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Chocolate — Food of the GodsLesson 9 of 16

The Fifty-Cent Question

Goal: After this lesson you can weigh fair trade against the living-wage gap and explain the small price increase it would take to close it. Subject: Economics | Run time: about 7 minutes

Quick recall

Last time we covered the commodity trap. Two quick questions. One: of a chocolate bar's price, about what share reaches the farmer? Only about 3 to 6 percent (International Cocoa Organization, 2023). Two: what is a monopsony? A market with few buyers and many sellers, where the few buyers set the terms (Fountain and Huetz-Adams, 2023).

Why this matters

Here is the gap at the heart of this episode. A cacao farmer earns about 0.50 to 0.84 dollars a day. To actually live, that same farmer needs around 6 dollars a day (Fairtrade Foundation, 2023). So the farmer is making roughly a tenth of what survival costs. That space between what someone earns and what they need to live has a name: the living wage gap. The whole question of this lesson is how big that gap really is, and how little it might take to close.

The idea

First, look at what changes when farmers get a better deal. Fair trade sets a higher, more stable price and adds a premium on top. Compare it to conventional cacao. Under conventional terms, child labor prevalence is about 31 percent. Under fair trade, it falls to about 12 percent (Fountain and Huetz-Adams, 2023). School attendance moves the same direction: about 58 percent for conventional, about 78 percent for fair trade (Fountain and Huetz-Adams, 2023). When the family earns more, fewer children work and more children sit in a classroom.

Where does the fair trade premium go? It is spent on the community, not handed out as cash. The largest share goes to community development, then education programs, then healthcare, then infrastructure (Fountain and Huetz-Adams, 2023). So the premium builds the things a village needs to climb out of poverty, not just a single paycheck.

Now a harder idea. Fair trade chocolate often costs more, sometimes much more. A thoughtfully sourced bar might be 8 dollars while a conventional bar is 1 dollar. That sets up something called ethical-consumption inequality. The ability to buy the expensive ethical bar correlates with income (Fountain and Huetz-Adams, 2023). In plain terms, doing the right thing at the checkout is easier if you have money. So we can't just tell every shopper to buy the 8 dollar bar, because not every shopper can.

That is what makes the last fact so striking. You don't actually need an 8 dollar bar to pay a farmer a living wage. Paying farmers enough to reach that roughly 6 dollar a day living wage would raise a 3 dollar bar to about 3.45 dollars (Fountain and Huetz-Adams, 2023). That is only about a 15 percent increase. Forty-five cents. The fifty-cent question of this lesson is right there: would you pay an extra 45 cents on a 3 dollar bar so the person who grew it could live? The gap is enormous for the farmer, and small for you.

Picture it

Picture two bars on a counter. One costs 3 dollars and the farmer behind it earns under a dollar a day. The other costs 3 dollars and 45 cents, and the farmer behind it earns a living wage. Hold the two bars in your hands. They feel identical. The only difference is 45 cents and whether a family can afford to send its children to school instead of to the field.

Remember this

The fact to carry out: cacao farmers earn about 0.50 to 0.84 dollars a day against the 6 dollars needed to live, and closing that gap would raise a 3 dollar bar only to about 3.45 dollars, about a 15 percent increase (Fairtrade Foundation, 2023; Fountain and Huetz-Adams, 2023). The living wage gap is wide for the farmer and narrow for the buyer.

Quick check

Quick check. About how much would a 3 dollar bar cost if farmers were paid a living wage? About 3.45 dollars, roughly a 15 percent increase (Fountain and Huetz-Adams, 2023).

Key Takeaways

  • The living wage gap: cacao farmers earn about 0.50 to 0.84 dollars a day against the roughly 6 dollars a day needed to live (Fairtrade Foundation, 2023).
  • Under fair trade, child labor prevalence falls from about 31 percent to about 12 percent, and school attendance rises from about 58 percent to about 78 percent (Fountain and Huetz-Adams, 2023).
  • The fair trade premium funds community development, education, healthcare, and infrastructure; ethical-consumption inequality means buying the expensive bar tracks income, like an 8 dollar bar versus a 1 dollar bar (Fountain and Huetz-Adams, 2023).
  • Paying farmers a living wage would raise a 3 dollar bar to about 3.45 dollars, only about a 15 percent increase (Fountain and Huetz-Adams, 2023).

Sources

  • Fairtrade Foundation. (2023). Cocoa farmer income and poverty reduction report. https://www.fairtrade.net
  • Fountain, A., & Huetz-Adams, F. (2023). Cocoa barometer 2023: Assessing sustainability in cocoa supply chains. VOICE Network. https://www.voicenetwork.cc
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