Abstract
Pay transparency is here to stay. Legal mandates requiring employers to disclose information about what, why, how, and how much their employees are paid have spread to over 70% of OECD countries. Many employers have (reluctantly) embraced the trend, even in jurisdictions where it is not legally required. Pay transparency has been proposed as a solution to closing gender and racial pay gaps and several other problems. While this seems to make sense, several questions remain unanswered in this under-researched area. Is pay transparency good —for employees, organizations, and society? Are governments’ varying pay transparency laws too moderate or too stringent? Does pay transparency work as advertised?
Peter Bamberger’s Exposing Pay sheds light on these issues and more. Bamberger, a management scholar affiliated with Tel Aviv and Cornell universities, is a leading expert on pay transparency and pay communication. Over the last decade, he has published half a dozen papers on this topic in premier academic journals such as the Academy of Management Journal; his work on the unintended consequences of pay transparency was recently published in the Harvard Business Review.
The eight chapters of Exposing Pay address four topics: the contextual and theoretical foundations of pay transparency (chapters 1 and 2), the employee perspective (3 and 6), the employer perspective (4 and 7), and implications for policy, practice, and research (5 and 8). It provides valuable frameworks and insights based on rigorous analysis and a comprehensive review of the literature from economics, psychology, organizational behavior, and management.
Introductory chapters 1 and 2 go beyond abstract assumptions about pay transparency policies and analyze the historical, legal, and institutional contexts in which they were crafted and implemented. Drawing from labor history, the first chapter provides a US-centric history of pay transparency laws dating back to the early 20th century and a brief overview of recent legislation around the world dating from 2010. The review of global legal trends should have discussed the drivers of these new laws, as many have objectives beyond tackling pay discrimination — such as enhancing public trust and accountability and fostering more competition in labor markets. Knowing the intended goals of pay transparency will provide a meaningful evaluation of their effectiveness. The unpacking of the concept of pay transparency and its theoretical underpinnings is expertly done along three dimensions — pay outcome, pay process, and pay communication — providing new and necessary language for researchers, practitioners, and other stakeholders to discuss this critical phenomenon.
Bamberger’s extensive coverage of employee perceptions, attitudes, and responses is commendable, as worker agency is often not taken seriously enough when crafting public and workplace policies on pay transparency. Chapter 3 provides fascinating material on the science of human behavior. The discussion on the dark side of transparency, notably that it can stoke feelings of envy in the workplace, is interesting, as are the analyses on the implications of pay transparency for job satisfaction, job performance, and trust in the workplace. But some will find this chapter a little too theory-heavy and overwhelming.
The focus on employees continues in chapter 6, which questions the effectiveness of pay secrecy policies given the increasing popularity of internet-mediated pay information platforms such as Glassdoor and Payscale. Another significant insight from the chapter: Employees weigh the costs of disclosure and privacy concerns against the benefits of sharing or exchanging pay information, which is especially important for those most sensitive to being treated unfairly. Therefore, Bamberger recommends that interventions to address employee concerns should center around increasing pay outcome transparency. One thing that seemed missing in the employee-centered chapters is an exploration of the role that national or societal culture plays in shaping employee attitudes and behaviors toward pay transparency policies. For example, will there be a preference for increased transparency in individualistic cultures relative to collectivist ones?
Attention shifts to employers in chapters 4 and 7, with a thorough analysis of the pros and cons of pay transparency. The “on the one hand…on the other hand” assessment of how transparency impacts critical issues, from attracting and retaining top talent to productivity and firm performance, highlights the need to strike a delicate balance. Bamberger notes that while increased transparency can help to attract and retain top performers by making the pay-performance link more visible, it can also have a negative impact if it leads to pay compression. Chapter 7 takes a very different direction, away from empirical and theoretical discussions, to detailed case studies of Whole Foods, Cogent, and Stratasys. These thought-provoking case studies illustrate the practical issues and challenges of implementing pay transparency and will be especially beneficial for those organizations looking for guidance as they decide if and how to embark on the transparency journey.
There is a lot to digest in chapters 5 and 8, which provide an in-depth analysis of the implications of pay transparency for public policy, management practice, and academic research. Chapter 5 explores research findings on the impact of pay transparency on the gender pay gap, inequality, and employee well-being. Perhaps not surprising, given the complexity of pay transparency, the results are mixed. The exciting news here is that there is evidence that pay transparency can be effective in narrowing the gender pay gap. So what does this all mean for crafting public and workplace policies on pay transparency?
In chapter 8, Bamberger explores various public policy initiatives, including one that is not widely used — providing safe harbor protections that incentivize organizations to conduct pay equity assessments and make their pay practices and processes more transparent. He subtly nudges regulators towards more modest transparency measures that can deliver tangible benefits (e.g., requiring employers to provide more information on pay ranges) due to uncertainty about transparency laws’ effectiveness and unintended negative consequences. Perhaps Bamberger missed an opportunity here. Given that pay transparency is part of a larger trend towards more openness in society, it would have been helpful to examine research evidence on the drivers and policy implications of similar initiatives, e.g., government transparency, data privacy transparency, and financial transparency.
Finally, in the section on implications for research, Bamberger identifies several interesting research questions to fill existing gaps in our understanding of this complex phenomenon. These include the implications of pay transparency on wage and employment, organizational effectiveness, employee health and well-being, and cognitive function and information processing. These are potentially fruitful avenues for future research, and hopefully, they will spark scholars’ interest in this important yet under-researched area.
With Exposing Pay, Peter Bamberger provides a timely and authoritative contribution to the debate on pay transparency. The author delivers on his promise to provide “an honest assessment of the good and bad of pay transparency” as he explores contradictory claims about the impact and effectiveness of pay transparency policies and practices. It is a must-read book for HR professionals, business leaders, policymakers and analysts, and scholars looking for a balanced and well-researched guide on pay transparency.
