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Pay Growth, Fairness and Job Satisfaction: Implications for Nominal and Real Wage Rigidity

  • Smith, Jennifer C

    (University of Warwick)

Theories of wage rigidity often rely on a positive relationship between pay changes and utility, arising from concern for fairness or gift exchange. Supportive evidence has emerged from laboratory experiments, but the link has not yet been established with ?eld data. This paper contributes a ?rst step, using representative British data. Workers care about the level and the growth of earnings. Below-median wage increases lead to an insult e¤ect except when similar workers have real wage reductions or ?rm production is falling. Nominal pay cuts appear insulting even when the ?rm is doing badly.

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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 130.

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Date of creation: 2013
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Handle: RePEc:cge:wacage:130
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