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Fair Wages, Worker Motivation, and Implicit Bargaining Power in Segmented Labor Markets

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  • William D. Ferguson

Abstract

This paper addresses implicit bargaining power within employment relationships using a versatile model of labor market segmentation that combines labor discipline, performance pay, insider power, and fair wage principles. In the primary sector, fair wage comparisons, firm-specific human capital, and less perfect monitoring engender bilateral bargaining power, yielding high compensation, sometimes including a bonus. Secondary-sector employers exert unilateral bargaining power, via credible dismissal threats with no replacement costs, and offer no bonuses. Differential determinates of implicit bargaining power can potentially explain various phenomena, including nominal wage rigidity, union wage differentials, job-specific wage differentials, and gender or race-based wage differentials.

Suggested Citation

  • William D. Ferguson, 2005. "Fair Wages, Worker Motivation, and Implicit Bargaining Power in Segmented Labor Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(1), pages 126-154, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200503)161:1_126:fwwmai_2.0.tx_2-m
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    References listed on IDEAS

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    Cited by:

    1. Joshua D. Pitts & Brent A. Evans, 2023. "New contracts and dismissal threats from highly drafted rookies: What motivates NFL quarterbacks?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 4-16, January.

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    More about this item

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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