The Wage Setting Process
Keywords:Fairness, Markets, Democracy, Imperfect Competition, Wages
I here defend a conception of fairness in labor markets. In particular, I argue that we should take a procedural approach to the evaluation of fairness in markets. The procedural approach defended here goes beyond the traditional procedural view that requires only the absence of force and fraud. It also avoids the pitfalls of other classical conceptions of fairness in the market, such as the idea of a just wage or just price. I contend that fairness in markets is analogous to fairness in the democratic process. I thus critique Joseph Heath’s discussion of fairness in labor markets: although I agree in part with his assessment of the just wage tradition, I argue that there is room for the analysis of fairness in markets. I lay out a conception of fairness that is based on the analogy with democracy. The basic procedural idea is that of equal power, understood in markets as a robust form of equality of opportunity and equal cognitive conditions. As such, the procedural idea of equal power argued for here can be given an interpretation within perfectly competitive markets and, furthermore, can be applied to imperfectly competitive markets. I thus draw out a number of institutional implications of this account for how the background institutions of society ought to be organized and how firms should be regulated and organized.