There have been a few studies on the systemic effects of wage transparency with respect to average pay. They tend to indicate, as in this paper [0] from 2021 for example, that wage transparency suppresses average wages over time. The proposed mechanisms for the wage suppressing effects seem eminently plausible. I haven't seen much evidence that it would increase average wages, either anecdotally or in studies.
"We find that in markets with high individual bargaining power (low unionization rates), pay transparency mandates lower average wages around 2%, as we find in the context of the U.S. private sector. In markets with low individual bargaining power (high unionization rates), pay transparency mandates have little to no effect on wages."
This seems to not be an argument against pay transparency so much as it's an argument for unionization. Transparent prices in any market are important for market efficiency, and that's no less true for the labor market. The mechanism for decreasing wages is "employers resist issuing individual raises because they think everyone else will want a raise too", and that's a cultural thing that will pass in a few generations. I have worked on teams with plenty of people who made more than me, and I didn't take it personally because I knew full well how brilliant and hardworking they were.
They discuss averages though. What is likely happening is a convergence on the mean, and a pulling in of the tails. The stars (or the stars at negotiating) are likely making less in both scenarios, and the disproportionately low wage earners are making more, while the middle of the distribution is unaffected. (No proof of this forthcoming just conjecture)
I am not sure about other examples, but isn't it just "winner takes it all market" in case of professional athletes? Fans want to see their favorite player and that brings in money. Meanwhile everyone else will be paid peanuts.
No, thanks to union bargaining the other players make at least millions in all of the major professional leagues. This is in large part due to players being transparent with each other about how much they were getting paid, which led to the formation of the players' unions several decades ago, and to the subsequent stratospheric rise in player salaries.
The point is that wage transparency enriches all of the players, not just the good ones.
With transparency, the information may not be able to capture the differences in expertise of each worker - like "someone who has delivered x products and is well versed in techniques a, b, and c". The market will just show a blanket designation giving an impression of fungibility (which unenlightened management already have) and the tendency will be to push rates down to the lowest common value.
I don't have any evidence for this, but the logic is not that "Everyone's wages go up." Rather, it's, "The folks at the lower end of the wage spectrum gain negotiating power to ask for more."
The folks at the higher end of the wage spectrum lose negotiating power too. I assume that outliers skew high, hence average wage gets suppressed. I’d be more interested in median wage data/trend, which didn’t seem to be in that paper.
Plausibly, if those at the higher end have wages clamped, and those at the lower end can see what they could be worth, wage spend becomes a mean reverting process except with a downward trend driven by a company’s general aversion to spending money.
From the employee perspective, it is of course more fair to be transparent about wages. I personally believe it’s for the best, at least socially and for worker’s rights. In some sense it can lead to worse outcomes, but these are really a reflection of the profit-seeking behaviour of companies, which is also made more effective by wage transparency. I would rather try to fix the underlying issue than not have wage transparency.
Imagine if, in addition to income, you could also lookup the debt level and net worth of anyone you know.
Are your neighbors driving a fancy car just because they're leveraged up to their eyeballs in mortgage debt? Would people change their buying habits if their net worth was public. Is there any point owning ostentatious possessions if everyone knows your debt level?
I think some nordic countries come close to that by allowing anyone to look at tax information by going into an office in person. (people availing of this service is also public knowledge)
> Is there any point owning ostentatious possessions if everyone knows your debt level?
Perhaps it seems safe to assume not, but it couldn't be further from the case. First of all, it's not necessarily the case that overleveraging so you can have possessions to enjoy is enjoyable.
Especially at the higher end of the earning, this can be very apparent. $20m underwater and living in a mansion. Am I really toughing it out? Remember when the Trump said a homeless guy has more money than him. Yet he's pooping on the street and not a golden toilet.
The truth is that people never care how much you really earn it. Our society would be totally different if so. Yeah, implied with the respect is that you earned it, but people don't care.
People either "like" you because they can share some of it, imagine themselves like you, or they're envious of your stuff. If you earned it that's just a cool bonus.
>Finally, I’m willing to bet a tenth of my monthly pay that should wage transparency become mandatory, the overall salary range will fall throughout the industry (at least in the short term), as this is how organisations generally deal with forced initiatives.
