Wednesday, May 8, 2013

How Much Do Consumers Care about the Death of Textile Workers?

Associated Press reported that there are now 761 known deaths in the collapse of a building housing multiple clothing factories in Bangladesh. Does that mean that firms will stop ordering clothing from suppliers with questionable safety standards? They have the means to do so because it is known that multi-story, multi-user buildings such as the one that collapsed are operated with low safety (the building that collapsed had too heavy machinery installed) and often have illegal modifications (the building that collapsed had three stories added illicitly). Single-story buildings are better; buildings owned by the factory operator are better.

The moral case for imposing safety standards is clear. The risk to the reputations of firms that do not is also clear, and understood by the firms. When boxes of Disney logo clothing were found in the building that collapsed, both Disney and Wal-Mart (the licensee) explained that they had withdrawn authorization to produce in such factories, and the boxes had been moved to this building for storage without their approval.

But ultimately what matters is how customers react, because there will always be firms that are willing to place orders in unsafe places unless customers are vigilant. Indeed, in the New York Times, Jerry Davis has argued that customers should make it unprofitable to be unsafe.  Will they do so?

Fred Pampel and Lori Hunter published a paper in the American Journal of Sociology that provides an interesting parallel, because it examined support for environmental spending. Concern for the environment is similar to concern for manufacturing safety because a consumer can be “selfish” and only consider local benefits (a cheap t-shirt), or the consumer can be an altruist who also considers benefits to others (not having a polluted river; not dying in a building collapse). They showed that environmental concerns have increased over time, and more importantly, they gave some insights into how. Using data on how attitudes changed over time within birth cohorts, they were able to show that individuals with higher socio-economic status (SES) were early supporters of the environment, but this concerns spread to others with lower SES, increasing the overall level of environmental concern. SES is related to income, though not quite the same, so one could say that an environmental concern spread via a diffusion process from rich to mid-income to poor.

This is important because it gives some predictions. If concern for worker safety is a concern of  high-SES individuals today (and it may well be – which newspapers and magazines discuss it?), then that is actually the start of broader acceptance. Firms may soon face customers who are broadly critical of unsafe manufacturing. And if you happen to belong to the high-SES segment, you should know that your attitudes and actions are influential.