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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
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
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.
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.
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
How a living wage is estimated?
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:
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
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
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?
FOOD COST
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
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
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
HOUSING COST
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
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
Housing Cost Calculations
Item Cost (LKR)
Rent 4,000
Utilities and other housing costs 1,003
Monthly Housing Costs for a family 5,003
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
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
ESTIMATING GAPS BETWEEN LIVING WAGES AND PREVAILING WAGES
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)
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
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
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
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
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
RECENT WAGE TRENDS
Sub‐sectoral Nominal Wage rates (2014)
Comparison of Real Wages in Agriculture
Tea Sector Wages with Inflation
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
Is the balance right?
Companies Workers
THANK YOU