I would like to see how this would all play out. Generally people know roughly what the market is paying, and unless desperate, people probably aren't inclined to pursue roles paying far less than a) they are currently getting, b) the market is generally paying. So assuming the industry drops rem in lockstep, people stick to their current role, or they wait for an org to need talent enough to raise the pay on offer. The market evens out again eventually, surely ("at least in the short term"). That said, I'm a casual observer and I'm speculating wildly. Did find the "aw, poor HR" moments in the article amusing though.
Inflation will eat the pay of people sitting on a good check because the company will give terrible updates to the pay knowing there isn't a good rock to hop to.
I don't know how realistic employers colluding to hold wages down is, but if it happens, this transparency is also a public signal they can legally use to verify the other employers aren't cheating to get better talent.
My pet theory is that their awful interview processes are at least in part another form of this. Why put someone who's already passed at your FAANG before, and at another in between, through the expensive and painful interview process again? Makes a lot more sense if there's a tacit agreement to do this to slow the velocity of labor movement among the top-paying companies, which would have the effect of suppressing wage growth.
I think that the long, opaque, fairly bureaucratic hiring experience is a type of "shit test" (to co-opt the term used in another less-respected community).
These companies need insecure overachievers. People that are brilliant, but aren't so sure of themselves that they will jump ship after the 2nd reorg in 14 months, after being passed over for promotion because their solution didn't demonstrate "complexity", after completing a 15 point launch review to add a checkbox to a webapp. The type of people that won't be too disappointed in plugging leaks in a data analytics pipeline for 2 years after they spent 6 months Leetcoding and cramming "Designing Data Intensive Applications".
It also has the effect that the timing of your FANG offer is hard to predict, so it's hard to align with other offers for leverage.
I haven't found that to be true. Negotiated wages are very different from employee to employee (in the same role), between companies, between roles, and how those valuations are done (ShortTermIncentives and LTIs). REI vs Cambia vs JPMC, the wages (both incentivized and not) are wildly different and they don't seem to care a bit.
The rock to hop to is starting your own shop. Or taking a sabbatical. Or just working less hours. Can the company afford that instead of giving a raise?
...Huh. Never expected a Malaysian article to land on HN's 1st page.
Considering the US/EU-centric userbase of this site & its consequent effects on links submitted here, I didn't expect one from my country making it here.
But yeah, further transparencies into wages/salaries will help everyone to make better judgements & decisions when it comes to wage/salary negotiations.
This is one of those issues where I have terribly, terribly little sympathy for the businesses. "It will cost the business more" "people might find out they're underpaid" "it'll bring down average comp!!" (Why? By what mechanism? All the author of the article does is bet 10% of his salary.)
In the US, employment is ridiculously one-sided in the benefit of the employer and this has only gotten worse as inflation has returned in force. The fact that they're throwing up their hands and complaining "think of the poor capitalists!!" just makes me shake my head.
When I worked at a state university, every salaried employee's pay was public information. You could just look up anybody and see how much their salary was. I never paid a lot of attention to it but some people did and seemed to obsess over who got paid how much in comparison to themselves.
They paid pretty poorly compared to what many in the tech sector can make, but it was low stress and you had a lot of PTO and decent other benefits.
This is true of all government jobs. I used to be an Army officer. Our pay is set by Congress and in the federal budget. And yeah, that means low performers sitting away in bullshit staff jobs doing nothing earn exactly what the highest performers commanding elite units in difficult theaters of combat earn.
So why does anybody bother to be a high performer? I don't know. Why do Olympic athletes in obscure sports with no pro leagues and no endorsement prospects still practice long hours and try hard? Why does anyone become an astronaut when they could earn more flying commercial jumbo jets? Some people just care about excelling at what they do, more than they care about money. Often you'll find these people in high-impact public sector work.
Unions are essentially just a form of wage transparency. The union says everyone with X experience gets paid at least $Y. Bosses hate it, so it must work.
Union wages are known by all their members. And somehow the world hasn't ended.
Transparency seems reasonable to me. A good first step.
For the game theory minded, highest recommendation for the book The Logic of Collective Action. Explains the free rider problem, debunking the prevailing economic folk theories of the day (1965).
