Incentive

Labour economics

Pay for performance

Inequality

Health care

Exploit

Microeconomics

Gender pay gap

Computer security

Wage

Economics

Transparency (behavior)

Market economy

Computer science

Pay Equity

Wage inequality

Mathematics

Political science

Demographic economics

Public economics

Mathematical analysis

Salary

Economic growth

Equity (law)

Performance-related pay

Nature Human Behaviour

Recent decades have witnessed a growing focus on two distinct income patterns: persistent pay inequity, particularly a gender pay gap, and growing pay inequality. Pay transparency is widely advanced as a remedy for both. Yet we know little about the systemic influence of this policy on the evolution of pay practices within organizations. To address this void, we assemble a dataset combining detailed performance, demographic and salary data for approximately 100,000 US academics between 1997 and 2017. We then exploit staggered shocks to wage transparency to explore how this change reshapes pay practices. We find evidence that pay transparency causes significant increases in both the equity and equality of pay, and significant and sizeable reductions in the link between pay and individually measured performance. Obloj and Zenger use data on US academic salaries to find that pay transparency decreases inequity (including gender pay gaps) and pay inequality, and also reduces the relationship between pay and performance.

The influence of pay transparency on (gender) inequity, inequality and the performance basis of pay