Thank you for sharing! The wage compression finding is worth sitting with. If the laws lead to closing gaps that shouldn't have existed in the first place, it's hard to call that a net loss.
I recall a paper showing a potential downside to pay transparency w.r.t to the 80-20 rule. Basically, with pay transparency means you can't pay your superstars like superstars (without making all the non-superstars mad) and this leads to them leaving or lowering their productivity, I might go track down the cite. But I'm not sure pay transparency is a priori "good."
She mentions that somewhat in the JEP article, but the more interesting set of studies is the differences between horizontal and vertical pay transparency
Fascinating, I'll have to read the JEP piece. I'm certainly more interesting in vertical transparency in my own jobs vs. horizontal, I actually don't want to know what anyone at MRU makes, nor do I want to know what they make. I guess I just trust my manager to set salaries according to value (which I know sounds crazy to some). Vertical transparency would be valuable in the sense of what a promotion would be worth though.
There is a inherent sysem of asymmetrical information in the hiring process. It is not the same for both employers and seekers. Employers off the back can request far more information from seekers just from the postion of decision making. While seekers are often blocked by differeing excuses that may block them from the information they seek. I think salary transparency can help dramatically. I also think we should normalize having final candidates interview with the team they will be working on with no managers present. That is something we started at my last company and i am doing everything in my power to spread it.
Very much so with the top candidates saying they felt comfortable joining the team having met their future team mates. It has led to less stress and easier on boarding when everyone has a sense of one another and the initial trust barriers are already broken.
Does anyone remember the old Parade magazine’s annual piece in which they reported the pay of dozens of people? I found it fascinating.
I have never been shy about talking about my personal finances — it’s one of the things I talk about pretty frequently through my primary lens of economic inequality. I openly discuss what I paid for my house (under $100,000) and what my last decent job paid ($40k salary for 60-hour workweek running a newsroom.)
I don’t see paychecks as reflecting anything about a person’s actual worth, intelligence, talent or hard work, so I fail to see why anyone should tie their self regard to a salary.
I used to assign that article in my principles course, and students loved it. When I look back on a lot of my past jobs, it came from conversations with others where they let me know I could make more money and be happier somewhere else.
When I was hired in my current role, my employer had a need for someone to do a particular type of work. Based on the supply of people like me that were qualified to do the job, they offered me a salary. If I had said no because the salary was too low, they would have offered the job to another applicant. If enough applicants said no, they would raise the salary...because the supply of workers willing to do the work for the original salary was too low.
If they offered me 25% more than what I would have accepted, I would happily have said "yes!" However, if the employer does that too many times, they'll end up overpaying for labor and risk going out of business because they cannot compete with other firms that are not overpaying for labor.
Just because I make 10% less than the person sitting next to me, doing the same work, doesn't make it "unfair." The supply/demand proposition was different when my co-worker was hired three years ago.
Your logic makes perfect sense at the time of hiring, but markets don't freeze at the moment you sign an offer letter. As you noted, the market rate for a role three years ago may look very different today. Salary transparency doesn't change how wages are set, but it can give workers the same updated market information that employers already have access to. Whether someone uses that information to negotiate, stay put, or explore other options is entirely up to them.
My textbook has six different definitions of fairness! When I talk about the different rationales for fairness, I've found that it's context dependent.
I always found this paper to be interesting: https://doi.org/10.3982/ECTA19788 (youtube explainer: https://youtu.be/CO4Ek-3STxQ?si=m7Ce2Hn3B0gWNIvg).
“transparency laws empirically lead wages to decline by approximately 2%”
Thank you for sharing! The wage compression finding is worth sitting with. If the laws lead to closing gaps that shouldn't have existed in the first place, it's hard to call that a net loss.
Zoe also has a great piece in the JEP that's well worth the read: https://www.aeaweb.org/articles?id=10.1257%2Fjep.38.1.153&ref=aussienomics.com
I recall a paper showing a potential downside to pay transparency w.r.t to the 80-20 rule. Basically, with pay transparency means you can't pay your superstars like superstars (without making all the non-superstars mad) and this leads to them leaving or lowering their productivity, I might go track down the cite. But I'm not sure pay transparency is a priori "good."
She mentions that somewhat in the JEP article, but the more interesting set of studies is the differences between horizontal and vertical pay transparency
Fascinating, I'll have to read the JEP piece. I'm certainly more interesting in vertical transparency in my own jobs vs. horizontal, I actually don't want to know what anyone at MRU makes, nor do I want to know what they make. I guess I just trust my manager to set salaries according to value (which I know sounds crazy to some). Vertical transparency would be valuable in the sense of what a promotion would be worth though.
There is a inherent sysem of asymmetrical information in the hiring process. It is not the same for both employers and seekers. Employers off the back can request far more information from seekers just from the postion of decision making. While seekers are often blocked by differeing excuses that may block them from the information they seek. I think salary transparency can help dramatically. I also think we should normalize having final candidates interview with the team they will be working on with no managers present. That is something we started at my last company and i am doing everything in my power to spread it.
That's a great example of transparency working beyond just salary. I assume you're finding positive results?
Very much so with the top candidates saying they felt comfortable joining the team having met their future team mates. It has led to less stress and easier on boarding when everyone has a sense of one another and the initial trust barriers are already broken.
worker-driven transparency, here for it!👏
Does anyone remember the old Parade magazine’s annual piece in which they reported the pay of dozens of people? I found it fascinating.
I have never been shy about talking about my personal finances — it’s one of the things I talk about pretty frequently through my primary lens of economic inequality. I openly discuss what I paid for my house (under $100,000) and what my last decent job paid ($40k salary for 60-hour workweek running a newsroom.)
I don’t see paychecks as reflecting anything about a person’s actual worth, intelligence, talent or hard work, so I fail to see why anyone should tie their self regard to a salary.
I used to assign that article in my principles course, and students loved it. When I look back on a lot of my past jobs, it came from conversations with others where they let me know I could make more money and be happier somewhere else.
What does "fair" mean?
When I was hired in my current role, my employer had a need for someone to do a particular type of work. Based on the supply of people like me that were qualified to do the job, they offered me a salary. If I had said no because the salary was too low, they would have offered the job to another applicant. If enough applicants said no, they would raise the salary...because the supply of workers willing to do the work for the original salary was too low.
If they offered me 25% more than what I would have accepted, I would happily have said "yes!" However, if the employer does that too many times, they'll end up overpaying for labor and risk going out of business because they cannot compete with other firms that are not overpaying for labor.
Just because I make 10% less than the person sitting next to me, doing the same work, doesn't make it "unfair." The supply/demand proposition was different when my co-worker was hired three years ago.
Your logic makes perfect sense at the time of hiring, but markets don't freeze at the moment you sign an offer letter. As you noted, the market rate for a role three years ago may look very different today. Salary transparency doesn't change how wages are set, but it can give workers the same updated market information that employers already have access to. Whether someone uses that information to negotiate, stay put, or explore other options is entirely up to them.
Good point, thank you!
Is there a definition of "fair" or is it just in the eye of the beholder?
My textbook has six different definitions of fairness! When I talk about the different rationales for fairness, I've found that it's context dependent.