Market Forces and Equitable Comparisons in Wage Determination: a Research Note

Abstract

In the last few decades there has been a worldwide shift in values and attitudes towards markets and institututions. In the labour market the shift is reflected in legislative reforms designed to decentralise pay determination and deregulate the employment relationship. The claimed macro-economic benefits of such a shift include enhanced productivity, employment growth and lower inflation stemming from re duced wage flow-ons. The reforms implicitly assume that the determinants of wages under centralised and decentralised systems differ. Is this a valid assumption? The research in this paper suggests that notions of fairness and comparative wage justice are important determinants of wages, irrespective of the system of wage determination.