A16Z just released a podcast about this. [1] They explore the nuances of what the rules require, and how various types of companies are responding to them.
This is pretty useless. When enforced you end up with ranges like 80k - 180k "depending on experience" which tells you nothing. What I do is ask the recruiter right away when they reach out, if they won't give me at least a narrow range I'm unlikely to continue the process.
I don't give a care how much more difficult it is for the employer. It's unambiguously GOOD for the applicant to know the expected compensation before applying. If you're opposed to wage transparency, I can only assume it's for manipulative & dishonest reasons.
> - forcing a range means these ranges will skew lower so higher performing people will lose out and average salaries will go down
I could easily see this having the opposite effect: Forcing a range causes employers (particularly those with less name recognition) to increase posted salaries in order to get people interested enough to apply.
I don't see how posting lower salaries would do anything but discourage top applicants.
I can see how companies paying their current staff a lower salary would be hesitant to post the new job at a higher salary range. There would be a strong temptation to post at a lower range, despite that not attracting the best new talent, to avoid the demands of pay raises from the existing staff.
> some roles don’t really have a budget, salary will depend on applicant and can range a lot
Of course they all have a budget. You're not going to have a $1m range on pay for the same position that depends on the applicant, except for maybe a few exceptional cases.
Employers will always try to get you to undervalue yourself so they can get away with paying you as little as possible. Taking tools away from them that they use to do this is only a good thing.
While I 100% agree with wage transparency, just like I agree with price transparency for any other good...
This idea that there is some evil conspiracy to screw people is crazy to me.
Everyone wants to get the best price they can for anything, I am sure when you hire a HVAC person, or a plumber you are not looking to hire the most expensive person, you are looking to hire the best value...
Why do people believe employment is something different than any other goods exchange, employers buy labor from the market no different you buy a computer monitor, or a plumber.
I think everyone should have transparent pricing for everything, if Space X can post pricing to launch something into orbit, then dave the plumber can publish his rates, and Amce Corp can publish what they are paying employees...
"Call for pricing" should be a thing of the past for products just like "We pay competitive wages" should be a thing of the past for job ads.
It absolutely is a rule if 2 of most valuable companies on the planet are colluding. (Apple and Google). Most SW devs aren't FAANG or whatever you call it these days, but downward pressure trickles down to everyone.
If $96 billions in fines over two decades and thousands of companies doesn’t demonstrate a pattern, I don’t know what to tell you. Perhaps we’re haggling over the conspiracy ruler.
Refer to your quote I quoted, and the data provided. There is clearly a broad effort to suppress wages, even if everyone involved isn’t getting together at a Skull and Bones convention to do it.
> Why do people believe employment is something different than any other goods exchange, employers buy labor from the market no different you buy a computer monitor, or a plumber.
They're at least a little different, as evidenced by how employment is treated legally. There's usually a significantly larger asymmetry of power in the employee-employer relationship than there is when you buy a good as a consumer.
Speaking for US Employment Largely created by government treating labor differently than any other good. It is ironic how government regulations creates a problem for which then we need ever increasing amounts of regulations to fix...
Asymmetry comes from the wide ranges of things we have linked to employment via regulation such as health care....
I think people tend to forget how much of the regulations we have in the US related to labour arose because labour fought (and often bled and died) for.
Sure we have problems like healthcare being tied to employment that are a result of some heavy-handed regulations in the WW2 era, but we also have things like a minimum wage, and overtime, workers comp..etc.
A lot of employment law is bottom up, it is top down. For example Walmart is on record advocating for an increase in the Min Wage Federally, they have zero positions they are currently paying at federal minimum wages so to them it costs them nothing, and it may have the advantage to taking out small businesses.
Lots of regulation is the same way, written by and for large companies so ensure their competition can never have a competitive advantage.
This is why over the last few decades the market has been massively consolidated, where the top 5 companies in a market used to control around 20% of a market, 80% of the market share for most markets are controlled by less than 5 companies.
I think both things are true. There is a lot of regulation surrounding labour and employment that was hard won by labour, but you're right that there is also a lot that was similarly fought for by the employers.
