Salary Transparency Laws Raise Pay for All Workers: Study

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Salary transparency laws are proving to be more than just a way to make job hunting easier. Recent research suggests that these laws are also leading to an increase in wages across various industries.

In several states, employers are now required to disclose a pay range in job listings, a move that has resulted in a significant boost in wages for workers. According to a working paper published by the National Bureau of Economic Research (NBER), wages have increased by up to 3.6% due to these transparency laws.

Lead economist David Arnold, who authored the report, stated, “We find that pay transparency in job postings successfully leads to higher average wages.”

The study analyzed job listings in Colorado both before and after the implementation of a salary transparency law in 2021. The researchers found that disclosed salaries resulted in a 3.6% increase in wages compared to pre-law levels. Additionally, self-reported salary data on Glassdoor and wage information from the U.S. Department of Labor showed a 1.3% increase in actual earned salaries.

Similar wage increases of 1.3% were observed in other states following the enactment of transparency laws, indicating a positive impact on wages for both existing employees and new hires.

These findings highlight the benefits of salary transparency in raising wages by ensuring competitive pay for new hires, addressing underpayment for current employees, and fostering wage competition among employers.

The NBER study also noted a 30 percentage point increase in job listings with posted salary ranges as a result of transparency laws, although some high-paying roles still do not disclose pay information.

A separate study by the Federal Reserve Bank of New York supported these findings, showing a surge in pay range disclosures in job listings in states like Colorado, New York City, California, and Washington. However, compliance with these laws hovers around 75%, indicating room for improvement in disclosing pay information.

States with Pay Transparency Laws

Several states have implemented pay transparency laws to promote fair wages and transparency in the job market. These laws have had a positive ripple effect, with over two-thirds of U.S. job postings now including salary information.

The NBER study revealed that these laws have had minimal negative impact on pay differentials within companies, employment levels, job listings, or educational requirements for new positions, highlighting the effectiveness of salary transparency in increasing wages.

“Pay transparency laws appear to be a cost-effective way to boost average wages,” Arnold concluded.