Speakers: Tomasz Obloj (HEC Paris) and Todd Zenger (University of Utah)
Abstract: Pay transparency—the widespread sharing of individual wage information has become an increasingly advocated policy lever by both governments and organizational consultants. Proponents of pay transparency suggest that its adoption motivates employees, closes the gender pay gap, and attracts desirable talent. Detractors suggest it demoralizes employees, drives talent away, and destroys the link between pay and performance. However, to date there has been very little research documenting its actual influence on organizations. We take advantage of the staggered shocks to the accessibility of information on wages in the public university systems in the US to explore the implications of pay transparency in academia. We find that pay transparency dramatically increased mobility among academics, on the order of a 30% higher probability of mobility following transparency. We also find evidence that pay transparency significantly decreased the gender wage gap and provide suggestive evidence that women’s increased mobility following pay transparency partly explains this narrowing gap. Finally, we provide evidence that in response to pay transparency, universities have reshaped their pay policies, adopting increased pay compression with a reduced emphasis on observable performance metrics as the basis for determining individual wages. We discuss both the causes and consequences of these empirical patterns.