Abstract
Wage transparency in the workplace matters to employers and employees alike. Some countries such as Norway have introduced wage transparency by allowing constituents to search for wage levels through an online search. Employees have several interests that are related to wage transparency, such as knowing that they are receiving a fair wage relative to their coworkers or knowing their relative position in a social or professional ladder. Managers are aware that their employees value this information as a way to “understand and contextualize their workplace,” yet face trade-offs (Collins & Mossholder, 2014). In the interest of encouraging productive employees, increasing or maintaining job satisfaction, increasing trust, and reducing employee turnover, employers and policymakers face the decision on whether to provide wage transparency (Cohen-Charash & Spector, 2001; Ambrose et al., 2002; Reb et al, 2006; Sklaricki & Folger, 1997). Furthermore, transparency discourages public corruption and nepotism, and increases trust in the tax and social security system. This study aims to investigate wage transparency as a tool for increasing productivity and its effect on employees’ motivation to increase effort. Experimental literature shows that transparency is valued when it reduces uncertainty about wages (Brandes & Darai, 2017). Workers also have varying and substantial willingness to pay to learn the wages of peers and their boss (Cullen & Perez-Truglia, 2022). Our study examines conditions under which transparency of wages or productivity may induce workers to exert higher effort when there is no vertical differentiation (similar positions) among them and in a setting where more productive employees are paid more.