Do pay transparency laws raise wages? - Marginal REVOLUTION

A forthcoming paper by economists at the University of Toronto and Princeton University estimates that Canadian salary-disclosure laws implemented between 1996 and 2016 narrowed the gender pay gap of university professors by 20-30%. But there is also evidence that they lower salaries, on average

Another misconception about pay-transparency laws is that they strengthen the bargaining power of workers. A recent paper by Zoe Cullen of Harvard Business School and Bobby Pakzad-Hurson of Brown University analysed the effects of 13 state laws passed between 2004 and 2016 that were designed to protect the right of workers to ask about the salaries of their co-workers. The authors found that the laws were associated with a 2% drop in wages, an outcome which the authors attribute to reduced bargaining power.

That’s interesting, but the time period 1996-2016 coincided with the 2006 real estate collapse, the 2008 financial collapse, and the Great Recession and periods of high unemployment.

It also coincided with a period of high immigration and ever growing affirmative action.

University professors are a very peculiar form of “labor.” The jobs have a lot of status. Salaries tend to be low, but have a lot of perks, like housing and free college education for their children at other colleges. Professors also may hold endowed chairs, do sponsored research, do consulting, write books, etc etc that produce a lot of additional income, sometimes very substantial income. Professors with tenure have very comfortable and secure jobs.

I can imagine circumstances where giving employers more information would lower wages.

For example unions compete with each other in a race to the bottom, and negotiate poor contracts. The union wage scales are generally known to management in the industry, then the Non union managers point to the union contracts and say “we are paying almost union scale,” or “we are paying more (slightly) than union scale.”

There are situations where employers might learn that they are overpaying.

I think there would be a lot more situations where employees would learn that they are being underpaid.

When salary ranges must be disclosed by law, odd things can happen:

Wall Street will advertise investment banking jobs that range from $150,000 (starting) to $150 million (high performance with huge bonuses).

Western Towboat (under Washington state disclosure laws) advertised awhile ago for Mates with a salary range of $550 (green mate fresh out of school) to $800 (a Mate with a lot of experience who is capable of sailing as Master in Western Alaska).

I’m sure some managers at other companies: used that information to justify paying less, while

There is a lot of different factors that determine wages levels. But in general If there is better data it allows things to get dialed in tighter.