How the Coffee Industry Creates Income Inequality
Cafes and coffee have historically been associated with dissent and fomenting positive change. Yet in the past decade the industry has actually added to one of the most insidious socio-economic trends we face – increasing income inequality. As we think about this issue in the upcoming Presidential election, we would do well to examine the role we as an industry play. How ironic that as we sit in our cafes bemoaning rising income inequality so many of us actually enable it and even benefit from it.
We all know that farmers are getting screwed in the market. Fair trade, direct trade, etc. are all attempts in varying degrees and with varying commitments to change that. Many farmers have benefitted from these practices, but in almost thirty years in the industry I have yet to see significant improvements to farmer income and quality of life over time. An underlying statistic may help explain this.
Follow the money
According to UN statistics, the ratio between what a farmer received in the 1970’s versus what a retailer receives was roughly 1:3. What about today? It is now about 1:8 or 1:10. What does that mean? Farmers may receive on average around a dollar or even two dollars per pound for their beans. Yet the price charged by many retailers, even the self-proclaimed socially responsible ones is around twenty dollars or more (don’t be fooled by the fifteen dollar or so prices - that is usually for 12 ounces!). Why has the income inequality gap expanded over the years? There are plenty of reasons according to economists. But at the end of the day, the prices charged at our end are determined by the roasters and retailers themselves. I have noticed many companies raising their prices dramatically in the last several years when the price they pay for coffee may have actually come down during the same period. I have been told by some owners that they need to raise prices because consumers associate higher prices with higher quality. I don’t agree with that self-serving logic, but even if it is true for a certain consumer segment, do we really want to sign on to that ethically challenged notion? Ask the farmers what they think about that one! If you sell coffee for twenty bucks a pound the farmer should get more than you are currently giving them! You know who you are.
Money In/Money Out of the Country
A basic tenet of community development is that when jobs and local economies are created (like opening a new café), money gets circulated within the community and the profits are locally invested, raising all boats on a tide of java. True enough and a good thing. But the latest dynamic in the USA coffee scene cuts the other way. In obedience to the market mantra “Grow It and Sell It” many third wave and allegedly hip coffee companies (Peet’s, Stumptown, Intelligensia) and even oldsters like Green Mountain, Gloria Jean’s and Caribou have recently sold out to giant European and Asian investment groups. That means that a large chunk of the profits does not stay local but rather heads overseas. Seems like that economic tide is receding.
Don’t Forget Internal Income Inequality!
We should also look within. Some of the most profitable coffee companies in the country don’t permit the wealth to trickle down even within their own companies. One of the most shocking statistics I have encountered is that full-time baristas in some of the fancier or self-proclaimed progressive company cafes make so little that they are eligible for food stamps! How can companies with such large gross profit and so much marketing around their sustainable business practices knowingly add to the growing income inequality in our country?
“We Have Met the Enemy, and It is Us!” (Pogo)
Income inequality is shredding the social and economic fabric of communities worldwide. We in the coffee industry through our direct business practices with farmers, customers and employees have the choice whether to increase the insidious gap or close it. We need to look hard at our philosophies around trade and around profit. There is nothing wrong with healthy profit, but when does the search for higher and higher profits become inherently gross?
Drink Deep!