Pay disclosure, or letting employees know what their co-workers earn, has been touted as a remedy to wage discrimination against women, but Emiliano Huet-Vaughn’s research suggests that its benefits may extend beyond that:
What I found was that people in the group shown their relative earnings position were more productive than those that weren’t given that information. In fact, the work output of those in the informed group increased by about 10 percent after they learned their relative positions.
Why did pay disclosure increase productivity? We’re not sure, but the answer may be that people care about their position relative to their coworkers. We may work harder even if we don’t see a raise if we know that we’re doing well compared to our peers. Workers may care about the level of their earnings not only because it lets them buy goods and services, but because it also lets them know where they stand in their peer groups, giving them an internalized sense of status.