Pay Transparency and Productivity

Abstract

Taking advantage of the staggered timing of shocks to the availability of wage information for US academics we show that, across a range of metrics, transparency causes no decrease and, in some cases, results in an increase in performance outcomes. However, productivity responses predictably vary based on what transparency reveals. At the individual level, we find that those inequitably overcompensated increase their effort, while those inequitably under-compensated decrease or do not change their effort. At the organizational level, we find that the productivity decreases when pay transparency reveals inequity. Our study provides one of the first field-based empirical investigations of the productivity consequences of wage transparency and points to the importance of delineating the effects driven by equity as opposed to equality of pay.

Keywords: pay transparency, equity, equality, productivity