Sales of Fairtrade-certified products from Uganda and Ethiopia are not benefiting poor farmworkers as profits fail to trickle down to much of the workforce, says a groundbreaking study.

The Fairtrade Foundation is committed to "better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world". But a UK government-sponsored study, which investigated the production of flowers, coffee and tea in Ethiopia and Uganda, found that "where Fairtrade flowers were grown, and where there were farmers' groups selling coffee and tea into Fairtrade certified markets, wages were very low".

Christopher Cramer, an economics professor at Soas, University of London and one of the report's authors, said: "Wages in other comparable areas and among comparable employers producing the same crops but where there was no Fairtrade certification were usually higher and working conditions better. In our research sites, Fairtrade has not been an effective mechanism for improving the lives of wage workers, the poorest rural people."

Researchers who collected detailed information on more than 1,500 people said they also found evidence of the widespread use of children being paid to work on farms growing produce for Britain's leading ethical label.

Fairtrade, started in Britain 25 years ago by development and consumer groups including Oxfam and the Women's Institute, has grown into one of the world's most trusted ethical schemes, with 1.24 million farmers and workers around the world. Fairtrade products contribute to the funding of schools, health clinics, sanitation and other "social projects" in rural areas. To join the scheme, farmers must agree to meet social, labour and environmental standards. In Britain it is a £1.78bn enterprise backed by government, Comic Relief, churches and supermarkets.

Fairtrade tea and coffee from Ethiopia and Uganda have proved popular with millions of British consumers. Starbucks, the House of Commons and Virgin Atlantic are among many organisations advertising that they serve Fairtrade produce from these countries.

Generally, the study found, wages were higher on farms that were larger, commercial and not Fairtrade-certified. Even comparing different smallholder sites, wages were generally lower in the areas dominated by Fairtrade producer organisations.

Social projects, paid for partly by the Fairtrade premium, were found not to provide equal benefit to all. The researchers reported that many of the poorest did not have access to facilities. In one Fairtradetea co-operative the modern toilets funded with the premium were exclusively for the use of senior managers.

The study also found that young people were widely used as labourers on both Fairtrade and other farms. "When wage workers aged over 14 years were interviewed, a very large proportion of them said they had been working since the age of 10, or even earlier," it said. "What is clear ... is that very significant numbers of young, school-age children are having to work for wages in the production of agricultural export crops, including Fairtrade-certified commodities."

The authors said a combination of idealism and naivety could explain why Fairtrade did not reach the poorest people in Ethiopia and Uganda. "One possibility is that Fairtrade producer organisations are always established in significantly poorer, more marginalised areas where an accumulation of disadvantages means smallholder farmers are unable to pay even the paltry wages offered by smallholders in other areas without Fairtrade producer organisations," they said.

"Fairtrade attempts to support and subsidise co-operative groups of 'smallholder' producers on the remarkably naïve assumption that the benefits of this support are distributed evenly amongst the group. This assumption about egalitarian distribution is unwarranted."

Fairtrade International said the report's conclusions were unfair and generalised. "In several places it compares wages and working conditions of workers in areas where small-scale Fairtrade-certified tea and coffee farmers were present with those on large-scale plantations in the same regions," it said in a statement.

"The report itself identifies farm size, scale and integration into global trade chains as major factors influencing conditions for wage workers, but then its conclusions appear to be based on unfair and distorted comparisons between farms and organisations of dramatically different size, nature and means.

"When comparisons are based more on like-for-like situations, such as the study's own analysis of Ugandan coffee in small scale coffee production set-ups, it finds key areas where workers in areas with Fairtrade-certified farmer organisations in fact had better conditions compared with those in non-certified, such as free meals, overtime payments and loans and wage advances for workers. This is in sharp contrast to the more generalised conclusions being presented by the School of Oriental and African Studies team."