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Fairness and Freight-Handlers: Local Labor Market Conditions, Wage Fairness Perceptions, and Employee Performance in a Trucking Firm

By Eric A. Verhoogen, Stephen V. Burks, Jeffrey P. Carpenter, Matthew Rabin, Jesse Rothstein, Stan Sedo, Pete Swan and The Santa


This paper draws on an internal attitude survey in the freight-handling terminals of a unionized trucking firm to investigate the effect of local labor market conditions on employee wage-fairness perceptions. The key element of our research design is that local managers have no discretion to vary wage rates in response to local labor market conditions; local economic shocks thus generate exogenous variation in the attractiveness of the wage paid by the firm relative to employees ’ options in the outside labor market. We find robust associations between two indicators of local conditions — the rate of unemployment and the wages of similar workers in the outside market — and the wage-fairness perceptions of employees in the firm, and argue that they reflect a causal relationship: an increase in unemployment or a decrease in outside wages leads workers to perceive their wage to be more fair

Topics: fairness, gift exchange, reference point, efficiency wage JEL codes, J41, Z13, D23
Year: 2003
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