a person holding dollars on the table

Salary Transparency Policies, Partnered with Low-cost Monitoring Tools, Can Help Close the Gender Pay Gap

By Sarah Steimer

Salary transparency could be a great equalizer tool, but new research finds that those effects may be seen only if the cost of monitoring salaries is low. If the public has easy, cheap access to salaries, they are more likely to put pressure on institutions. And the organizations most likely to equalize salaries are more prominent institutions — for fear of being scrutinized.

The findings come from a new study published in Strategic Management Journal from authors Elizabeth Lyons of the University of California, San Diego, and Laurina Zhang of Boston University. Making use of Ontario’s Public Sector Salary Disclosure Act of 1996, which mandated salary disclosure of public employees earning at least $100,000, they focused their research on tenured and tenure-track faculty in Canadian universities.

What they found was that Ontario’s policy closed the gender pay gap more than policies that have less-detailed information and those that do not include cheap, public monitoring databases. And lastly, they found that institutions more concerned about how they may be scrutinized — those with greater public visibility — were more likely to equalize salaries.

“Improvement in the gender pay gap is really driven at the organization level,” Zhang says. “It’s really about organizations that anticipate public scrutiny and perhaps backlash in the future; they’re more likely to implement institution-wide changes.” The researchers did not, however, find that women used the salary information to successfully negotiate higher pay (underscoring that changes are institution driven). And the researchers also found just how costly salary transparency policies can be to certain organizations. “The study highlights why there are hurdles to salary transparency being implemented in a wide way,” Zhang says. “It puts a lot of pressure on organizations to enact change once they do so.”

Strategic Management Journal, published by the Strategic Management Society, publishes the most influential, managerial-oriented research on global strategy.

Based upon:

Lyons, E, & Zhang, L. (2022). Salary transparency and gender pay inequality: Evidence from Canadian universities. Strategic Management Journalhttps://doi.org/10.1002/smj.3483.