It’s good for pay equity, and it can be good for managers, but it’s not so good for superstars.
This month, laws went into effect in California and Washington State that required companies to post salary ranges on job listings. Like similar rules in New York City and Colorado, lawmakers passed them on the premise that pay transparency helped reduce wage gaps.
There’s little debate among researchers that this is the case. “It is totally 100 percent true across all the studies I’ve seen, with very few exceptions,” Zoe Cullen, an economist at Harvard Business School, said. Pay transparency laws are “very good” at reducing wage disparities, she added.
But that’s not the end of the story. As companies embrace pay transparency — either because the law forces them to, or because their employees are becoming more comfortable disclosing their salaries anyway — both employers and workers have noticed ripple effects. It’s changing how bosses set salaries. And it has the potential to make life a little less lucrative for star performers.