Fall 08 Living Wage Report Rural Guatemala Central Departments: Context Provided in the Coffee Sector September 2016 By: Koen Voorend, Richard Anker and Martha Anker Photo courtesy of – Koen Voorend Series 1, Report 16 March 2018 Prepared for: The Global Living Wage Coalition Under the Aegis of Fairtrade International, Forest Stewardship Council, GoodWeave International, Rainforest Alliance, Social Accountability International, Sustainable Agriculture Network, and UTZ, in partnership with ISEAL Alliance and Richard Anker and Martha Anker Living Wage Report for Rural Central Valley Area of Guatemala EXECUTIVE SUMMARY .................................................................................................................................. 3 ABOUT THE AUTHORS ................................................................................................................................... 4 ACKNOWLEDGEMENTS ................................................................................................................................. 5 SECTION I: INTRODUCTION ........................................................................................................................... 6 1. Background ............................................................................................................................................... 6 2. Living wage estimate ................................................................................................................................ 7 3. Context ...................................................................................................................................................... 7 3.1. Guatemala and its economy ........................................................................................................... 7 3.2. The locations and methodological strategy for this study ............................................................. 8 3.3. The Guatemalan coffee sector ..................................................................................................... 13 3.4. Methodological strategy on the ground ....................................................................................... 16 4. Concept and definition of a living wage ................................................................................................. 18 5. How a living wage is estimated .............................................................................................................. 19 SECTION II: COST OF A BASIC BUT DECENT LIFE FOR A WORKER AND HIS OR HER FAMILY .................... 21 6. Food costs................................................................................................................................................ 21 6.1 General principles of model diet ................................................................................................... 21 6.2 Model diet for rural central Guatemala ........................................................................................ 21 6.3 Food prices .................................................................................................................................... 27 7. Housing costs .......................................................................................................................................... 28 7.1 Standard for basic acceptable local housing ................................................................................. 30 7.2 Rent for basic acceptable housing ................................................................................................. 31 8. Non-food and non-housing costs ........................................................................................................... 35 9. Post checks of non-food and non-housing costs.................................................................................... 38 9.1 Health care post check .................................................................................................................. 39 9.2 Education post check ..................................................................................................................... 41 9.3 Transportation post check ............................................................................................................. 43 9.4 Overview of NFNH costs ................................................................................................................ 45 10. Provision for unexpected events to ensure sustainability .................................................................. 46 SECTION III: LIVING WAGE FOR WORKERS ................................................................................................. 48 11. Family size needing to be supported by living wage ........................................................................... 48 12. Number of full-time equivalent workers in family providing support ................................................ 49 13. Take home pay required and taking taxes and mandatory deductions from pay into account ........ 50 SECTION IV: ESTIMATING GAPS BETWEEN LIVING WAGE AND PREVAILING WAGES .............................. 52 14. Prevailing wages in Coffee Sector ........................................................................................................ 52 14.1 Basic wage, cash allowances and bonuses, and overtime pay .................................................... 52 © Global Living Wage Coalition 1 Under the Aegis of Fairtrade International, Forest Stewardship Council, GoodWeave International, Rainforest Alliance, Social Accountability International, Sustainable Agriculture Network, and UTZ, in partnership with ISEAL Alliance and Richard Anker and Martha Anker Living Wage Report for Rural Central Valley Area of Guatemala 14.2 In-kind benefits as partial payment of living wage ...................................................................... 53 15. Living wage in context and compared to other wages ........................................................................ 53 15.1 Wage ladder ................................................................................................................................ 55 15.2 Wage trends ................................................................................................................................ 56 16. Conclusions ........................................................................................................................................... 58 REFERENCES ................................................................................................................................................ 63 ANNEXES ..................................................................................................................................................... 65 © Global Living Wage Coalition 2 Under the Aegis of Fairtrade International, Forest Stewardship Council, GoodWeave International, Rainforest Alliance, Social Accountability International, Sustainable Agriculture Network, and UTZ, in partnership with ISEAL Alliance and Richard Anker and Martha Anker Living Wage Report for Rural Central Valley Area of Guatemala EXECUTIVE SUMMARY This report estimates a living wage for Guatemala for September 2016 for rural areas of the Central Departments, focusing on agriculture, and specifically (although not exclusively) on the coffee sector. It was commissioned by UTZ, a member of The Global Living Wage Coalition, made up of Fairtrade International, Forest Stewardship Council (FSC), Goodweave International, Rainforest Alliance (RA), Social Accountability International (SAI), Sustainable Agriculture Network (SAN), and UTZ, in partnership with the ISEAL Alliance and Richard and Martha Anker. The study uses the Anker methodology (Anker and Anker, 2017), adopted by the Global Living Wage Coalition, that builds and improves on their earlier work on living wages published by ILO (see Anker, 2006a, 2006b, 2011). This methodology has been used so far to estimate living wage benchmarks for urban and rural areas in more than 25 locations globally, with many more studies underway. This living wage study calculates the cost of a simple, but decent life, including a model diet that complies with WHO nutrition standards, and a housing standard that meets minimum international standards adapted for rural Guatemala. This report estimates the gross living wage for central rural Guatemala for September 2016 to be Quetzal (GTQ) 2,689 (US$ 359) per month. This living wage estimate is considerably higher than average prevailing wages of year around formal sector workers in the rural coffee sector of Guatemala’s Central Departments (around 60% higher than the closest estimate of prevailing wages) and the national poverty line wage (by around 50%). On the other hand, the living wage estimated is similar to government’s monthly minimum wage for agriculture that assumes 30.42 workdays per month and only about 21% more than the minimum wage if one assumes 24 work days a month. However, most agricultural workers, including in the coffee sector, are paid on a piece rate basis and earn less than the minimum wage. The paper calls for making living wage an important objective for the coffee sector with the entire value chain participating in efforts to raise wages. © Global Living Wage Coalition 3 Under the Aegis of Fairtrade International, Forest Stewardship Council, GoodWeave International, Rainforest Alliance, Social Accountability International, Sustainable