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Pay Transparency and Pay Inequity

Scholars Tomasz Obloj (HEC Paris) and Todd Zenger (University of Utah) recently published a study of pay transparency in the US academic workplace. The paper was published in Nature Human Behaviour (10.1038/s41562-022-01288-9) and the authors also publicly deposited their data and code (10.3886/E155541V1).

The study merged salary information obtained via FOIA requests to faculty rosters and productivity metrics provided by Academic Analytics. The study explored whether “staggered shocks” (the time when salary information was made publicly available online) had a relationship with pay equity. The authors found that pay transparency resulted in greater pay equity (“the fairness and consistency with which an institution or department allocates pay to individuals”) and pay equality (“the equivalence of pay,” e.g. between men and women). Interestingly, “pay for performance” (e.g., performance-based salary) show the opposite pattern; in the author’s words, “Pay transparency prompts those allocating pay to weaken the link between observable performance metrics and pay” and “the financial rewards linked to observable performance metrics as well as rank advancement substantially decline after wages become more transparent.”

This important study has clear implications for higher education administrative leaders responsible for salary and merit increases. Pay transparency has long been discussed as a means to address pay inequality, and this study demonstrates that transparency does push the needle towards that goal, but also acts to partially decouple the relationship between performance and pay.

 

References

Obloj, T., Zenger, T. The influence of pay transparency on (gender) inequity, inequality and the performance basis of pay. Nat Hum Behav (2022). https://doi.org/10.1038/s41562-022-01288-9

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