What’s in it for the firms? Living wage adoption as signal of ethical practice

Paul Schweinzer and Joanna K. Swaffield

Discussion Papers from Department of Economics, University of York

Abstract: We analyse the effect of the voluntary adoption of a living wage on firms operating in product markets in which consumption behaviour is at least partly determined by reputational concerns for ethical firm behaviour. We show without recourse to morality or efficiency-wage theories that the adoption of a living wage policy may increase consumer welfare as well as producer surplus through the segmentation of a previously homogenous product market. In particular, we demonstrate that it may serve a firm’s profit maximisation interest to voluntarily adopt a living wage.

Keywords: Living wage; Signalling; Reputation (search for similar items in EconPapers)
JEL-codes: J31 J38 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-bec, nep-hme, nep-lab and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:14/21

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