Salary transparency reduces gender asymmetries – 08/05/2023 – Cecilia Machado

The idea behind a pay transparency policy is to expose the differences in pay between men and women and shift the responsibility for addressing the reasons for this difference to companies.

It works more or less like this. A consumer who is concerned about gender inequalities in society stops consuming products and services from companies that have a very high differential. In this case, the company loses market. And a worker, when she becomes aware of the salary gap in her company, starts to negotiate higher salaries or migrates to companies where the differential is smaller. If that happens, the company loses talent.

When information about wage differences becomes public, companies, acting in their best interest, begin to develop a more effective action plan.

This is how it happened in the UK in 2017, when the government established that companies with 250 or more employees would report various salary and bonus statistics for men and women. In 2018, with the publication of the first report, it did not take long for the news to promptly list the companies with the worst performances.

In the newspaper business, for example, the Telegraph reported an average differential of 35% in 2017/2018, with 74.1% of men in the company’s highest earnings quartile. In 2022/2023, the picture was different: the average difference became 25%, with 62% of men in the top quartile. All numbers of this initiative can be found here.

Some studies, such as this one, are already able to establish that transparency policies actually reduce wage inequalities. Considering that men and women have different positions in salary negotiation, as documented in “Women Don’t Ask: Negotiation and the Gender Divide”, the provision of information can make women start negotiating on better terms, as shown in this work .

Most studies on transparency policies find positive and promising effects (as this review shows), although wage transparency policies may be the target of some criticism – the reduction of the wage gap between men and women may be accompanied by a reduction in the wage gap. average salary in the company as a whole.

In this sense, the biannual publication of transparency reports for companies with 100 or more employees, as set out in bill 1,085/23, is a fine step forward in the agenda for reducing inequalities in the country, even if the frequency of publication (half-yearly) and which companies the legislation affects (one hundred or more employees) raise some questions.

Finally, the question remains: would it be possible to infer some type of discriminatory behavior by companies based on the results obtained?

The fact is that attributing discrimination based only on the salary differential can be very fallacious, since even the comparison of salaries of individuals with the same level of education and performing the same function is not able to take into account that the success rate of the women in reaching some high-paying jobs (traditionally held by men) is low.

In the case of the United Kingdom, the initiative publishes a roadmap for interpreting the results, ranging from the verification of imbalances that occur in the selection and recruitment process, promotions and employee retention to the way the evaluation process is carried out. and the support given through parental leave.

The transparency policy is right when one bears in mind that differences in wages measured do not necessarily reflect discriminatory behavior by companies. Transparency operates through other channels. It reduces asymmetries and frictions in the labor market, allowing workers to better negotiate their salaries and promotions. It is a low cost and highly effective intervention, which only requires publicizing the facts, without much value judgment.

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