Pay Transparency and Potential 2.2% Decrease in Average Salaries

I recommend the thread by Adam Suraj dedicated to analyzing the impact of pay transparency on average salaries. It turns out that — contrary to popular belief — pay transparency did not translate into a better bargaining position for employees, and real wages decreased by 2.2% after a year.

• Supporters of pay transparency argue that such transparency reduces pay discrimination and also gives employees greater bargaining power in negotiations when they know how much an employer can actually pay.
• The study “Equilibrium Effects of Pay Transparency”, analyzed by Adam Suraj, showed that although transparency significantly reduces inequalities and wage gaps, it also causes a 2.2% decrease in average salaries after its implementation, with the greatest effect occurring three years later.
• It is important to consider the context here: we are talking about the USA and the often imposed ban by employers on discussions about salaries, which was effectively prohibited in 2018 (“Right of Workers to Talk”). So we are not talking about explicit salary ranges or access to someone’s salary as in Sweden (to be more precise, in Sweden, it is not public salary but tax statements).
• What could be the reason for the decrease in average salary? The study and the article in the Obserwator Gospodarczy describe more nuances (including the influence of unionization), but in short, we must remember that transparency proves to be a double-edged sword: it increases the bargaining position of those earning less, but it also makes the market more competitive (hypothetically: “You get X with those skills? I can do it for Y”) and lowers the bargaining position of those who are overpaid (“you earn the most, don’t expect a raise”).