Publications
Publications
- 2023
- HBS Working Paper Series
Is Pay Transparency Good?
By: Zoë Cullen
Abstract
Countries around the world are enacting pay transparency policies to combat pay discrimination.
71% of OECD countries have done so since 2000. Most are enacting transparency horizontally,
revealing pay between co-workers of similar seniority within a firm. While these policies have narrowed
co-worker wage gaps, they have also lead 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 research findings on pay transparency,
and open questions.
Keywords
Pay Transparency; Trends; Transition; Communication Strategy; Wages; Policy; Europe; North America; Australia
Citation
Cullen, Zoë. "Is Pay Transparency Good?" Harvard Business School Working Paper, No. 23-039, January 2023. (Revised March 2023.)