Using consumer power to stop the IR ‘race to the bottom’

The proposed changes to Industrial Relations legislation have understandably caused confusion and uncertainty in sections of the community. Chief among the concerns are that without adequate protection, workers will be forced to negotiate conditions away in order to obtain or retain employment. Some business people have also expressed concerns that workers’ rights will be eroded as businesses are forced into a race-to-the-bottom in order to remain competitive with the ‘guy down the street’. The economic dynamics are relatively straightforward: businesses that save money on workers’ entitlements can afford to pass on their goods and services to the consumer at a cheaper price and thus enhance their competitiveness. Implicit in this argument is that there is no effective penalty to those firms who choose to water down entitlements as consumers are either unwilling or unable to distinguish between ‘fair’ businesses and ‘unfair’ businesses. However, what difference would it make if consumers were both willing and able to distinguish between the two? Roy Morgan polling in July of this year suggested that 49 per cent of respondents disagreed with the proposed IR reforms, with only 17 per cent agreeing. Meanwhile, 70 per cent of respondents disagreed with the abolition of unfair dismissal laws to businesses employing less than 100 employees, while only 24 per cent agreed. So there is a core base of consumers who appear to have little sympathy with the proposed changes, but would they be willing to change their consumption decisions as a result? Consumers make purchasing decisions to satisfy their demand for goods and services; their choices are informed by expectations of quality and value as well as what their decision says about them as a person. Over the last two decades, we have seen the rise of ethical consumerism; people have recognised that their consumption decisions impact the world they live in. Such thinking has driven the rise of organic produce, fair-trade coffee, and ethical investment to name a few. Common to all is the preparedness to pay a premium to ensure that one’s consumer decisions are a positive force for good. Producers in turn have responded to this expanding market segment – not least because ethical consumers are disproportionately affluent – through expanded product ranges, enlightened supplier practices (e.g. no sweatshop policies), or other forms of corporate social responsibility. It is fair to assume that there is a healthy degree of overlap between ethical consumers and those opposed to IR reform – just as they campaign to improve conditions and stop sweatshops abroad, they would expect retention of good working standards in Australia. They would therefore be natural allies for an attempt to use their consumer power for a positive social outcome such as maintaining worker entitlements. The trick is finding an appropriate mechanism for enabling this power to be unleashed and directed. The chief weapon of such an approach is, of course, information. This could take a number of forms: consumer information websites, education campaigns or even blogging. However consumers are often busy people who would prefer to rely on simple and convenient ‘signals’ that their purchasing decisions are correct – step forward the humble label. Product labels have been used to inform consumers about whether a product is Australian-made, good for your heart, dolphin-friendly or even whether its purchase will raise money for a particular charity. In the service economy, accreditation of companies can inform buyers of appropriate levels of say quality or restaurant cleanliness. The mechanics of such arrangements would need careful consideration, including the appropriate involvement of consumer advocacy groups, business groups and unions. Details of how to win accreditation and, just as importantly, how to lose it will be critical to the scheme’s credibility, transparency and workability. A labelling strategy would necessarily be voluntary, however at the very least it would give companies who are prepared to play fair the ability to inform consumers that they are doing so. Would such a scheme make a lick of difference? It is uncertain how successful such a scheme would be – in highly competitive industries, sources of differentiation are highly sought after, particularly when they correspond with an affluent market segment. Governments as ‘lead buyers’ could ensure that their procurement policies encourage accreditation and thus provide impetus to the scheme. Perhaps the most successful aspect of the project would be in awakening people’s understanding about the influence their individual consumption decisions can have on the society they live in as well as a potent reminder of the pervasiveness of IR reforms on Australian society. The combination of the high profile of IR reform in the news and the perceived threat that abuse of the reforms poses to many ordinary workers, may even succeed in broadening the appeal of ethical consumption beyond the urban latte-set. Ordinary Australians would have a chance to keep businesses honest by voting with their wallet. The Prime Minister has stated that the purpose of the proposed IR legislation is not to advantage either the employer or the employee. If this is true, the Government should support such a scheme, as its primary purpose is simply to provide a means of keeping business honest and thus provide a brake on the race to the bottom.

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