The Cost of a Cup of Tea

The tea industry in India is in crisis – and one of the answers is to improve social dialogue. In this extended blog, Stirling Smith explains research that Just Solutions has recently carried out on low wages for tea workers in India.

Tea is the most popular drink in the world – after water. And most tea drinkers – in the UK at least – associate tea with India. Rightly so, because by the end of the 19th century, British-owned tea plantations provided the bulk of tea drunk in the UK.

All the tea in China

All the tea imported into Britain in the eighteenth century came from China and, to pay for it, in 1776 the East India Company created a market for opium, grown under government control in India. The opium was sent to China and exchanged for tea. The massive scale of opium addiction, encouraged by the British, eventually led to the opium wars of 1839-42 between Britain and China.

In the late 1840s, the British began to grow tea in Assam, in north-eastern India. Tea cultivation spread to southern India, and then to Ceylon (now Sri Lanka) in the 1880s, after the previous crop, coffee, was wiped out by disease. By 1900, India and Ceylon were supplying most of Britain’s tea, 61lbs per head of population (27.6 kilograms). India replaced China as the source of tea, as drinking tea grown in the Empire was encouraged.

Only in 1907 did Britain finally agree to stop exporting opium from India to China.

But that is another story…

Slave labour?

British dependence on Indian tea has changed – today, more tea probably comes from Kenya, but in most people’s minds, tea remains linked to India.

And because of that, there has been a lot of interest in reports published in the last few years on the low wages and poor conditions of tea plantation workers, especially in Assam and Darjeeling, and allegations of slavery in tea production.

Last year the Fairtrade Foundation asked Just Solutions to research tea workers’ wages in north east India. Everybody – well nearly everybody – accepts that the workers’ wages should increase. But is the answer to low wages just that employers should pay more?

There is actually a complex puzzle of different obstacles to better pay – a Rubik’s Cube of issues. Making sense of all these factors was what we were tasked with doing by the Fairtrade Foundation.

Chronic low wages – a national problem

India has a chronic low wage problem. Using a formula laid down by the tripartite Indian Labour Conference, and amended by the Supreme Court, a national minimum wage would be set at between INR 350-400 per day. 92% of women workers in India earn less than this amount.

50% of workers in India currently earn below 166 rupees a day.

There is an immensely complicated minimum wages system in India, with each state setting rates for different occupations, or areas of the state, and different rates for highly skilled, skilled, semiskilled, and unskilled workers.

Guess what? Most workers are described as unskilled, whatever they do.

It has been calculated that there are 8,000 different minimum wage rates in India!

You read that right. There were three noughts there. 8,000 minimum rates. A simple national rate, that everyone could understand, with no argument about skill level, would be a huge improvement. The law is supposed to be changing to bring such a national minimum wage, and more of that later.

Non-wage benefits

In the tea industry, workers’ cash wages are supplemented with a range of in-kind benefits including housing and healthcare; these are a legal requirement under the Plantation Labour Act, 1951. In addition, in north-east India, collective bargaining agreements between the trade unions representing workers and the employers’ associations, provide for subsidised food rations to be distributed to workers. All these ‘in kind’ elements are taken into the calculation of the wage for tea workers.

These arrangements are, in theory, permitted under the relevant international labour conventions, under certain conditions, and Just Solutions has a long experience of working with the ILO. We looked in detail at this issue, and we found that the “in-kind” elements in Indian tea workers’ wages fail to meet the tests set down by the ILO. Many estates do not provide these benefits anyway (which, just to stress, are legal requirements) and where provided they are not of the appropriate quality. Per capita expenditure on healthcare in tea plantations is about half the national level. Maternal mortality rates and anaemia levels are well above the national average.

These non-wage benefits have become a way of disciplining workers and are often a cause of conflict on plantations. There have even been cases of a worker dying, and his or her colleagues blaming the plantation doctor – who is then attacked – and in some cases killed.

