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Fair Pay and Pay Determination

In: Choice and Public Policy

Author

Listed:
  • Julie Dickinson

    (Birkbeck College)

  • Lucia Sell-Trujillo

Abstract

Demands for ‘fair pay’ are a common feature of pay negotiations and human resource managers are careful to take ‘felt fairness’ into account when designing pay systems. However, wage theories hold that there is nothing inherently fair about pay differentials. In economic terms, pay is the price for labour, and the price is determined by market forces. Some economists, for example, Minford (1992) argue that the common preoccupation with the fairness of pay is an outcome of a poor understanding of how labour markets work. Nonetheless, most firms take concerns about fair pay seriously. Even if the scarcity of alternative jobs is such that there is little possibility of losing disgruntled employees, there is a strong risk of generating a climate of low trust and poor industrial relations if employees feel they are getting a raw deal.

Suggested Citation

  • Julie Dickinson & Lucia Sell-Trujillo, 1998. "Fair Pay and Pay Determination," Palgrave Macmillan Books, in: Peter Taylor-Gooby (ed.), Choice and Public Policy, chapter 8, pages 145-163, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26302-8_8
    DOI: 10.1007/978-1-349-26302-8_8
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