Posted on

Living Income for Dummies: Part I

This is the first of a series of posts about Living Income. The name ‘Living Income’ may sound boring, but it’s really the basis of what every ambitious social entrepreneur/company is looking to boost when they touch ground in developing countries. For a company like Moyee then (which checks all those boxes), boosting Living Income is one of our Holy Grails. What is the fairest price we can pay our farmers, for example? What is the fairest income we can offer an Ethiopian coffee farmer and his family? For answers we sat down with Jeroen Smits, associate professor at Nijmegen University and the Director of the Database Developing World (DDW).

Q: You have your own International Wealth Index (IWI) to measure the wealth of people in developing countries. How important is the IWI?

A: First, such an index makes it easy to follow and compare data from different countries over a long period of time. That’s important. Another big advantage is that the IWI doesn’t focus on income, which probably sounds strange when you’re writing a piece about Living Income. Think of it this way: what is more insightful when monitoring a farmers’ wealth? Focusing entirely on the few dollars he earns with his coffee and other crops? Which, as Moyee has transparently pointed out, might end up being spent on honey wine? Or is it smarter to look at his assets, such as the house he lives in. Does he own a bicycle, does he have electricity and water?

Q: In other words, money is just a means not an end goal.

A: An international poverty line has been established, of course. But my question is what do we know about the farmer when they earn two dollars a day? Not much, right? First, 2 dollars a day in Ethiopia is not the same as 2 dollars in Switzerland. Why should 2 dollars be the minimum in Ethiopia and not, say 1 dollar or 5? It completely depends on the cost of food, housing, education, etc.

Q: But there has to be a minimum wage, right?

A: In Ethiopia for example, for government employees there is a minimum wage, with an emphasis on ‘minimum’. But when it comes to independent entrepreneurs, which is what farmers are, wage levels hardly apply to them. For these people, for example, a mobile phone is essential. It’s probably the most coveted item around the world. Knowing whether a farmer owns one is a valuable piece of information. That’s why it scores high on our IWI Index. The same can be said for items like furniture and flooring material.

Q: You are helping us here at Moyee monitor the Living Income of our Ethiopian partners. Can you explain how that works.

A: All the data we have culled from surveys will be entered into our database. This information gives Moyee the opportunity to benchmark your own farmers and see how they score against the average of other farmers working in rural Ethiopia. And not only in Ethiopia, but with every developing country across the planet.

Q: We enter our data and a score rolls out?

A: Correct.

We entered the data we had gained from 2015 interviews and our farmers score 7/100, which is slightly below the national average for Ethiopia. We’ll be honest, 7 is very low. Farmers in Kenya, for example, often score more than 20/100. Farmers in China ring in at 70/100. The thing is, we already know this. Coffee farmers like those in Ethiopia are at the absolute bottom of the economic pyramid. The only caveat to this is: they farm extremely fertile soil which means they can easily grow their own food, meaning coffee farmers are never battling hunger.

Q: Is food supply integrated into your survey?

A: We didn’t include food supply into the standard IWI. This is because food supply can vary from year to year – influenced by El Niño for example – while the IWI items are more robust, and by that, you can monitor progress over, let’s say, a 10-year period.

In 2017 Moyee will collaborate with Jeroen and his IWI team to monitor the Living Incomes of our farmers. We’ll benchmark the area to determine what the fairest possible income is for the men and women who grow our coffee. It goes without saying that we’ll be shamelessly transparent about our data and information. It’s your coffee, after all.

Next up in our Living Income series: Noura Hanna from the Global Living Wage Coalition