{"id":3957,"date":"2025-04-23T17:36:35","date_gmt":"2025-04-23T17:36:35","guid":{"rendered":"https:\/\/aomtodayprod.wpenginepowered.com\/?p=3957"},"modified":"2025-07-09T15:37:36","modified_gmt":"2025-07-09T15:37:36","slug":"transparency-alone-doesnt-solve-unequal-pay","status":"publish","type":"post","link":"https:\/\/www.aom.org\/today\/transparency-alone-doesnt-solve-unequal-pay\/","title":{"rendered":"Transparency Alone Doesn\u2019t Solve Unequal Pay"},"content":{"rendered":"

By Daniel Butcher<\/a><\/p>\r\n

Are pay-transparency laws the answer to fix the problem of women earning less than men? It\u2019s complicated.<\/p>\r\n

Academy of Management Scholar Carol Kulik<\/a> of the University of South Australia said she would be reluctant to remove the discretionary part of executives\u2019 pay packages, as performance bonuses have benefits and removing them wouldn\u2019t necessarily close the gender pay gap.<\/p>\r\n

\u201cIt is certainly true that in sectors that have less discretionary elements in pay packages, we tend to see smaller gender pay gaps,\u201d Kulik said. \u201cFor example, in general, the pay gap in the public sector is smaller than pay gaps in the private sector.<\/p>\r\n

\u201cBut I don\u2019t think we want to say, \u2018Just get rid of discretionary pay,\u2019\u201d she said. \u201cIncentive pay is important for motivating effort and good performance, so we don\u2019t want to remove that.\u201d<\/p>\r\n

Evidence does show that pay transparency narrows gender pay gaps. Several U.S. states and cities have pay-transparency laws, and in February 2024, the Australian government made information about individual companies\u2019 gender pay gaps available for the first time. But rather than raising women\u2019s pay, transparency often leads to compression of compensation toward the middle.<\/p>\r\n

\u201cAustralia is getting on a bandwagon that we see in other countries, suggesting that one of the first steps you should take is find out how big the gap is, and to look at that requires pay transparency,\u201d Kulik said. \u201cBut it\u2019s really interesting to see what happens when countries have made pay gaps transparent; what we find is that, over time, pay gaps get narrower.<\/p>\r\n

\u201cBut it doesn\u2019t necessarily mean that women\u2019s wages are getting higher; it often means that men\u2019s wage growth is slowing,\u201d she said. \u201cIf you\u2019re an individual manager and you know that your pay decisions are going to get scrutinized, you become a little reluctant to pay anybody on the high end, so you start creating some compression at the top.<\/p>\r\n

\u201cNow, that\u2019s not necessarily a bad thing, if you\u2019ve got a pay system that\u2019s really gotten out of whack, and you\u2019ve got a few star performers who are really pulling the whole compensation system too far to the high end\u2014on the other hand, you don\u2019t want to eliminate all the motivating potential of your pay system because managers are reluctant to pay what it takes to recruit and retain top performers.\u201d<\/p>\r\n\r\n

A sample of Kulik\u2019s AOM research findings:<\/strong><\/p>\r\n\r\n\r\n\r\n