Glassdoor Updates, Salaries

Is Pay Transparency Good for Business?

What do your coworkers earn, and why? Outside of a small number of government and union jobs that question has long been taboo.

Thanks to growing sources of job information, like Glassdoor, the pendulum today is finally swinging away from secrecy. This trend toward pay transparency has caught the attention of researchers. As a result, a whole literature in economics has bloomed studying the impact of better workplace information.

That’s the subject of our latest Glassdoor research report: “Is Salary Transparency More than a Trend?” which uncovers economic research on workplace transparency and how it affects three stages of the employment cycle: job search, pay negotiation and on-the-job performance. For the report, we evaluated dozens of academic studies on the impact of workplace transparency, summarizing how growing transparency is likely transforming labor markets for the better. See below for three key lessons among many that highlight why pay transparency is good for business.

3 Reasons Pay Transparency is Good For Business:

  • Employers that switch from pay secrecy to a policy of open compensation experienced large and long-lasting boosts in productivity. Studies also find that when pay is secret, employees commonly overestimate others’ pay, hurting job satisfaction.
  • Workplace transparency can help boost the number of female applicants for jobs. Studies also find job transparency can help close the salary “negotiation gap” between men and women, leading women to be just as likely to negotiate over wages as men.
  • Better information in labor markets improves job matching and shortens unemployment spells. Some economists even argue improved information can prevent workforce drop-outs and “discouraged workers” in the same way as far more costly worker retraining programs.

The lessons from research are clear. A wider spread of workplace information holds the promise of lasting improvements in today’s labor market: better job matches, more fairness in pay setting, more diverse applicant pools, shorter unemployment spells, smarter job relocation decisions and a more engaged and productive workforce.

With the rapid growth of online sharing, there is no putting the genie of salary transparency back into the bottle. Thankfully, the research suggests this is good news for everyone: better productivity for companies, better careers for job seekers, and—ultimately—a brighter outlook for today’s economy.