The Wage Setting Process

  • Thomas Christiano University of Arizona
Keywords: Fairness, Markets, Democracy, Imperfect Competition, Wages


The Wage Setting Process



In this paper I will defend a conception of fairness in labor markets.  I will argue that we should take a procedural approach to the evaluation of fairness in markets.  The procedural approach defended here goes beyond the traditional procedural view that requires only the absence of force and fraud.  But it avoids the pitfalls of the other classical conception of fairness in the market: the idea of a just wage or just price.  Fairness in markets is analogous to fairness in the democratic process. 

            I will start with a discussion and critique of Joseph Heath’s stimulating discussion of fairness in labor markets.  Though I agree in part with his assessment of the just wage tradition, I will argue that there is room for thinking about fairness in markets.  I will then lay out a conception of fairness that is based on the analogy with democracy.  The procedural idea of equal power can be given an interpretation both in perfectly competitive markets and in imperfectly competitive markets.  I will show how this approach has implications for conceiving of how firms ought to be organized and for defining a fair process of wage setting in the essentially highly imperfect conditions of the labor market.