Employees’ reaction to gender pay transparency: an online experiment

Abstract

The primary aim of pay transparency measures is to make pay systems less opaque and to reduce the gender pay gap. To investigate the behavioural implications of pay transparency measures, we ran an incentivized online experiment focused on the effects on employees’ performance, provision of extra effort and actions to correct pay disparities. We found that overall pay transparency does not disrupt employees’ performance. However, by revealing relative wages, it does interfere with the provision of effort and extra effort of employees with a below-average wage. Moreover, we found that pay transparency increased potentially justified requests to correct pay disparities while decreasing unjustified requests. Our evidence also shows that employee’s effort and action against unfair pay are more sensitive to lower relative wage with respect to own gender, rather than the other gender. We discuss potential policy implications of these findings and argue that more research should be carried out to better understand the efficiency of transparency measures, with a particular focus on gender reference groups.