A study by Professor Tae-Youn Park of the SKKU Business School, examining the implications of pay transparency policies for the labor market, has been published online in the Harvard Business Review (HBR), a leading practitioner-oriented outlet in the field of business and management.
The HBR article is based on joint research conducted by Professor Tae-Youn Park of Sungkyunkwan University, Professor Alice Lee of Cornell University, and Professor Sungyong Chang of Cornell University. This HBR article is based on the forthcoming academic paper to be published in the Journal of Applied Psychology.
In recent years, a growing number of countries, including the United States, have adopted and expanded pay transparency policies to reduce information asymmetry in the labor market and address unfair wage inequality, such as gender pay gaps. However, most policies focus only on whether pay information is disclosed, without providing clear guidelines on the appropriate width of disclosed pay ranges. As a result, substantial variation in pay ranges has emerged across firms even for the same job.
For example, for the same software engineer position in California, Tesla posts a salary range of $83,000 to $418,000, whereas Uber offers a much narrower range of $174,000 to $194,000.
Drawing on multiple studies, including analyses of approximately 10 million job postings, Professor Park and his coauthors find that wider posted pay ranges are associated with a lower proportion of female applicants. This pattern can be explained by the fact that wider ranges signal greater uncertainty in potential compensation, even when the midpoint of the range is identical. On average, female applicants—who tend to exhibit higher levels of risk aversion—are more likely to apply to positions with narrower pay ranges.
These differences at the application stage carry over into the salary negotiation stage. Applicants who choose positions with narrower pay ranges tend to have lower expectations for salary increases compared to those who apply to positions with wider ranges. Empirically, they also request approximately $3,600 less in salary. Such initial pay differences may accumulate over time through promotions, bonuses, and future salary growth, potentially leading to persistent long-term wage gaps. In other words, a preference for narrower pay ranges driven by risk aversion may inadvertently contribute to widening gender pay inequality.
Importantly, the research also shows that this issue can be mitigated through simple informational interventions. When pay ranges are accompanied by additional information—such as typical starting salaries and the criteria used to determine pay (e.g., experience and skills)—the gender gap in application rates decreases, and differences in negotiation behavior across pay range conditions are significantly reduced.
Based on these findings, Professor Park emphasizes that “firms should go beyond merely disclosing pay information and provide meaningful context to applicants,” and that “policymakers should take these considerations into account when designing pay transparency regulations.”
This research was supported by the Sungkyunkwan University Academic Research Support Program (Samsung Research Fund).
Journal of Applied Psychology
The implications of pay range transparency on job application preferences and negotiations