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Researchers Find Pay Transparency Laws Really Do Raise Wages (and Not Just for New Hires)
By Adam Hardy MONEY RESEARCH COLLECTIVE
More than a dozen new pay transparency laws have taken effect in the U.S. since 2021 — and a new NBER working paper confirms they’re actually working.
Salary transparency laws don’t just make the job hunt a little less frustrating. New research shows they also help raise wages across the board.
In a growing number of states, new rules require employers to disclose a good-faith pay range on job listings. The changes come with the added benefit of lifting wages by up to 3.6% for workers, according to a working paper released Monday by the National Bureau of Economic Research, or NBER.
“We find that pay transparency in job postings successfully leads to higher average wages,” economist David Arnold, lead author of the report, tells Money in an email.
The researchers discovered the pay bump by analyzing job listings in Colorado aggregated from thousands of websites before and after a watershed 2021 salary transparency law took effect in the state. They found that disclosed salaries represented a 3.6% increase relative to pay before the law was enacted. Actual earned salaries increased by 1.3%, according to self-reported salary data on Glassdoor and wages published by the U.S. Department of Labor.
When looking at Labor Department data in other states following 2021, the researchers similarly found a 1.3% increase in wages as a result of disclosure laws.
What’s more, “this positive wage effect appears for both incumbent workers and new hires,” the NBER researchers wrote, “indicating that the policy impacts workers not directly targeted by the law.”
This analysis confirms that salary transparency, a recent workplace trend in the U.S., can help raise wages in several ways, like by helping new hires secure competitive pay, informing current workers whether they’re being underpaid and spurring wage competition among employers.
“The finding that wages tend to go up is quite distinct from past work,” Arnold says. “We provide suggestive evidence that pay transparency is an effective way to get firms to compete for workers, therefore bidding up wages.”
The NBER study also found that transparency laws increase the amount of job listings with posted salary ranges by 30 percentage points, though the researchers noted that many listings for high-paying roles still don’t include pay.
A separate study by the Federal Reserve Bank of New York found much the same. Following the enactment of salary transparency laws, pay ranges in job listings spiked in Colorado, New York City, California and Washington. However, in all cases, the NY Fed determined that compliance typically tops out at around 75%, meaning that about a quarter of job listings don’t disclose pay even when they’re supposed to.
Which states have pay transparency laws?
Many areas across the country are following in Colorado’s footsteps by enacting legislation that requires more pay transparency from employers.
More than a dozen new pay disclosure laws have gone into effect since 2021. Many of the rules are statewide, though a handful of municipalities have made similar changes.
“Pay transparency laws seem to be a relatively low-cost way to increase average wages,” Arnold says.
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.