Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm

33 Pages Posted: 18 Oct 2004

See all articles by Eric A. Verhoogen

Eric A. Verhoogen

Columbia University - School of International & Public Affairs (SIPA); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Jeffrey P. Carpenter

Middlebury College - Department of Economics; IZA Institute of Labor Economics

Stephen V. Burks

University of Minnesota, Morris - Division of Social Science; Institute for the Study of Labor (IZA); Center for Decision Research and Experimental Economics (CeDEx); Center for Transportation Studies, University of Minnesota

Date Written: October 2004

Abstract

This paper draws on evidence from an internal attitude survey in the freight-handling terminals of a unionized trucking firm to investigate the effect of local labor market conditions on employee wage-fairness perceptions. The key element of our research design is that local managers have no discretion to vary wage rates in response to local labor market conditions; local economic shocks thus generate exogenous variation in the attractiveness of the wage paid by the firm relative to employees' options in the outside labor market. We find robust associations between two indicators of local conditions - the rate of unemployment and the wages of similar workers in the outside market - and the wage-fairness perceptions of employees in the firm, which we argue reflects a causal relationship. As an extension, we relate the changes in local conditions and fairness perceptions to changes in employee performance, as measured by the rate of disciplinary dismissals. We find suggestive evidence that increased local unemployment leads to improved employee performance, and, conditional on a particular assumption about the mechanism through which local conditions affect performance, that increases in wage-fairness perceptions lead employees to supply more effort.

Keywords: fairness, gift exchange, reference point, efficiency wage

JEL Classification: J41, Z13, D23

Suggested Citation

Verhoogen, Eric A. and Carpenter, Jeffrey P. and Burks, Stephen V., Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm (October 2004). IZA Discussion Paper No. 1352. Available at SSRN: https://ssrn.com/abstract=606526

Eric A. Verhoogen (Contact Author)

Columbia University - School of International & Public Affairs (SIPA) ( email )

420 West 118th Street
New York, NY 10027
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jeffrey P. Carpenter

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
802-443-3241 (Phone)
802-443-2084 (Fax)

HOME PAGE: http://community.middlebury.edu/~jcarpent/index.ht

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stephen V. Burks

University of Minnesota, Morris - Division of Social Science ( email )

600 East 4th St.
Morris, MN 56267
United States
320-589-6191 (Phone)
320-589-6117 (Fax)

HOME PAGE: http://www.morris.umn.edu/academics/truckingproject/

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=1883

Center for Decision Research and Experimental Economics (CeDEx) ( email )

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Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://www.nottingham.ac.uk/cedex/people/external/index.aspx

Center for Transportation Studies, University of Minnesota ( email )

200 Transportation & Safety Bldg.
511 Washington Ave. SE
Minneapolis, MN
United States
612-626-1077 (Phone)
612-625-6381 (Fax)

HOME PAGE: http://www.cts.umn.edu/

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