Here's a contribution to the sometimes confusing debate about salary transparency.
''Equilibrium Effects of Pay Transparency in a Simple Labor Market"
Zoe B. Cullen and Bobak Pakzad-Hurson
Abstract: Public discourse on pay transparency has not focused on equilibrium effects: how greater transparency impacts hiring and bargaining. To study these effects, we combine a dynamic wage-bargaining model with unique data of temporary work arrangements that differ in their level of transparency. Full transparency lowers wages by up to 25% and increases hiring by similar magnitudes. Earnings inequality falls, and employer profits rise significantly. A key intuition is high transparency commits employers to negotiating aggressively, because a highly paid worker’s salary affects negotiations with other workers. We discuss implications for the gender wage gap and employers’ endogenous transparency choices.
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Here are some earlier posts that touch on related issues:
''Equilibrium Effects of Pay Transparency in a Simple Labor Market"
Zoe B. Cullen and Bobak Pakzad-Hurson
Abstract: Public discourse on pay transparency has not focused on equilibrium effects: how greater transparency impacts hiring and bargaining. To study these effects, we combine a dynamic wage-bargaining model with unique data of temporary work arrangements that differ in their level of transparency. Full transparency lowers wages by up to 25% and increases hiring by similar magnitudes. Earnings inequality falls, and employer profits rise significantly. A key intuition is high transparency commits employers to negotiating aggressively, because a highly paid worker’s salary affects negotiations with other workers. We discuss implications for the gender wage gap and employers’ endogenous transparency choices.
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Here are some earlier posts that touch on related issues:
Wednesday, August 17, 2016
Salary negotiation: some Massachusetts market design
The NY Times has the story: Massachusetts Bans Employers From Asking Applicants About Previous Pay
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