The Salary Taboo: Privacy Norms and the Diffusion of Information

Abstract

The limited diffusion of salary information has implications for labor markets, such as wage discrimination policies and collective bargaining. Access to salary information is believed to be limited and unequal, but there is little direct evidence on the sources of these information frictions. Social scientists have long conjectured that privacy norms around salary (i.e., the “salary taboo”) play an important role. We provide unique evidence of this phenomenon based on a field experiment with 755 employees at a multibillion-dollar corporation. We provide revealed-preference evidence that many employees are unwilling to reveal their salaries to coworkers and reluctant to ask coworkers about their salaries. These frictions are still present, but smaller in magnitude, when sharing information that is less sensitive (seniority information). We discuss implications for pay transparency policies and the gender wage gap.