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

Abstract

The authors draw on an internal attitude survey conducted yearly from 1996 to 2000 in the freight-handling terminals of a unionized trucking firm to investigate the effect of local labor market conditions on employee wage-fairness perceptions. Their research design exploits the fact that local managers had no discretion to vary wage rates in response to local labor market conditions; local economic shocks thus generated exogenous variation in the attractiveness of the wage paid by the firm relative to employees' options in the outside labor market. The authors find robust associations between the wage-fairness perceptions of employees in the firm and two indicators of local conditions—the rate of unemployment and the wages of similar workers in the outside market. They argue that these correlations reflect a causal relationship: an increase in unemployment or a decrease in outside wages led workers to perceive their wage to be more fair.