We extend the benchmark real business cycle model amending technology for
fair wage considerations. Effort depends on current, alternative, and past wages.
Past wages are treated as the worker’s past wages personal norm or as the past
wages of the society (social norm). This last model reproduces the high variability
of employment, the low variability of wages, and the low wage-employment
correlation without requiring a second source of impulsions. Wages and employ-
ment dynamics are adequately captured when norms adjust slowly to the environ-
ment. Fair wages are thus useful to solve the business cycle puzzle when we allow
for intertemporal wage comparisons.