High-profile cases of exploitative labour practices have increased concerns over agricultural working conditions. However, it is unclear to what extent the public is willing to trade-off fair working conditions for higher prices. To find out, Drichoutis, Vassilopoulos, Lusk & Nayga (2017) implemented a large-scale survey in two different cities of Greece (Athens and Ioannina). Using the Contingent Valuation method, the study aimed to understand whether consumers’ alleged disapproval of unfair working practices is reflected in their willingness-to-pay (WTP) a premium above regular prices of conventional agricultural products. This can be valuable information for producers and retailers that seek to differentiate their products and who are wondering whether costs associated with product differentiation can be recouped from potential customers.

To elicit valuations for a fair labour certified product, the research team chose a pack of 500gr of strawberries. The choice of strawberries was mainly because: i) they are widely consumed and would appeal to most consumers, ii) they are mainly sold in packages, so labelling for fair working conditions was easier to apply and iii) their production process is a (manual) labour intensive process (labour contributes to 45-50% of total cost of strawberries).

Due to the hypothetical nature of the survey, the experimental design aimed to identify and weed out potential behavioural biases related to non-market valuation (social desirability bias, hypothetical bias, status-quo bias, consequentiality of the survey, and certainty of responses), as well as to mimic the market situation as closely as possible. As a result, the design varied the scripts accompanying the valuation questions, the elicited valuation measure, the question format and the bid amounts.

A pilot questionnaire was pre-tested in February-March 2014 in the city of Athens with 160 subjects, after which several adjustments were made. The full-scale survey was then launched on April 1, 2014 and questionnaires were filled in until June 11, 2014. The period of data collection was predominantly dictated by the fact that strawberries are mainly traded during April, May and early June. Consumers were randomly intercepted in front of the main entrance of various supermarkets. In all, 11,510 subjects were intercepted in the cities of Athens and Ioannina and 3,825 agreed to take part in the survey resulting in a cooperation rate of 33.23%.

With the most conservative estimates, the study found that consumers are willing to pay an average premium of 53 cents of a Euro per 500 g, 95 per cent CI [43.9, 62.3], for strawberries with fair labour certification. This is equivalent to 72.6 per cent of the average realised mode price for strawberries in April–May 2014 (which was at €1.46/Kg) and suggests that consumers do value the better treatment of workers in the agricultural sector. This figure should be used by the industry in cost-benefit analysis, along with any cost estimates of providing and/or certifying fair working conditions, to understand whether fair labour practises can be a profitable signalling strategy and a good way to differentiate their products.

Reference:

Drichoutis, A. C., Vassilopoulos, A., Lusk, J. L., & Nayga, R. M. (2017). Consumer preferences for fair labour certification. European Review of Agricultural Economics, 44(3), 455-474.

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