Thoughts on this research paper? Supposedly transparency doesn't work

Question

The main argument seems to be that with transparency companies can change their approach to compensation too. (For example Coinbase doesn't allow negotiation anymore, in essence embracing transparency by setting a strict salary range).

Companies also no longer have incentive to make out of band offers for exceptional candidates because if it becomes public, they have to bring everyone else up to par. So salaries meet at this equilibrium which tends to be on average worse for job seekers. At least my takeaway from the paper.

Arguments against this though: the whole concept of leveling scope and responsibility suggests that roles are not equal, people are literally paid differently based on scope and performance. Also, it is a free market after all. Just because your company can't pay, doesn't meant other companies can't. Talent will go where they are valued the most. This is why competing offers are so advantageous when negotiating. You aren't competing with people at the company, you're competing against the rest of the market.

Paper here:

https://www.nber.org/papers/w28903

AlwaysRock · Accepted Answer

I can see the points made by this article but the truth is that companies will/do continue to make out of band offers when they are motivated to and even companies like Coinbase that, "don't negotiate" negotiate when they need to.

15ctkytkqlnvasr · Answer

Right now, companies have an asymmetric knowledge advantage over job seekers. Not only do they know how much they are paying everyone, they also share this information with other companies. I would think that making the compensation info symmetric would greatly benefit the job seeker because you can’t low balled due to being at an information disadvantage.

19g6tkurhm4vh · Answer

"A key insight is that employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others under transparency."

This can be true, but it can also be true that one company will offer higher wages, have a higher hiring bar and just get more of the good people.

It can lead to you either pay for the best, or don't have any of the best. So then it becomes worthwhile to negotiate sometimes. The whitepaper also says salaries went down 2% on average, but what happened to the median? Negotiation drives the highs and the lows away from each other. You could have a much higher median and a lower minimum, with a handful missing out.

kfc · Answer

I can see how this applies for standard jobs across the US. If you assume salaries will eventually become public, then there's less incentive to stretch salaries for stronger hires.

19g6vkvllmyk3 · Answer

The author lost me on page two with this assertion: "The fact that wages are public allows the employer to credibly say, 'If I give you a higher salary, I’ll have to give everyone else a raise too, and I just can’t afford that.' " -- this is a deeply flawed mindset.  In no circumstance does a change in one person's wage necessitate a change in others' wages, and conversely, a company can never leave wages stagnant endlessly.  The article seems to also rely heavily on correlation between the timing of a law taking effect, together with including pay targets on job descriptions for open roles, and the actual wages of employees at companies -- which is a logical stretch at best.

Thoughts on this research paper? Supposedly transparency doesn't work

Equilibrium Effects of Pay Transparency

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