Do pay secrecy policies prevent voluntary turnover?

Abstract

AbstractPay secrecy (PS) policies, commonly found in the US private sector, restrict pay communication among employees. Previous research suggests that these policies help prevent pay dissatisfaction and attrition among low earners by limiting salary comparisons. However, by exploiting the staggered adoption of PS bans across US states as a negative shock to PS, I find no causal relationship between PS and voluntary turnover. This suggests that workers' reluctance to ask others about their pay renders PS policies irrelevant for retention purposes. This, in turn, highlights the need for organizations to consider alternative approaches to enhance employee retention and commitment.