Is Pay Transparency Good?

Zoë Cullen

Journal of Economic Perspectives, 2024, vol. 38, issue 1, 153-80

Abstract: Countries around the world are enacting pay transparency policies to combat pay discrimination. Since 2000, 71 percent of OECD countries have done so. Most are enacting transparency horizontally, revealing pay between coworkers doing similar work within a firm. While these policies have narrowed coworker wage gaps, they have also led to counterproductive peer comparisons and caused employers to bargain more aggressively, lowering average wages. Other pay transparency policies, without directly targeting discrimination, have benefited workers by addressing broader information frictions in the labor market. Vertical pay transparency policies reveal to workers pay differences across different levels of seniority. Empirical evidence suggests these policies can lead to more accurate and more optimistic beliefs about earnings potential, increasing employee motivation and productivity. Cross-firm pay transparency policies reveal wage differences across employers. These policies have encouraged workers to seek jobs at higher paying firms, negotiate higher pay, and sharpened wage competition between employers. We discuss the evidence on effects of pay transparency, and open questions.

JEL-codes: D31 J24 J31 J64 J71 K31 M52 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/jep.38.1.153 (application/pdf)
https://www.aeaweb.org/doi/10.1257/jep.38.1.153.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/jep.38.1.153.ds (application/zip)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:38:y:2024:i:1:p:153-80

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/jep.38.1.153

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().