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For the past couple of weeks the media has been full of stories about food inflation and its devastating impact on the developing world.  

Last week the World Bank and the IMF released reports indicating that we are facing a potential ‘food price crisis’ and thousands of people may starve.

There have been riots in Bangladesh, Cameroon, Egypt, Ethiopia, Haiti, Indonesia, Mexico and the Philippines. In Bangladesh 10,000 garment workers rioted on Saturday, vandalising factories and smashing cars in anger at low wages and high food prices. This could be an indication of more trouble to come.

Robert B Zoellick, President of the World Bank warned last week that “33 countries around the world face potential unrest because of the acute hike in food and energy prices.” He went on to estimate that the food price surge could mean the loss of 7 years in the fight against global poverty. At the same event, Dominique Strauss-Kahn, Head of the IMF, warned of mass starvation and dire consequences if food prices continued to rise.

In recent months across the developing world the prices for food staples such as rice, corn and wheat have all reached record highs. In the last two months alone the price of rice has skyrocketed, rising by about 75% globally. Wheat has risen by 120% in the last year.

The impacts have been uneven, but it seems East Asia has been hit the hardest. In Bangladesh the real price of rice reached a 19 year high as it rose by 70% this year. China, India, Vietnam and Cambodia have already responded by imposing tariffs and export bans, leading economists to predict worse to come.

The situation has been blamed on a number of factors, including:

• Rising cost of fuel and fertilisers;
• Climate change, drought and unpredictable weather patterns;
• Increased demand for biofuels, which leads to competing pressures for land;
• Changes in the diets of people in China and India, as the wealthy switch from carbohydrates to meat, which is more expensive and resource intensive to produce.

Of course, it is the poor across the developing world who are suffering the most. According to the World Bank, the poor spend as much as 75% of their income on food. Juan Jose Daboub, a senior Director at the World Bank, has said “In virtually every East Asian country, high food prices are…contributing to a significant decline in the real incomes of the poor.”

Unfortunately many of the workers in the supply chains of western multinationals, whilst perhaps not being the poorest of the poor in their communities, are struggling to maintain their livelihoods. The rioting in Bangladesh confirms that garment workers are suffering under the pressure.

Impactt has been looking at whether minimum wage provisions around the world constitute a ‘Living Wage’. For the 88 countries we investigated, we concluded that in only 23 countries did the Minimum Wage constitute a ‘Living Wage‘.

Food inflation on staple foods such as rice and wheat is running at such a level in some developing countries, that even massive and regular increases in the minimum wage are not enough to meet workers needs, and make something as vital as basic foods affordable. Wage increases that match, or exceed, inflation rates, or even food inflation rates, are only making up for past increases and are not tackling the continuing issue of increased prices.

Companies, NGOs and audit agencies should be aware that minimum wage provisions are increasingly unlikely to support workers’ livelihoods. It is more important than ever that workers earn a living wage and that wages stay ahead of inflation.

Companies should be responding directly to the crisis by implementing living wage programmes and looking to purchasing practices to help alleviate the pressure on workers. Buyers must be aware that the price paid for their last order, may not be sufficient for the next.