New paper by Kyle Kettler and Ian Burn (Institute for Social Research at Stockholm University): “The more you know, the better you’re paid? Evidence from pay secrecy bans for managers”. The paper is available at https://doi.org/10.1016/j.labeco.2019.03.003 and will be published in the Journal of Labour Economics.
Approximately half of Americans are employed at firms where employees are forbidden or discouraged from discussing their pay with coworkers. Employees who violate these rules may be subject to punishment or dismissal. While many employees are legally protected from reprisal under the National Labor Rights Act, the law exempts managers from these protections. Eleven states have passed laws banning pay secrecy policies for managers. In this paper, we explore what effect these state laws had on the wages and employment of managers. We find pay secrecy bans increased the wages of managers by 3.5% but had no effect on the gender wage gap, job tenure, or labor supply. The effects are heterogeneous along a number of dimensions. Below the median wage, female managers experienced a 2.9% increase in their wages relative to male managers. Above the median wage, male managers experienced a 2.7% increase in their wages relative to female managers. The wage gains were concentrated among managers employed at firms with fewer than 500 employees.