MIT Sloan Management Review Article on Why Pay Transparency Regulations Are a Strategic Management Opportunity

Touted as one remedy to the gender wage gap, pay transparency laws are increasingly being rolled out across the United States at the state and local levels. Nine states — including New York, as of September — are currently regulating some aspect of pay disclosure. The National Women’s Law Center reports that altogether, more than one-quarter of U.S. employees live in a location where pay information is regulated.

By and large, pay transparency regulations have emphasized disclosing a salary range for advertised positions and internal opportunities for advancement. These laws are designed to ensure equal pay for equal work and effectively close the gender wage gap. The logic is simple: If underpaid employees, including women and minorities, aren’t aware of what their coworkers are paid, they are at a significant disadvantage in leveling the playing field through litigation and negotiation. How can inequities be addressed when they remain in the dark? Without pay transparency, enforcement of existing laws, such as the Equal Pay Act of 1963, becomes difficult. Based on recent cases and notable discrepancies that have been exposed (some spanning years of underpayment), it seems that greater transparency has an important role to play.

About the Author

Tamara Montag-Smit is an assistant professor of management at the University of Massachusetts (UMass) Lowell. Karoline Evans is an associate professor of management at UMass Lowell. Brandon Smit is an assistant professor of management at Bentley University. Cassondra Batz-Barbarich is an assistant professor of business at Lake Forest College.

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