Marie Curie fellow, SBE’s Peter Werner, on the benefits and risks of wage transparency

Marie Curie fellow Peter Werner, assistant professor at the Maastricht University (UM) School of Business and Economics (SBE), will be conducting research into wage transparency. The main question he seeks to answer is how much information about wage structure an employer should reveal to employees. The project contributes to the emerging field of economic design, combining insights and methods from behavioral and experimental economics, social psychology and management research.

Peter Werner“It’s a very interesting topic, because it’s not so clear from a company perspective how much information about wages you should provide to your employees,” Werner says. “And by ‘wage transparency’, I mean that one employee knows what his or her coworkers earn.”

The question is complex because there are so many factors at play, Werner says. “Interestingly, there are a lot of arguments on the pro and con side, but there aren’t so many structural insights from economics that suggest what the optimal degree of transparency actually is,” he says.

Transparency about wage information can have both pro and con impacts, Werner says. “A non-transparent system might create some feelings of mistrust or an impression that employees are being cheated,” he says, “whereas an important argument that is made from a policy perspective is that a transparent system makes wage discrimination less likely, because it makes it easier to detect it, for example, wage discrimination based on gender. So that’s the positive side.”

At same time, he adds, transparency may also have negative consequences. “Some research from economics suggests that transparency about the wage structure, for example—if I know what my coworkers are earning—might lead to envy, to lower job satisfaction and also decrease motivation. And also can lead to people leaving the firm.”

Finding the right balance is one goal of the research. “I would like to dig deeper into this area and look more in detail at what type of wage information should be shared with employees and which factors contribute to the acceptance of wage differences,” Werner says.

The project will begin in October 2017 and run until September 2019.

This article is the first of a three-part series exploring the research projects of three SBE researchers who this year received Marie Curie grants. The award, named after the double Nobel Prize winning Polish-French scientist famed for her work on radioactivity, supports researchers working across all disciplines, from life-saving healthcare to ‘blue-sky’ science, are eligible for funding.

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