Salaries on Display: Unintended Consequences of Wage Disclosure

Abstract

This study examines whether wage disclosure assists employers in suppressing wages. Economic theories suggest that wage disclosure might facilitate wage coordination among employers by aiding coordination and monitoring for deviations, especially in highly concentrated labor markets. Using the U.S. Department of Labor's public disclosure of wage information as a natural experiment, I find that disclosure contributes to wage suppression in these highly concentrated markets. Additionally, a policy change to real-time disclosure of Labor Condition Applications (LCAs) reveals further wage suppression. To demonstrate that disclosure is the main driver of wage suppression, I conduct cross-sectional tests, which show that the effect is more pronounced in markets where wage variability decreases post-disclosure and in industries with lower union presence. Mechanism tests suggest that employer coordination contributes significantly to this suppression, particularly in jobs with high task heterogeneity and variability. These findings suggest that wage disclosure enables employers in concentrated markets to tacitly coordinate and suppress wages.

Keywords: disclosure, transparency, labor markets, wage, coordination