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Fair Compensation

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  • John E. Stovall

Abstract

We introduce a novel framework that considers how a firm could fairly compensate its workers. A firm has a group of workers, each of whom has varying productivities over a set of tasks. After assigning workers to tasks, the firm must then decide how to distribute its output to the workers. We first consider three compensation rules and various fairness properties they may satisfy. We show that among efficient and symmetric rules: the Egalitarian rule is the only rule that does not decrease a worker's compensation when every worker becomes weakly more productive (Group Productivity Monotonicity); the Shapley Value rule is the only rule that, for any two workers, equalizes the impact one worker has on the other worker's compensation (Balanced Impact); and the Individual Contribution rule is the only rule that is invariant to the removal of workers and their assigned tasks (Consistency). We introduce other rules and axioms, and relate each rule to each axiom.

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  • John E. Stovall, 2021. "Fair Compensation," Papers 2109.04583, arXiv.org, revised May 2022.
    • Handle: RePEc:arx:papers:2109.04583
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    References listed on IDEAS

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    1. H. Peyton Young, 1987. "On Dividing an Amount According to Individual Claims or Liabilities," Mathematics of Operations Research, INFORMS, vol. 12(3), pages 398-414, August.
    2. Lensberg, Terje, 1987. "Stability and Collective Rationality," Econometrica, Econometric Society, vol. 55(4), pages 935-961, July.
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