Women workers

The tea industry is unusual in India’s organised sector in employing a high number of women workers. Women in the tea industry are almost entirely absent from decision-making structures. Issues such as maternity leave and sexual harassment, which have seen recent legal changes, seem to be completely ignored. Discrimination against women workers is built into the ration system: a female-headed household gets less rations than a male-headed household.

Health outcomes on plantations are poor. Anaemia rates for women are astonishingly high. Maternal mortality rates in upper Assam are twice the national average, and three quarters of these deaths are in tea plantations.

There is an almost total gender division of labour with women as pluckers, while men work in factories and sub-staff positions such as supervisor. Only one, small, trade union has a woman general secretary. There seem to be no gender bargaining proposals put forward by the trade unions.

Collective bargaining

A minimum wage set by government is only one of the mechanisms for deciding wages; the other, much better mechanism for wage setting is through collective bargaining.

And tea in India has a long history of industrial relations collective-bargaining at state level. There are powerful employers’ associations and a long history of trade unionism.

None of the previous reports had studied industrial relations in the tea sector. But this is one of our areas of expertise, and our findings here were quite startling.

Cash wages produced as a result of collective bargaining were low. In 2015, the Assam wages agreement provided for a minimum daily rate of only Rupees 115, rising to Rupees 137 by 2017.

Plantation workers and their families are a huge “vote bank” in Assam. And the Bharatiya Janata Party (BJP) was desperate to capture these votes which traditionally had gone to the Congress Party. So politicians promised that if they were elected to power, they would declare a minimum wage of Rupees 350.

At national and at state level in Assam, the BJP now rules; needless to say, it has not increased wages as promised. The state government announced a minimum wage rate of just Rupees 143.5 per day, by-passing the collective bargaining agreement.

This political interference in the collective-bargaining process resulted in employers using the legal route and they went to the courts to suspend the government notification.

Trade unions

While industrial relations have been almost totally ignored in most other recent reports, everybody thinks that they understand the trade unions, which have received a bad press. At Just Solutions, we really understand trade unions; and Indian trade unions are particularly difficult to get to grips with.

The trade unions in the tea industry are not as bad as many people make out, however, and they have mostly the same characteristics as trade unions in other sectors in India.

The Plantations Labour Act was part of the 1950s post-colonial settlement in the industry; another key component was the establishment of industrial relations and collective bargaining at state level. Management accepted the role of trade unions, which served as a watchdog for the implementation of the law, in the absence of effective labour inspection.

Sure, there were problems with the system. There is no doubt that the cash wages produced by collective-bargaining were low, but this should be remembered in the context of a very weak collective-bargaining position.

But recent years has seen an increasing tendency to by-pass industrial relations and to seek to marginalise trade unions altogether. International organisations, NGOs and employers have supported so-called ‘worker voice’ structures that are in violation of the ILO Convention No. 135 on workers’ representatives. None of these can operate above the level of the individual plantation and they cannot engage in collective bargaining. While the trade unions have several shortcomings, particularly on gender issues, they are the most bone fide representatives of tea workers.

Small tea growers

Another hugely important phenomenon, which most studies of the problems in tea have completely ignored, has been the spectacular growth in the small tea growing (STG) sector, which is something of a misnomer. Many small tea growers are in fact large farmers and employ hired labour with none of the safeguards that apply in the organised plantation sector. No trade unions, and no “in-kind” benefits.

In West Bengal, the small tea growers association has proudly announced an increase in the minimum wage of 9 Rupees a day to …. wait for it…159 Rupees a day.

That is actually less than the cash wages paid to workers in the organised plantation sector who also receive housing, healthcare, and subsidised food rations – yes, we know these are poor quality, but they are a benefit.

The small tea sector has received considerable support from the Indian government. No attention at all has been paid to the environmental costs of the expansion of the small tea sector, with indiscriminate use of agrochemicals. Much of this expansion has been on land previously used for growing food.

