Modesitt, who begins by noting that “[p]ay transparency is all the rage these days,” says that a primary goal of this transparency is the elimination of the gender wage gap in the United States, where women earn roughly 21 percent less than men.
The Equal Employment Opportunity Commission, which enforces laws prohibiting employment discrimination, recently issued a regulation that requires large companies to disclose aggregate salary information in their annual informational filings. Though the measure has been hailed as a pay transparency law, Modesitt points out that it simply prohibits employers from retaliating against employees who reveal their own salary.
Companies, unlike government agencies, are not required to disclose salary information for individuals.
To create actual pay transparency, employees must be willing to share their salaries with coworkers — a step, Modesitt says, that is “at odds with the longstanding social norm against discussing pay.”
Modesitt notes that there appears to be no empirical study on the effect of pay transparency on the gender pay gap, nor is there research that shows what happens to the gap when companies shift from withholding to disclosing employee pay. Nor, for that matter, is there research that compares the gender wage gap in companies that keep salaries secret versus the gap in companies that disclose employee pay.
She also observes that while there is research comparing the federal workforce’s gender wage gap with that of the private sector, it does not demonstrate whether pay transparency is a factor in the smaller gap seen in the federal workforce.
Says Modesitt: “[I]t is quite probable that the most important factor explaining the smaller federal wage gap is the government’s highly structured pay and promotion system.”
She concludes: “[W]hile pay transparency is a good idea, on its own it probably won’t be able to eliminate the persistent pay disparities between men and women.”