Person:

Cullen, Zoe

The discourse around pay transparency has focused on partial equilibrium effects: how workers rectify pay inequities through informed renegotiation. We investigate how employers respond in equilibrium. We study a model of bargaining under two‐sided incomplete information. Our model predicts that transparency reduces the individual bargaining power of workers, leading to lower average wages. A key insight is that employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others. When workers have low individual bargaining power, pay transparency has a muted effect. We test our model with an event‐study analysis of U.S. state‐level laws protecting the right of private sector workers to communicate salary information with their coworkers. Consistent with our theoretical predictions, transparency laws empirically lead wages to decline by approximately 2%, and wage declines are smallest in magnitude when workers have low individual bargaining power.

The COVID‐19 pandemic led to dramatic economic disruptions, including government‐imposed restrictions that temporarily shuttered millions of American businesses. We use a nationwide survey of thousands of small business owners to establish three main facts about business owners’ decisions to reopen at the end of the lockdowns. First, roughly 60 percent of firms planned to reopen within days of the end of legal restrictions, suggesting that the lockdowns were generally binding for businesses—although nearly 30 percent expected to delay their reopening by at least a month. Second, decisions to delay reopenings did not seem to be driven by concerns about employee or customer health; even businesses in high‐proximity sectors with the highest health risks generally reported intentions to reopen as soon as regulations allowed. Third, pessimistic demand projections primarily explain delays among firms that could legally reopen. Owners expected demand to be one‐third lower than before the crisis throughout the pandemic. Using experimentally induced shocks to perceived demand, we find that a 10 percent decline in expected demand results in a 1.5 percentage point (8 percent) increase in the likelihood that firms expected to remain closed for at least one month after being legally able to open. We use follow‐up surveys to cross‐validate expectations with realized outcomes. Overall, our results suggest that governments set more stringent guidelines for reopening than what many businesses would have selected, suggesting that governments may have internalized costs of contagion that businesses did not.

Countries around the world are enacting pay transparency policies to combat pay discrimination. Since 2000, 71 percent of OECD countries have done so. Most are enacting transparency horizontally, revealing pay between coworkers doing similar work within a firm. While these policies have narrowed coworker wage gaps, they have also led to counterproductive peer comparisons and caused employers to bargain more aggressively, lowering average wages. Other pay transparency policies, without directly targeting discrimination, have benefited workers by addressing broader information frictions in the labor market. Vertical pay transparency policies reveal to workers pay differences across different levels of seniority. Empirical evidence suggests these policies can lead to more accurate and more optimistic beliefs about earnings potential, increasing employee motivation and productivity. Cross-firm pay transparency policies reveal wage differences across employers. These policies have encouraged workers to seek jobs at higher paying firms, negotiate higher pay, and sharpened wage competition between employers. We discuss the evidence on effects of pay transparency, and open questions.

We study the growth of online peer-to-peer markets. Using data from TaskRabbit, an expanding marketplace for domestic tasks at the time of our study, we show that growth varies considerably across cities. To disentangle the potential drivers of growth, we look separately at demand and supply imbalances, network effects, and geographic heterogeneity. First, we find that supply is highly elastic: in periods when demand doubles, sellers perform almost twice as many tasks, prices hardly increase, and the probability of requested tasks being matched falls only slightly. The first result implies that in markets where supply can accommodate demand fluctuations, growth relies on attracting buyers at a faster rate than sellers. Second and perhaps most surprisingly, we find no evidence of network effects in matching: doubling the number of buyers and sellers only doubles the number of matches. Third, we show that the cities where market fundamentals promote efficient matching of buyers and sellers are also those that are the fastest growing. This heterogeneity in matching efficiency is related to two measures of market thickness: geographic density (buyers and sellers living close together) and level of task standardization (buyers requesting homogeneous tasks). Our results have two main implications for peer-to-peer markets in which network effects are limited by the local and time-sensitive nature of the services exchanged. First, marketplace growth largely depends on strategic geographic expansion. Second, a competitive rather than winner-take-all equilibrium may arise in the long run.

Drawing on surveys of small business owners and employees, we present three main findings about the evolution of remote work after the onset of COVID-19. First, uptake of remote work was abrupt and widespread in jobs suitable for telework according to the task-based measure from Dingel and Neiman (2020). The initial adoption lead to a persistent shift in work arrangements that both firms and workers forecast would continue into the future. Second, business leaders’ perceptions of how remote work affected productivity shifted over time. In early 2020, 70 percent of small business owners reported a productivity dip due to remote work. By contrast, the median business owner reported a positive productivity impact of remote work by 2021. Third, 21 percent of workers report being willing to accept a pay cut in excess of 10 percent if it allowed them to continue working from home, but the median worker in a teleworkable job would not tradeoff any compensation for the option of continued remote work. Taken together, our evidence points to perceived productivity gains and some workers’ preferences as reasons for the persistence of remote work in the years following the onset of COVID-19.