Is Salary Transparency More Than a Trend? Lessons from Economic Research
How does “salary transparency” affect job seekers and companies? This report explores lessons from recent economic research on how workplace transparency affects labor markets in three key areas:
- Job Search: How does company transparency affect the way workers and companies find each other?
- Pay Negotiation: How does salary transparency affect the way new employees negotiate over salary and benefits?
- On-the-Job Performance: Are employees in more transparent companies more productive? Are they more engaged?
Effects on Job Searching
- Studies find better access to job information can encourage smarter job searching, help improve the quality of job matches, and may lead to shorter unemployment spells for workers.
- Providing more information to job seekers about job application processes improves the diversity of applicant pools by boosting the number of female job applicants.
Impact on Pay Negotiation
- Salary transparency helps expose pay gaps between otherwise similar workers, encouraging underpaid employees to renegotiate or move to better-fitting jobs, improving overall efficiency in labor markets.
- Men are more likely to negotiate salary than women. But studies show this “negotiation gap” disappears when information about other job applicants’ negotiation experience is public information.
- While the literature on productivity and salary transparency is mixed, most studies find employees are more productive and engaged when pay structures are transparent and predictable.