Perceived Fairness

Fairness is, of course, normative economics -- to say that something is fair is to say that "it ought to be." But a minority of economists believe that perceptions of fairness may have an influence on wages paid. This is especially likely if bargaining (either collective or individual) plays a role in determining wages. If workers see a low wage offer as "unfair," they may be more likely to resist it, making it more difficult for employers to insist on it. And employers may be more likely to agree to a wage demand if they perceive it as "fair."

Thus, perceptions of normative economic concepts, such as fairness, can have an impact on "what is," positive economics. But perceptions are changeable and may depend on wider social attitudes and customs. For example, it appears that employers are less concerned with "fairness," and more determined to maximize profits by reducing wage costs, in recent years than they had been in the "good old days." In recent years social attitudes have been more accepting toward this sort of competition, and it may be that this accepting attitude has changed the behavior of business. But it may be that only the rhetoric has changed, and that employers are more open about their decisions than they were when social attitudes were less favorable to "profit maximization."

Unfortunately, we know very little about the impact of perceived fairness, but we cannot rule it out as a factor in wage bargaining.