Publication Date



Technical Report: UTEP-CS-21-64

Published in Asian Journal of Economics and Banking (AJEB), 2021.


On the one hand, everyone agrees that economics should be fair, that workers should get equal pay for equal work. Any instance of unfairness causes a strong disagreement. On the other hand, in many companies, advanced workers -- who produce more than others -- get paid dispropotionally more for their work, and this does not seem to cause any negative feelings. In this paper, we analyze this situation from the economic viewpoint. We show that from this viewpoint, additional payments for advanced workers indeed make economic sense, benefit everyone, and thus -- in contrast to the naive literal interpretation of fairness -- are not unfair. As a consequence of our analysis, we also explain why the labor share of the companies' income is, on average, close to 50% -- an empirical fact that, to the best of our knowledge, was never previously explained.