Although the gender wage gap has decreased substantially over the last 50 years, progress has stalled in recent decades. Forecasters project it would take until 2059 to eliminate the gender wage gap, if we kept up at the current pace.
The persistence of gender-based wage disparities has prompted calls for new approaches to address the issue. Prominent among these are mandatory disclosure laws, which a growing number of countries have adopted. Although the specifics vary from nation to nation, these laws require firms to publicly reveal data regarding the size of the gender wage gap. The idea is that public disclosure will “shame” firms with large wage gaps, creating pressure for them to address gender-based disparities in compensation. But does it play out that way?
In a recent paper published in Administrative Science Quarterly, we addressed this question by analyzing the reputational impacts of a 2017 mandatory disclosure law implemented in the United Kingdom. The law requires organizations with more than 250 employees to publicly post certain statistics about the gender wage gap at their organization.
We sought to understand how the law impacted firms’ reputations among a crucial audience: employees. Using data from the employee review website Glassdoor.com, we analyzed how employees’ ratings and reviews of the organizations where they work changed after mandatory disclosure, depending on the size of the pay gap that was revealed.
There was reason to expect that disclosure would spark a reaction from employees on Glassdoor.com — the law impacted a large and diverse set of firms, attracted a great deal of media coverage, and made statistics about gender pay gaps easily available to the public on a colorful, searchable government website. Moreover, in contrast to raising pay-related concerns with a boss, employee reviews on Glassdoor.com are anonymous, which should mitigate fear that employees might have about speaking up.
Our analyses yielded surprising findings. Contrary to our expectations, we found no evidence of penalties on Glassdoor for firms that revealed large wage gaps. When we examined how ratings changed from before to after disclosure for firms with a large gender wage gap (more than 20%), as compared to firms that had a more modest gender pay gap (2-20%), we did not observe a decline for firms with substantial pay disparities. This runs counter to the rationale given for the law.
In contrast, we found that firms disclosing that they were paying men and women relatively equally (less than a 2% difference in pay) experienced a reputational boost from disclosure, as employees left more positive reviews for these firms and used gender-related words more frequently in their comments about the “pros” of working for the organization. Given that many employees use Glassdoor to research prospective employers during their job searches, this finding indicates that firms that pay men and women relatively equally may benefit from highlighting this information, since it may enable them to attract a wider or more talented pool of job applicants.
We explored several explanations for why the effects were so muted for firms revealing sizable gender wage gaps. We tested whether we might observe a penalty for these firms when we honed in on certain timeframes (such as when news coverage of disclosure was most prominent) or when we focused on certain types of firms (such as those that had a more equal mix of men and women or those where the data was more interpretable) due to the firm having a more homogenous mix of job types.
Ultimately, we were not able to definitively account for the lack of an observed effect on firms with large pay gaps. One possibility is that employees at some firms have become resigned to the existence of the pay gap, resulting in acceptance, feelings that it is futile to complain, or silent resignation. Future research is needed to better understand which, if any, of these explanations may account for the lack of an observable negative impact on firms’ reputations as employers.
In contrast, we found important contingencies that amplified employees’ reactions to firms revealing near pay parity. The positive effects of disclosure on the reputations of these firms were heightened during timeframes when there was more news coverage of disclosure, among employees were relatively newer at the firm and at firms where the data was more interpretable and the gender composition of employees was more balanced. These findings indicate the importance of ensuring that disclosure gains adequate attention and is provided in an easily interpretable format, if it is to have an impact.
Overall, our findings highlight the potential of mandatory disclosure for sparking a reputational reaction and thus nudging firms to make changes. At the same time, our findings also contain cautionary notes. Disclosure alone is unlikely to be a panacea to the gender wage gap, and many nuances need to be taken into consideration in order to make it effective. Rather than questioning the effectiveness of all forms of transparency in mandating change, our research adds to the evidence that policymakers can draw upon as they carefully consider how to design of future transparency initiatives to help them achieve their intended aims.
Amanda Sharkey, Elizabeth Pontikes and Greta Hsu. “The Impact of Mandated Pay Gap Transparency on Firms’ Reputations as Employers.” Administrative Science Quarterly 2022.
Image: Sean Wallis via flickr (CC BY-NC-SA 2.0)