This is part of the asymmetry of power -- as employers pockets get deeper, they are more easily able to have regulations implemented that further deepen their pockets. The same would be possible with labour, but there's little concentration of power there. It's a lot easier to spend $1m as a company to get the regulations you want than it is to organize however many workers to spend $1m to get the regulations they want, especially since no one will have the exact same regulations in mind.
I don't know how "regulations are the real problem" libertarian types are so numerous. You want to insist things were better when the children working the coal mines could purchase private health insurance (from the company store, with company scrip, naturally)?
> This idea that there is some evil conspiracy to screw people is crazy to me.
$203 million in wages stolen in the past 5 years, and that's just in New York.[1] The US Department of Labor recovered $3 billion in stolen wages 2017-2020.[2]
A large portion of wage theft also slips through the cracks because of cash transactions that make it hard to catch or when it's difficult for victims to seek legal redress, such as when they are undocumented.
But sure, there obviously is nothing to worry about. /s
There's no evil conspiracy. There are convergent interests. Wealth wants to retain wealth. Labor wants to get wealth for the labor. Employers want to spend as little as possible on labor to retain wealth. Our (US) tax policy encourages this behavior.
Everyone should have transparent pricing - yes. It seems like you're just one layer of ignorance away from understanding what is actually going on. No conspiracy needed BUT that doesn't mean that there hasn't been conspiracies (note: not conspiracy theories) for wage/cost fixing.
>>It seems like you're just one layer of ignorance away from understanding what is actually going on.
No, you seem to be one layer of ignorance away from understanding the economic reality, you are adding a layer of complexity to labor markets attempting to treat them differently from any other market.
It has everything to do with wealth. Wealth is the basis of our economic systems.
BTW, "no u" isn't a valid response. You can use it but nobody has any interest in continuing that discussion. Just like I no longer have any desire to converse with you regarding this. Have a good life.
Only if you are an anti-capitalist that has swallowed the anti-capitalist propaganda hook line and sinker with the view that capitalism is evil and should be replaced with the utopia of socialism....
This doesn't make any sense? Which capital do we talk about with the word 'capitalist'? Exactly. It's wealth.
Capitalism is a system where the production is decided and owned by the capital owners. So, wealthy people. If bezos want a mega-yacht, a mega-yacht will be built.
I mean; that sounds like a personal problem. If you take responsibility for your life and are honest with yourself about the value you bring to the table, then what you’re saying is moot.
The supposed issue there would be missed matches no?
If the range really is quite wide, the employer probably isn't really trying very hard to hire at the top end and someone at that price can compare it to their options well enough before spending time on it.
A bottom limit is always helpful, for all applicants. For those who expect more and do not want to waste time, they can look elsewhere. For prospective labor sellers, such as high school and college students or career changers, the bottom limit (and its trend) can help them project cash flow if they were to pursue that type of work.
And it results in a more efficient allocation of labor for the country as a whole. For example, it could more quickly signal to people that we need fewer paper pushers and more trades workers.
What is this industry where a few people are being paid so far beyond their peers that moving salaries to a market-decided fair range brings the average salary down?
That’s what the evidence shows, yeah. Pay transparency benefits employers at the cost of high performers because they can credibly commit to not paying more.
> Equilibrium effects of pay transparency in a simple labor market
> 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 data from online markets for low-skill, temporary jobs that differ in their level of transparency. Wages are more equal, but lower under transparency. Transparency increases hiring and employer profits, rising 27% in an online field experiment. 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.
> The discourse around pay transparency has focused on partial equilibrium effects: how workers rectify pay inequities through informed renegotiation. We investigate how employers respond in equilibrium. We study a model of bargaining under two‐sided incomplete information. Our model predicts that transparency reduces the individual bargaining power of workers, leading to lower average wages. A key insight is that employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others. When workers have low individual bargaining power, pay transparency has a muted effect. We test our model with an event‐study analysis of U.S. state‐level laws protecting the right of private sector workers to communicate salary information with their coworkers. Consistent with our theoretical predictions, transparency laws empirically lead wages to decline by approximately 2%, and wage declines are smallest in magnitude when workers have low individual bargaining power.
The range is not forced and salaries of existing employees are not disclosed, so this effect does not hold. A talented individual is free to negotiate above the pay range and the range for a new role does not have to reflect the salaries of existing employees in that role.