With more productive, new tea bushes, lower wages and no “social costs”, the small tea growing sector has a lower cost of production than the traditional plantations and is driving down the price of tea.

In effect, what we are seeing is a “race to the bottom” in the tea industry.

The traditional, organised (and unionised) large plantations are now operating on very thin margins. Big players in tea are selling off their estates and concentrate on added value packing and marketing.

Labour law changes

Meanwhile, the central government has undertaken a process of consolidating more than 40 existing labour laws into four new “codes”. The first of these, the Wages Code, provides for a national floor minimum wage, and the definition of wage excludes the use of ‘in-kind’ benefits.

Under another new code on occupational safety, health and working conditions (OSH Code), the Plantation Labour Act will be repealed but the provisions for non-wage benefits will continue.

Thus, it is possible that the tea industry will be faced with a requirement to pay higher cash wages while continuing to provide some non-wage benefits. Existing margins are thin, and the Covid-19 pandemic has delivered a considerable short-term shock, as plantation activities were shut down. Some vulnerable companies may exit the business. Estates have been abandoned in previous downturns, particularly in the Dooars/Terai region. The position of workers in estates that have been abandoned has been critical, with starvation deaths reported and cases of human trafficking.

Turning the clock back 100 years

The labour law reform process may well be stalled, as government attention is focussed on dealing with Covid-19. But important changes are taking place in labour law.

In May 2020, several state governments announced that they were suspending the operations of some labour laws. Some have announced that the working week can go up to 72 hours, with no overtime payments. This extraordinary step backwards is contrary to the provisions of the ILO Convention No. 1, which India ratified in 1921.

Effectively, for millions of workers, the clock has been turned back 100 years.

What would be a ‘living wage’?

So far, we have not mentioned what a reasonable wage for workers in the tea industry might be.

As part of our research for the Fairtrade Foundation, we constructed a comprehensive “wages ladder”. This lists all possible wage rates that will provide a comparison. When looking at any workplace or industry, it is important to see how the wages being paid relate to similar occupations, well established poverty benchmarks, and average earnings.

One useful benchmark is the Global Living Wage Coalition figure for rural workers in another part of India, Uttar Pradesh; that is 408 Rupees a day.

Using the methodology proposed by the tripartite Indian Labour Conference, and amended by the Supreme Court in India, a government committee came up with a figure of 375 Rupees per day as a national minimum wage. The government of Assam itself has come up with a figure of 351 Rupees per day as an appropriate figure for the tea industry.

These figures are not too far apart. A wage of between 350-400 a day would seem to be supported by all the organisations that have tried to calculate basic minimum requirements.

The issue remains whether part of these wages can be given “in-kind”.

Summing up

There is no doubt that the cash wages for tea workers are very low, but this should be remembered in the context of a weak collective-bargaining position, and chronic low wages in India as a whole.

Previous research has neglected the role of collective bargaining and has disregarded any role for trade unions. While the role of government in setting a minimum wage will remain dominant in the Indian context, it may still take years before the government implements the new law on a national floor minimum wage; and the level it sets may not reflect the methodology which we discussed in this blog. And, unless the government resolves the issue of wages being partially paid in cash and partially “in-kind”, many difficulties will remain.

But our research led us to conclude that the revival of social dialogue – including collective bargaining at state level and, possibly even more importantly, establishing a real system of worker representation at plantation level – must be an important part of any future for a sustainable tea industry.

Interference by government in wage-setting for purposes of political grandstanding, or by-passing trade unions by supporting alternative “workers’ committees”, are not going to help improve workers’ lives.

A new system of worker representation should provide more space for women workers, who are the majority of workers in the tea industry in India. Their interests need to be at the centre of any new system for wages and collective bargaining.

This will mean a programme of support to improve collective bargaining, and particularly trade union education. We are looking forward to a future action phase of this assignment.