Optimist Economy What’s the Skinny on Laws that Make Salaries Public?
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Dec 10, 2025 Listener Max shares insights from his thesis on pay transparency laws, revealing an 8-cent reduction in the gender wage gap. Catherine discusses how these laws empower job applicants but may lead to pay compression, impacting wages within firms. The conversation explores the competition between employers influenced by disclosed salaries, and the long-term effects of transparency on wage dynamics. They also touch on the challenges of individual negotiation versus collective bargaining, highlighting broader implications for discrimination in the job market.
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Transparency Gives Information Power
- Pay transparency gives workers information power that improves outside bargaining and negotiation.
- But it can also cause firms to compress pay to avoid internal wage pressures.
Outside Versus Inside Effects
- Pay transparency produces both outside-firm gains and inside-firm compression effects simultaneously.
- Net outcomes depend on which effect dominates and how firms adjust.
Combine Transparency With Bigger Reforms
- Expect messy short-run transitions after pay-transparency laws and monitor firm reactions over time.
- Focus on larger reforms to boost worker bargaining power alongside transparency measures.