Transparency in reducing wage disparities – 04/25/2023 – Policies and Justice

In a viral tweet, worker Kimberly Nguyen denounced her company for offering, in a job posting on the LinkedIn, a much higher salary than she earns for the same job. The discovery of the salary discrepancy was possible after his state, New York, passed a salary transparency law requiring job advertisements to inform the salary range.

Kimberly’s account sparked discussion about how transparency can help minorities who are being underpaid in their work.

A bill is pending in the Brazilian Chamber of Deputies that obliges companies to inform the salary range in job advertisements. One of the possible advantages of wage transparency laws is moving the job search effort to the firms that are posting the highest wages.

In particular, research in Germany found that low-wage workers underestimate how much they could earn at other companies. Evidence like this suggests that wage transparency can help vulnerable workers to seek higher-paying jobs.

As Brazil is a country with substantial gender and racial inequalities in the labor market, a relevant question is how women and black workers could be particularly benefited by wage transparency policies. Research investigating wage disparities by gender and race in Brazil point out that a relevant factor to explain such inequalities is the greater concentration of women and blacks in companies that pay worse.

Even though more evidence is needed to understand this phenomenon, information on which firms are offering the highest wages could benefit these groups of workers.

Wage transparency can also affect gender pay inequality by reducing gender asymmetry in wage bargaining. In a recent study, an MIT researcher analyzed data from an online platform for engineering jobs.

On the website, applicants must post the required salary and then companies choose whether to begin the interview and salary negotiation process. Initially, the survey found that women ask for lower wages compared to men with similar qualifications. However, when the platform began to inform the average remuneration required by applicants with similar experience applying for the same position, women began to ask for higher salaries.

What would be the effect of transparency on the value of posted wages? We might think that transparency induces firms to raise salaries in order to compete with companies that advertise better wages.

On the other hand, the wage transparency law could motivate employers to agree to lower advertised wages. However, this last hypothesis has not been empirically proven. Recent research investigating a pay transparency law passed in the US state of Colorado suggests that the law’s adoption led to an average increase of 3% in posted wages.

In summary, wage transparency in job postings can be positive for low-wage workers, with the potential to particularly benefit women and blacks. Faced with a range of positive evidence for other countries, such a policy deserves greater attention in the debate on reducing wage disparities in the Brazilian labor market.

The editor, Michael França, asks each participant of the space “Politics and Justice” of the Sheet suggest a song to the readers. In this text, the one chosen by Maria Oaquim was “We Are Women”, from Samba Que Elas Querem.

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