Research

Abstract: Pay transparency laws are increasingly discussed and have been implemented in several jurisdictions in the United States as a means of improving pay equity. I examine the effects of pay transparency by exploiting a Colorado law that required the inclusion of wage information in job postings, using online job posting data and CPS data. I use an equilibrium model with subjective beliefs to illustrate how wage beliefs affect job search behavior and outcomes. Under the assumptions that women have lower wage beliefs than comparable men and that more wage information in job postings reduces the gender gap in wage beliefs, the model predicts that the pay transparency law will decrease the gender wage gap. Using a difference-in-differences design, I find that the pay transparency law increased the fraction of job postings with salary information by more than 40 percentage points. The law disproportionately increased salary postings for high-wage jobs, resulting in an overall increase in posted wages by about 2.6 percent. Consistent with the model’s prediction, pay transparency reduced the gender wage gap for employer changers and occupation changers within the employer by 11% and 4%, respectively. The reduction in the gender wage gap is mainly driven by an increase in female wages, not a decrease in male wages. Despite a noticeable effect on the gender wage gap for job changers, pay transparency did not affect the gender gap in job mobility, employment, or labor force participation.