Is There a Demand for Labor Standards? Evidence from Field Experiments in Social Labeling

Date Published:

Abstract:

A majority of surveyed consumers say they would be willing to pay extra for products made under good working conditions rather than in sweatshops. But as yet there is no clear evidence that enough consumers would actually behave in this fashion, and pay a high enough premium, to make social product labeling profitable for firms. We provide new evidence on consumer behavior from experiments conducted in a major retail store in New York City in 2005. Sales rose for items labeled as being made under good labor standards, and demand for the labeled products actually rose with price increases of 10-20% above pre-test (unlabeled) levels. If the results hold more generally, there is a strong latent consumer demand for labor standards that many more retailers and producers could satisfy profitably by switching to certified and labeled goods.