IDEAS home Printed from
   My bibliography  Save this paper

Minimum wage setting and standards of fairness


  • David A. Green

    () (Institute for Fiscal Studies and University of British Colombia)

  • Kathryn Harrison

    (Institute for Fiscal Studies)


We examine the setting of minimum wages, arguing that they can best be understood as a reflection of voters' notions of fairness. We arrive at this conclusion through an empirical investigation of the implications of three models, considered in the context of policy setting by sub-units in a federation: a competing interests group model; a constrained altruism model; and a fairness based model. In the latter model, voters are interested in banning what they view to be unfair transactions, with the notion of fairness based on comparisons to the "going" unskilled wage. We use data on minimum wages set in the ten Canadian provinces from 1969 to 2005 to carry out the investigation. A key implication of the models that is borne out in the data is that minimum wages should be set as a positive function of the location of the unskilled wage distribution. Together, the results indicate that minimum wages are set according to a "fairness" standard and that this may exacerbate movements in inequality.

Suggested Citation

  • David A. Green & Kathryn Harrison, 2010. "Minimum wage setting and standards of fairness," IFS Working Papers W10/09, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:10/09

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:10/09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Emma Hyman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.