pay transparency

Ads disclosing compensation have doubled over the last year. However, much of the compensation is listed as a salary range and these ranges are pretty wide.

Pay transparency is the recent hot job posting trend. Microsoft is the latest company to commit to publicly sharing salary ranges for open roles. Microsoft follows several cities and states who have passed laws requiring employers to disclose salary ranges in job descriptions.

Indeed has also essentially required pay transparency in its ads. Indeed also assigns an estimated salary range for ads where pay is not disclosed or is unreadable.

Job Ad Example

The number of ads disclosing compensation have doubled over the last year as indicated by the black line in the graph below. However, pay ranges (as defined by the difference between the minimum and the maximum disclosed compensation) as a percentage of the mid-point of the salary have remained relatively flat. They show a wide range between 23% and 25.5% over the last year as indicated by the blue line.

This leads to the question, if the range is so wide, is pay transparency really helpful?

pay transparency

Further pay ranges can vary widely by occupation and title. The scatterplot below shows the mid-point salary compared to the range of the salary as a percentage of the midpoint by occupation for jobs paying under $100,000.

  • The amount of compensation does not necessarily drive the pay variability.
  • Certain jobs such as healthcare and computer jobs tend to have some level of predictable compensation. Therefore, they do not have high variability in the salary range despite being in many cases highly paid.
  • Certain jobs may have high salary range variability, because they are less predictable such as sales and finance jobs.
  • Surprisingly many entry level jobs can have 20% or more variability in the pay ranges.

The Bottom Line of Pay Transparency

Pay disclosure by itself does not necessarily promote pay transparency. Pay transparency dictates a certain level of precision of the job and the requirements of the job. Many jobs provide for a certain level of flexibility by the fact that the job itself may be variable. To promote pay levels exactly is to in many cases strip out the inherent flexibility of the job.

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