Fair Compensation

TL;DR

This paper proposes a new framework for fair worker compensation considering productivity and fairness, analyzing different rules and properties to identify unique characteristics of each rule.

Contribution

It introduces a comprehensive framework for fair compensation, characterizes key rules with unique fairness and efficiency properties, and relates these rules to specific axioms.

Findings

Egalitarian rule is unique in ensuring non-decrease in compensation with increased productivity.

Shapley Value rule uniquely balances impact among workers.

Individual Contribution rule is invariant to worker removal and task changes.

Abstract

We introduce a novel framework that considers how a firm could fairly compensate its workers. A firm has a group of workers, each of whom has varying productivities over a set of tasks. After assigning workers to tasks, the firm must then decide how to distribute its output to the workers. We first consider three compensation rules and various fairness properties they may satisfy. We show that among efficient and symmetric rules: the Egalitarian rule is the only rule that does not decrease a worker's compensation when every worker becomes weakly more productive (Group Productivity Monotonicity); the Shapley Value rule is the only rule that, for any two workers, equalizes the impact one worker has on the other worker's compensation (Balanced Impact); and the Individual Contribution rule is the only rule that is invariant to the removal of workers and their assigned tasks (Consistency). We introduce other rules and axioms, and relate each rule to each axiom.