You do realise that it's possible to believe both "the world would be better if everybody did X" and also believe that "the government should not have the power to mandate everybody does X"?
I can imagine the argument when X is something that only negative affects the 'defector' (eg: "everyone should wear a helmet but the government shouldnt make you wear a motorcycle helmet") but what's the rationale when the reason that everyone should do X the social good at no costs, rather than personal good?
ensuring compliance has a non-zero cost. you need to set up a regulations, have people to enforce them and deal with the aftermath of the enforcement (this last one is why the war on drugs was so dumb).
People are opposed to being valued the same way that mediocre people are. Like, I don’t talk about money until the interview process is over. That way I have the leverage (concrete examples of performance) that I need to negotiate fairly.
Employers now can just race to the bottom with accurate info on their competition.
Which just proves my point: If I (hypothetically) don't do my application process in your expected way, I'm going to be penalized by this law, so it's not unambiguously good for the applicant.
> If the expected compensation has to be honored, then you have no way to negotiate a salary higher than the upper bound or lower than the lower bound.
That's when you see that the upper bound they wish to pay doesn't match your lower bound, close the tab with that job listing and move onto the next one. Negotiation done. No one is twisting your arm forcing you to apply to a job that is below your desired compensation.
You're already instructing me on how to do my application process.
What if I don't want to do my application process your way? Is it fair for me to be penalized by the law for doing something in an unexpected, but legal and unharmful way?
Actually I think that is a bad thing. Employee negotiating power is strictly capped under such a system. If every employer offers the same range, you’re screwed.
> If every employer offers the same range, you’re screwed.
That's not likely to happen outside of collusion, or a severely limited labour market where there are very few employers to choose from. If every employer is offering the same compensation, then the first one to go slightly above that range will probably see more applicants.
Next, I want a bounty system to report third party recruiters and employers that post job descriptions without them
because right now the consequences are weak
maybe we can make the the consequences hold greater legal muster by tying it to something else, like "if you register for an account with the payroll tax department, your job descriptions must have cash salary ranges posted with the compensation description"
It's not just HR. As a consultant, wage "transparency" is just price fixing with the effect of mean reversion that disadvantages applicants. The underlying pretext of these anti-negotiation activists is that the people looking for jobs lack skills, agency, and grit, and work on a tenuous 19th century narrative where job seekers were essentially beggars going hat in hand for a wage in exchange for exploited labour.
If you believe them, you've been taken and the only thing being exploited is perhaps your ignorance of an entire genre of $3.99 paperbacks on how to negotiate a basic wage. If you're really serious about anti-negotiation, there's nothing anyone can tell an ideologue other than that gaslighting poor people is despicable.
> and work on a tenuous 19th century narrative where job seekers were essentially beggars going hat in hand for a wage in exchange for exploited labour.
...Except that is still more or less the case for the vast majority of workers. Most employers won't even wait for you to finish your negotiation spiel before kicking you out and moving onto the next applicant.
Most people, at least in the US (which is seemingly the focus), are not working in an industry where workers have any real room for negotiation. You might be able to get a dollar or two per hour more if you really impress the hiring manager, but that's not happening for the $10/hr kinds of jobs that so many people work. And if you try to squeeze the employer for more, they probably have a stack of applications many of whom will take whatever the employer gives them because their alternative is getting paid nothing at all.
A "dollar or two" in the $10/h range is literally being able to negotiate a 10-20% raise. If you can get someone to move 10-20% in a single conversation, you're worth every penny and then some.
Im sympathetic to the price fixing concerns. But publishing wages seems like a detail of executing a price fixing scheme (which can be executed other ways currently). I dont see how it encourages price fixing. It seems to me the forces discouraging price fixing include ethical obligations, competition, and threat of law. I dont see how wage transparency overcomes any of these. You would still need to be an asshole willing to break the law with the threat of a competitor undercutting you.
What changed that suddenly gave workers the upper hand in negotiating with company management? The whole “hat in hand bit” seems like an effort to obscure the obvious fact that individual workers still lack meaningful power in negotiating wages.
[0] https://www.nber.org/system/files/working_papers/w28903/w289...