Pay Transparency, Negotiation, and Employer Demand

We propose a field experiment conducted in a real-world labor market setting to investigate employers' perceptions of negotiating candidates during the hiring stage, and how that changes when there is pay transparency.

In this experiment, we will assume the role of an employer and enlist actual recruiters who will be paid real wages to evaluate fictitious job applications. These recruiters will be tasked with evaluating candidates who have received job offers and are actively negotiating counteroffers. To explore the influence of negotiation intensity, we will randomly vary the extent of their counteroffer amounts. The recruiters will be asked to evaluate these candidates and determine suitable compensation packages.
To understand how pay transparency affects employer behavior, we will divide the recruiters into two groups. Half of the recruiters will be assigned to the transparency treatment, where they will be informed that the employer's job advertisements display the target salary range. The remaining recruiters will be part of the no-transparency treatment, where they will receive information about the target salaries without any indication of transparency in the job adverts. By comparing how recruiters evaluate negotiating candidates in the transparency and no-transparency treatments, we will shed light on the impact of pay transparency on employer perceptions and their compensation decisions.

2024-05-08

2024-09-08

Our primary outcomes include recruiters’ salary offers, offers of non-salary benefits, and recommendation of continued negotiation.

Non salary benefits are using categorical variables on a 4-point scale. Qualitative assessments of skills are measured using categorical variables on a 4-point scale for each skill.

Current salary prediction, best annual outside offer, suggestions of other non wage benefits such as work-from home, suggestion for a more senior position, recommendation for continued negotiation, perceived likelihood of acceptance of the offer, general comments about the candidate, quality of the overall pool of candidates and general opinion about salary asks, in particular when made outside the pay range.

For reasons behind continued negotiation recommendation, if the respondent says no we will use the following options: "Attempt to negotiate with this candidate to reach closer to the initially offered salary.", "Explore negotiating with this candidate by offering non-salary benefits but maintaining our initial offer.", and "Reject this application." The perceived likelihood of acceptance of the offer will be measured with a categorical variable on a 4-point scale. We will use a text box for other comments about the candidate. For the follow-up survey, to measure their opinion about the information contained by salary asks, we will ask how informative they think the candidates' counteroffers are regarding their current salaries, outside options and personalities. To measure their opinion about salary ask when made outside the pay range, we will offer the choice between: "Fear of wider re-negotiations among employees or the necessity of offering higher salaries to future candidates", "Considerations of fairness to other candidates regarding exceptions to the salary range", "Concerns about potential legal consequences for making exceptions.", "None of the above", "Other".
To measure gender norms, we will measure the frequency of female candidates mentioned among the top three selections, adjusted for the total number of high-quality female candidates (i.e., the number of candidate profiles with female names ranked in the top six biographies, as rated by all participants) included in the recruiter’s evaluation packet. We will also collect information about recruiters’ beliefs regarding the frequency of counteroffers, in particular for female candidates.

We will conduct a field experiment in real-world labor market settings. We will assume the role of an employer and hire actual recruiters to screen job applications, which have varying intensity of negotiation and whether the salary range was posted.

We will hire 400 recruiters from Upwork, a popular job platform used by employers to hire contractors. We aim to mimic the way companies would approach recruiters when they contract out part of their recruiting services.
In our research design, each recruiter will receive a prompt detailing the employer's profile and the desired candidate characteristics, along with the budgeted salary range for the position. Subsequently, the recruiters will be asked to evaluate candidates who have applied through our talent management system. For this evaluation, we will present each recruiter with 16 different résumés, each representative of a candidate profile within a specific industry. These résumés will be modeled after real résumés found on a popular job board site, Indeed.
Within each candidate's profile, we will introduce three randomly-varying features. First, we will randomly assign a gender to the candidate using the 100 most popular names for boys and girls in 1990. Approximately 50% of the résumés will be given a female first name, and the other 50% a male first name. Second, we will vary the specific counteroffer amount over the initial salary offer. The counteroffer will be either within the salary range or above the range but within a 20% band of the top of the salary budget range. Within a recruiter’s resume packet, the fraction of candidates suggesting counteroffers beyond the threshold will be either 25%, 50% or 75% (randomly selected). Lastly, at the level of recruiters, we will randomly assign half of them to the transparency treatment, where the job adverts will display a target salary range for the position. The other half of recruiters will be informed of the employer's target salary range but their adverts will not display this information.
This approach allows us to measure the effect of salary transparency on how employers evaluate candidates who adopt stronger negotiation stances. Furthermore, we can study how employers perceive candidates who negotiate for salaries higher than the target range in both the transparency and no-transparency treatment.
We will employ a structured questionnaire to gather insights from the recruiters about their perceptions of the presented candidates. The questionnaire will be designed to elicit information on several key aspects. First, recruiters will be asked to suggest appropriate compensation packages for the candidates. Additionally, we will seek the recruiters' evaluations of qualitative characteristics such as social skills, technical abilities, initiative, and overall fit with the company. Furthermore, we anticipate that pay transparency may influence employers' decisions to allocate non-wage amenities. We will inquire which candidates the recruiters believe would be suitable for more work-from-home days. We will also ask whether they recommend any of the candidates for a higher position that has opened up in parallel to the initial position We will use multivariate regressions to analyze the effects of salary transparency on how employers evaluate negotiating candidates.

Randomization done in office by a computer

Recruiter

Yes

400 recruiters.

6400 resumes

200 recruiters under pay transparency regime and 200 recruiters under no pay transparency. Within each regime, half show greater negotiation intent.