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Two_Corinthians t1_j5txtjo wrote

Is it true that pay transparency laws reduce wages?

Here's the Economist article that makes this claim: https://www.economist.com/united-states/2023/01/05/pay-transparency-laws-do-not-work-as-advertised

Relevant parts:

>Labour advocates champion pay-transparency laws on the grounds that they will narrow pay disparities. But research suggests that this is achieved not by boosting the wages of lower-paid workers but by curbing the wages of higher-paid ones. 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 paper by professors at INSEAD, UNC Chapel Hill, Cornell and Columbia University found that a Danish pay-transparency law adopted in 2006 shrank the gender pay gap by 13%, but only because it curbed the wages of male employees. Studies of Britain’s gender-pay-gap law, which was implemented in 2018, have reached similar conclusions.

>[...] 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. “Although the idea of pay transparency is to give workers the ability to renegotiate away pay discrepancies, it actually shifts the bargaining power from the workers to the employer,” says Mr Pakzad-Hurson. “So wages are more equal,” explains Ms Cullen, “but they’re also lower.”

Is this viewpoint mainstream, or the article cherry-picks studies that support their claim? Or something in between? If true, do we understand the mechanism of these results?

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RhodesArk t1_j5uxi4u wrote

Yes, it does. A direct comparison between the Government of Canada and the Government of Ontario shows the impact of a sunshine list exclusively in the latter. This creates an institutional disincentive from crossing that threshold, which severely limits career progress and I suppose also saves some money. The problem is that legislating the threshold is that it can't flex to accommodate inflation, new collective agreements, or specialization.

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[deleted] t1_j5wft6n wrote

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RhodesArk t1_j5wiiuv wrote

No, because you're competing with the private sector in a lot of these cases. So you need to offer graduates competitive wages because there aren't a lot of people that can credibly consult, propose statutory amendments or regulations, or deliver on multi billion dollar programs over the medium term. These are lawyers, accountants, and others that the government just can't afford anymore. How bad is it? Go watch how the Canadian Parliament is grilling McKinsey specifically for third party outsourcing work previously done by government. Sure there are bureaucratic checks in financial controls , but why name names when the stats for each specific hr category does the same thing.

My response is inherently biased to highly skilled labour located in OECD countries, like the Canadian province of Ontario. Transparency is necessary, but matter only if unions or people can organize to reflect the changing conditions of the market. For all institutions to immediately lock in inflationary labour costs (i.e. give everyone a raise permanently) is silly. But indexing it to inflation is the same end with more steps. But after this long, even if the number on the TV screen says 33,743, the fact that you're not eating as much meat is a pretty clear signal: raises need to index to a poverty rate nearer to 50k (or something, don't castigate me internet).

Ultimately, public service transparency laws are for a really specific type of worker and are a double edged sword. I'm only speaking anecdotally, but it's a conversation I've had dozens of times with public servants on both sides.

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[deleted] t1_j5wjtap wrote

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RhodesArk t1_j5wkzbm wrote

Ya, but it's not given equal between those two sectors. Some jobs are hyper specific, or have clearances, or are just specialized. Wage transparency is also variable, since most industries don't disclose and few jurisdictions require it.

The article is saying on a broad trend. I'm taking one sector out of context and being an internet contrarian.

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SofocletoGamer t1_j5vshjo wrote

Makes sense tbh. Statistically there are more men working extra hours than women, given the time that the latter need to dedicate to pregnancy/post-labor. So average salary gap numbers will reflect both actual cases of discrimination and also performance/dedication-based differences. Corporate HR departments cannot magically disentangle the two of those from their multiple business units (as extra hours / overall dedication are not necesarilly easily tracked), so they need to make broad adjustments. Given a fixed personel budget, its easier to lower average salaries to comply with policy

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Erlian t1_j5uodaz wrote

I find it hard to believe - as far as I know this viewpoint is not mainstream. Maybe cherry picked, but more likely the study isn't a very representative or large enough sample. It could also be that these policies in theory should help the labor side, but in practice there are some confounding variables - ex. "well we would pay you more except for this pesky law preventing us, sorry" being used as an excuse, or general disdain for the idea of raising everyone's wages vs. stagnating most employees' wages save a few favorite employees / new hires.

Could also be that a requirement to post salary ranges gives companies better information on what the lowest wage is that prospective employees would truly accept.

I also find it suspect that the article is lumping together a study that focused on pay transparency and university professors, with a different study on a pay disparity law and saying their results suggest similar conclusions. They are different policies, different samples, and different effects - tricky comparison to make.

Was having trouble finding other studies, but here's a good place to dig around: https://scholar.google.com/scholar?hl=en&as_sdt=0%2C38&q=effects+of+pay+transparency+on+wages&btnG=

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sy029 t1_j5w0alf wrote

It sounds to me like a case of companies saying "now that everyone can see your wages, if we give you a big raise, we have to give everyone after you the same amount." Whereas before, they could even it out by giving a few people big raises, and the rest got smaller ones.

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