Does Transparency Lead to Pay Compression?

By Alexandre Mas. Journal of Political Economy, 2017

132 citations recorded by the source corpus.

This paper asks whether pay disclosure in the public sector changes wage setting at the top of the distribution. I examine a 2010 California mandate that required municipal salaries to be posted online. Among top managers, disclosure led to approximately 7 percent average compensation declines, and a 75 percent increase in their quit rate, relative to managers in cities that had already disclosed salaries. The wage cuts were largely nominal. Wage cuts were larger in cities with higher initial compensation, but not in cities where compensation was initially out of line with (measured) fundamentals. The response is more consistent with public aversion to high compensation than the effects of increased accountability.

Subfields: Management Science and Operations Research, Public Administration, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/cee274fcd5fc4de67a3de4c620bea091cf81c03e

Citations in the corpus

• Pay Transparency and the Gender Gap (2019, unknown): “…relative to the average public sector salary and also led to higher growth in average professorial salaries in Ontario relative to other provinces.7 Mas (2017) looked at the effects of a law change in California that mandated the online disclosure of municipal salaries and found salary compression.”
• Do Firms Respond to Gender Pay Gap Transparency? (2019, unknown): “Mas (2017) shows top earners in municipal jobs experience a drop in wages following the public disclosure of wages, which he argues is primarily due to public aversion to visibly exorbitant salaries.”