Did some research into this a while ago, this is from a coffe buying mate…Fair Trade set a minimum price for each product standard they set up based on costs of production in each producing country.
If the market price falls below then producers / farmers / workers are protected. If market price is above, then they receive the market price. At the moment the tea market would need to fall off a cliff for the minimum price to kick in – don't think we have used it in 5 years…
On top of the minimum price there is a fixed social premium paid directly to the workers / farmers to be used in social projects. On tea this is 50 US cents per Kg – Sainsburys are currently paying c.$2.5M a year on tea premium alone – god knows what its costing them on bananas!
The use of the premium varies depending on where it is used. In Africa its mostly used to provide clean water, electricity, clinics, hospitals, food stores, educational bursaries, etc. In India and more 'prosperous' countries where infrastructure is generally better its used to fund workers pensions, higher education, crop diversification and sustainable agricultural practices.
Workers don't get 'paid' a lot more in most cases – but they are guaranteed a much better and safer standard of living than if not FT.
FT is still the gold standard – Rainforest Alliance (PG tips, McDonalds, etc) and the others, who do not guarantee a premium or a minimum price, are nowhere near as strong on ethical stuff but stronger on environmental.
Clarified it for me because, like most people I only had a vague idea of what it meant!