The solution to a race to the bottom, or to other kinds of prisoner's dilemma, is frequently to outlaw the option of racing to the bottom. Healthy bread can't compete because bread with sawdust is cheaper? Outlaw adding sawdust to the bread. Environmentally conscious factories can't compete because it is cheaper to pollute? Outlaw polluting to make a level playing field. Companies that pay their workers a living wage cannot compete with those who don't? Outlaw paying workers below a living wage, so that companies paying a living wage can compete.

In this case, I'd also want to see some form of UBI.