According to the latest findings published in the Strategic Management Journal, publicising salaries could be crucial in narrowing the gender pay divide. However, the costs associated with publicly tracking these salaries must be minimised. Elizabeth Lyons from the University of California, San Diego, and Laurina Zhang from Boston University embarked on a study investigating whether making salaries transparent could lessen gender-based pay discrepancies and, if so, by what means. Their research centred on tenured and tenure-track faculty within Canadian universities, utilising the Ontario Public Sector Salary Disclosure Act of 1996 as a case study. This legislation, which mandates the disclosure of salaries for public employees earning above $100,000, includes an online database that significantly eases the public’s ability to access salary information, thereby lowering the costs of such endeavours.

Zhang emphasised the importance of the legal framework and its effectiveness in genuinely decreasing the public’s costs to observe gender wage disparities across various organisations. The researchers compared this situation to a policy in another Canadian province that, lacking an equivalent publicly accessible online database, did not reduce the gender pay gap.

Their findings indicated that easy access to salary information puts considerable pressure on well-known organisations to diminish the gender pay gap and evade public critique of their salary structures. However, the study did not find evidence of women successfully leveraging this salary transparency to negotiate higher wages.

Zhang pointed out that improvements in bridging the gender pay gap are primarily driven by organisations, particularly those that foresee public scrutiny and potential backlash, prompting them to implement widespread changes.

The study also contrasts the Ontario policy with other policies that mandate salary disclosure at an aggregate level for sizable firms. Zhang argued that such policies are less effective as they only reveal average salaries for males versus females without detailed breakdowns, making it harder to assess gender inequality accurately. In contrast, Ontario’s detailed database facilitates more precise comparisons.

Nevertheless, salary transparency adoption and the consequent narrowing of the gender pay gap come at a cost, especially for organisations with a significant existing pay disparity. These organisations may face higher expenses to ensure equal pay across genders. Zhang highlighted the challenges in implementing salary transparency widely, noting the considerable pressure it places on organisations to initiate change.

Zhang also speculated on the potential for salary transparency to enhance competitiveness, particularly in the private sector, where employee movement between companies is more common. However, in academia, where the study was focused, the likelihood of increased competition due to salary transparency is lower because transitions between higher education institutions are rarer. This research sheds light on the complex dynamics of salary transparency, its impact on gender pay inequality, and the organisational and societal factors influencing its effectiveness.

More information: Elizabeth Lyons et al, Salary transparency and gender pay inequality: Evidence from Canadian universities, Strategic Management Journal. DOI: 10.1002/smj.3483

Journal information: Strategic Management Journal Provided by Strategic Management Society