data collection done in December 2015 2Most recent wage revision in October 20163Latest inflation data available for July 2017

Page 26: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Prevailing Wage Update

2015 December 1

2016October2

2017   July3

Basic wage (450/day500/day) 11,250 12,500 12,500Mandatory allowances 4,773 5,5604 5,560In‐kind benefits 949 961 1,026

Gross Living Wage (per month) 16,971 19,021 19,086

Notes:  1 Study data collection (Dec. 2015)               2 Most recent wage revision (Oct. 2016)3 Latest inflation data available (July 2017)  4 Productivity incentive of LKR 140, Price Share Supplement (PSS) of LKR 30 and an attendance incentive of LKR 60, over‐kilo payment of LKR 25 per kilogram

Page 27: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Wage Ladder

6,2218,236

10,150

16,971

19,021 19,086

21,585 21,866

23,314

0

5000

10000

15000

20000

25000

$1.90 povertyline

Official povertyline

$3.10 povertyline

Prevailing wage Living Wage Prevailing wage Living wage Prevailing wage Living Wage

2016(PPP adjusted)

2015‐Dec(Reference)

2016‐Oct(Wage revision)

2017‐Jul(Adjusted)

LKR

Poverty line wages Inkind benefits Basic wage Bonus & incentives Net living wage Mandatory deductions

Page 28: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

RECENT WAGE TRENDS

Page 29: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Sub‐sectoral Nominal Wage rates (2014)

Page 30: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Comparison of Real Wages in Agriculture

Page 31: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Tea Sector Wages with Inflation

Page 32: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Summary & Conclusion

Slight difference between prevailing wages for most workers on tea estates and our estimate of a living wage for the estate sectorDespite significant improvements over the years, the living conditions of the tea estate community are still not up to standard. All these conditions cannot be attributed only to the existing wage gap as plantation sector workers earn a relatively higher wage than the workers in other formal sectors

Page 33: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

Is the balance right? 

Companies Workers

Page 34: Global Living Wage Coalition SRI LANKA LIVING WAGE: ESTATE SECTOR

THANK YOU