Global supply chains keep workers poor: three case studies show how the cycle can be broken

Workers harvesting grapes for wine production in the Western Cape province of South Africa. Photo by David Silverman/Getty Images Globally, about one in five people in jobs live in poverty. A key reason lies in how global supply chains are organised. From agriculture to tourism, many jobs are embedded in systems that keep wages low, even as they generate value for international markets.

This has brought renewed urgency to the living wage debate. In 2024, the International Labour Organisation (ILO) formally endorsed general principles for defining and calculating living wages across different national contexts, including guidance on wage-setting and implementation. Living wages are pay for work that is high enough for the worker and their family to sustain a decent life.

We are researchers working on living wages, labour conditions and sustainable livelihoods, including those in global value chains in Africa. We argue that the growing recognition of living wages shifts the question from whether workers should earn enough to live on to how to make it happen.

But turning this idea into reality is far from straightforward. Our recent article, based on evidence from Africa, shows that some well-intentioned efforts to raise wages can backfire, while alternative approaches tailored to the local context are beginning to show more promise.

Our research is focused on socially innovative organisations in Africa. It shows that change is possible. But only if the focus shifts beyond compliance in the form of tick-box approaches and policing, and instead fosters collaboration between buyers, suppliers, workers and other actors across the value chain. This also requires moves away from constant cost-cutting through low wages and precarious work and towards supply chains that support sustainable livelihoods.

Our research has analysed living wages, labour conditions and social innovation across supply chains in sectors including agriculture and tourism. It showed that global supply chains often place suppliers and workers under intense pressure to reduce costs. This is because today’s global economy is organised through complex supply chains that stretch across countries. Products like fruit, coffee or clothing are often produced in lower-income countries and sold in wealthier markets.

Read more: Ghana’s cocoa farmers are trapped by the chocolate industry

These systems create efficiencies and economic opportunities. But they also concentrate power in the hands of large multinational buyers, such as supermarkets or global brands. These companies typically control pricing, standards and purchasing conditions.

As a result, lead companies capture most of the value, while suppliers – and especially workers – receive a much smaller share. In some industries, producers capture only a fraction of the final retail price. To remain competitive, suppliers are under constant pressure to reduce costs.

In this environment, wages are often treated as a flexible expense. This can lead to a “race to the bottom”, where countries and companies compete by keeping labour costs low.

Our research shows that over the past two decades, many governments and companies along supply chains have tried to improve working conditions through standards and certification schemes. These include specific requirements related to labour conditions, health and safety, and sometimes living wages. But such compliance-based approaches can fail to deliver better outcomes – and can even make matters worse.

Read more: Technology and supermarket chains can help strengthen southern Africa’s food systems

South Africa’s fruit export industry offers a telling example. Supermarkets in Great Britain and Europe impose strict quality and labour standards on fruit producers. At the same time, they push for low prices and high volumes. To be able to meet these standards, farmers face higher costs, but without higher payments from buyers. Many respond by cutting labour costs: replacing permanent workers with seasonal ones, increasing workloads, or reducing benefits. As a result, standards that were designed to improve labour conditions end up contributing to more precarious work.

If standards-driven approaches are not enough, what does work?

We analysed examples in depth through case studies. The cases presented here focus on inclusive tourism in South Africa, speciality coffee in Uganda, and chilli farming in Malawi, Mozambique and Zimbabwe. We found that these more collaborative and locally grounded approaches can make a difference to workers’ livelihoods.

Our first example is Nando’s PERi Farms initiative. The restaurant group works with smallholder chilli farmers in Malawi, Zimbabwe and Mozambique, providing technical support, access to inputs and guaranteed purchase agreements. This has helped farmers increase their incomes and invest in education and housing.

Mountain Harvest, a social enterprise in Uganda, focuses on coffee. The organisation works directly with farmers and pays higher prices for coffee beans to improve farmers’ lives. The company also supports farmers’ income diversification through crops like macadamia and avocado. An in-depth understanding of the local coffee farming context has allowed Mountain Harvest to improve conditions specifically for women employed seasonally as coffee bean sorters, a group who are often overlooked in supply chains.

In South Africa’s tourism sector, the NGO Fair Trade in Tourism has developed a certification standard that goes beyond compliance. It combines living wage requirements with mentoring, peer learning and support to strengthen businesses. We found that participating businesses reported better working conditions, higher staff retention and improved service quality.

All three examples share key features. First, they recognise that wages cannot be increased in isolation. Higher wages require changes in how value is distributed along the supply chain – including fairer prices paid to suppliers.

Second, they rely on long-term relationships rather than short-term transactions. Stable partnerships give suppliers the confidence to invest in their workforce.