Fixing Industrial Poverty with a Tip Jar

I have a simple idea for a charitable scheme that could solve much of the world's poverty in poor, industrial nations, as well as help bad companies improve their conditions and reputations.

All it would take is a bit of game theory.

Got a $100 pair of shoes or a $300 music player? How about a $60 shirt or a $15 bag of rice?
If these things cost $101, $301, $61 or $16, respectively, would you notice? Probably not.

With the basic supply chain for these goods commonly consisting of:

1. Manufacturer;
2. Exporter;
3. Importer;
4. Wholesaler(s); and
5. Retailer,

it is easy to see how that extra dollar gets swallowed up.

With the production-line style of production for these types of products, and with estimated rates of pay being around $1-$2 per pair of shoes made, and rates of production of about 25 pairs of shoes per person per day, imagine the massive difference that could be made if that extra dollar just flowed right back through to the person or team who made the shoes, without all of the people in the supply chain taking a cut.

That would have a pretty massive effect, right? In fact, that would make Chinese shoe makers earn about the same as, or more than, workers earning minimum wage in the U.S. Making clothes or electronics in China or India could become a reasonably-paying job.

Of course, that would never happen naturally. There's no motivation for it, and no system to support it.

So there needs to be something in place where the dollar gets added at the retail end, but flows directly back to the workers on the production line. Similar to how carbon offsets work when you buy a plane ticket, but less opaque.

I'm going to call this idea the tip jar. Hardly trademark-worthy, but descriptive nonetheless.

Let's say you walk into a store that has a tip jar logo in its window. You know this means they have added $1 to their prices and agreed to have that dollar taken from their account by the charity for each item sold in the store. Let's skim over the details about how sales get registered against SKUs, and how codes are issued on the consumer's receipt in order to verify the tip status.

You look at a pair of Reeboks, but notice that the Nike shoes have a tip jar logo on them. You know this means that, based on the specific product code of those shoes, $1 of the price is going to go directly to the team or assembly line that worked to produce those shoes. You know that if you buy the Reeboks, that extra dollar will go to the closest match out of subscribing manufacturers. That means that to buy a pair of Nikes will give an extra dollar to the people who made the shoes, but to buy a pair of Reeboks will still result in the Nike workers getting the dollar.

Not only will the workers at those companies want the companies to sign up to the program, but the companies themselves will want to sign up. The benefits to the companies are twofold:

1. If Reebok signs up, their workers start earning higher wages, which takes the pressure off Reebok. Sure there is a good chance that this will result in Reebok attempting to lower the base wage, but then they would be kicked out of the program, and they really want to stay in it because of the next reason.
2. If Reebok doesn't sign up, that extra dollar will go to the workers of its competitor. Who wants that? Happier competitor workers earning more for nothing? No chance.

There is more to this idea, and far more that could be developed. I see it as turning Fair Trade on its head. It takes the responsibility from the producer to care about their workers, and instead allows consumers to directly influence the behaviour of bad companies by scaring them with the proposition of losing the competitive advantage to their rivals. It does this using a mechanism that can only benefit the producer, in reputation and in bottom line.

So, what do you think? Could it work? Why not? Anyone interested in starting it?