Salary transparency and gender pay inequality: Evidence from Canadian universities

Abstract

AbstractResearch AbstractWe examine whether salary transparency influences gender pays inequality in the context of Canadian universities by exploiting a policy change enacted in one Canadian province that required salary disclosure through a publicly searchable database, thus lowering the cost of monitoring the gender pay gap. We find that, on average, salary disclosure improves gender pay equality but institutions respond in different ways. Despite little media attention around gender equality at the time of the policy, institutions most likely to anticipate higher scrutiny, such as top ranked institutions, respond more aggressively to improve gender pay equality—both in terms of the magnitude and type of response. Combined, our findings suggest that the extent of change from salary transparency depends on the reduction in monitoring costs and organizational characteristics.Managerial AbstractSalary transparency has been implemented in various ways around the world as a strategy by firms and policy makers to reduce the gender pay gap. However, whether and how it can achieve this in practice is unclear. We examine a salary transparency policy that mandated disclosure to the public through an online database in one Canadian province by comparing the change in gender pay inequality in that province relative to the change in the gender pay gap in provinces without disclosure. We find that salary transparency improves average gender pay equality primarily within the most visible organizations that likely anticipate high levels of public scrutiny. Our findings imply that facilitating low‐cost public monitoring of gender inequalities can motivate organizations to enact change.