Fair Trade: Does It Help Poor Workers?

Instructor: Don Boudreaux, George Mason University

Elizabeth, an Everyday Economics viewer, asks: “How does the purchase of fair-trade goods affect wages in developing countries?”

Great question! The “fair trade” movement has become popular as a proposed way to increase living standards in developing countries. In this video, we look at whether fair trade does just that.

For a good to be considered “fair trade” it must meet various requirements developed by a handful of fair trade organizations. In the developing world, who is better positioned to meet these fair trade requirements — large producers in wealthier countries or small producers in poorer countries? To answer this question, we take a look at the the example of fair trade coffee produced in both Costa Rica and Ethiopia. How does fair trade affect wages and overall quality of life in those countries?

And, if fair trade isn’t the best way to improve living standards in developing countries, how else can we maximize employment options and well-being for poor workers? This question is at the core of an entire branch of economics — Development Economics. To learn more, check out MRU’s Development Economics course.

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