I don't personally believe that overreaching management is necessarily bad for consumers. I was just trying to preempt what seemed to be a logical reply given philwelch's previous comments.
As to why the market won't necessarily correct for it, is because many times overreaching management is effective (at least in the short term). Degrade working conditions to cut costs and the consumer benefits. The information about how these lower prices were brought to the consumer is usually lost in the process. That signal simply doesn't reach all interested parties, and thus they aren't able to adjust their behavior in response. Some situations it can work, for example a business where customer service is a large part of the experience. The signal of overreaching management does eventually filter down to the consumer.
Most likely the information doesn't reach the consumer because the typical consumer doesn't care.
There are often niche producers who target the small fraction of consumers who care, and market their wares in part based on this. For example, see Fair Trade coffee producers (appealing to do-gooders) or American Apparel (appealing to US nationalists).
Your claim that markets can't transmit this information to interested consumers seems incorrect.
> That signal simply doesn't reach all interested parties,
Sure it does. I, the customer, see both the price and the service. If I'm willing to pay more for more service, I can do so.
And, this signal also reaches the employees as well. If you don't like it, go elsewhere. If you're right about how valuable your service is, customers will make the same choice. If you're wrong....
What about products that have no aspect of customer service, say canned tuna? The point is that there are classes of products with no meaningful level of customer service to the final consumer. Or, any consideration of service is trumped by lower cost. In both of these cases the market will not correct for overbearing management.
As to why the market won't necessarily correct for it, is because many times overreaching management is effective (at least in the short term). Degrade working conditions to cut costs and the consumer benefits. The information about how these lower prices were brought to the consumer is usually lost in the process. That signal simply doesn't reach all interested parties, and thus they aren't able to adjust their behavior in response. Some situations it can work, for example a business where customer service is a large part of the experience. The signal of overreaching management does eventually filter down to the consumer.