Minimum wage setting and standards of fairness

David Green and Kathryn Harrison
Additional contact information
Kathryn Harrison: Institute for Fiscal Studies

No W10/09, IFS Working Papers from Institute for Fiscal Studies

Abstract:

We examine the setting of minimum wages, arguing that they can best be understood as a reflection of voters' notions of fairness. We arrive at this conclusion through an empirical investigation of the implications of three models, considered in the context of policy setting by sub-units in a federation: a competing interests group model; a constrained altruism model; and a fairness based model. In the latter model, voters are interested in banning what they view to be unfair transactions, with the notion of fairness based on comparisons to the "going" unskilled wage. We use data on minimum wages set in the ten Canadian provinces from 1969 to 2005 to carry out the investigation. A key implication of the models that is borne out in the data is that minimum wages should be set as a positive function of the location of the unskilled wage distribution. Together, the results indicate that minimum wages are set according to a "fairness" standard and that this may exacerbate movements in inequality.

JEL-codes: D78 H73 J38 (search for similar items in EconPapers)
Date: 2010-05-13
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.ifs.org.uk/wps/wp1009.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ifs.org.uk/wps/wp1009.pdf [301 Moved Permanently]--> https://www.ifs.org.uk/wps/wp1009.pdf [302 Found]--> https://ifs.org.uk/wps/wp1009.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ifs:ifsewp:10/09

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in IFS Working Papers from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().