The objective of work package 1 was to analyze how transparency affects the wage negotiation process between employers and employees, the resulting wage profiles and subsequent performance. Here, the focus was on the choices of the negotiating parties to make wage information available and on the ability of the interaction partners to exploit the strategic value of wage information. As the basis for work package 1, I designed and implemented an experimental study in which one employer interacts with two employees. After sequentially negotiating the wages with each employee, the employer sends wage offers to the two employees who, upon accepting the offers, perform a working task. Higher performance in the working task yields higher revenues for the employer.
It is found that wage transparency, if it is fully implemented for all employers and employees, indeed affects wage profiles. In particular, full wage transparency is associated with higher wages and a higher frequency of equal wage offers to both employees. At the same time, participants in the role of employees are reluctant to obtain information about offers to other employees when they have the possibility to become informed. In these cases, wage distributions remain largely non-transparent.
In work package 2, it was studied in a similar experimental setting if and how a social norm within the firm may change the impact of wage transparency on the behavioral responses of employers and employees, and what the implications are for the resulting wage structure and work motivation. The main hypothesis was that the acceptance of wage disparities among employees can be increased by a commonly shared norm for wage differentiation. Such a commonly shared norm could be achieved by the provision of information suggesting the appropriateness of either stronger or weaker wage differentiation.
The results show that the provision of norm-relevant information about the appropriate degree of wage differentiation may indeed shift employers’ and employees’ attitudes. However, there is also evidence that the attitudes to wage differences are related to the performance achieved by particular employees. Moreover, employers’ responses to norm information are heterogeneous. For example, when the norm information suggests weak differentiation in wages, some employers still pay substantially higher amounts to high performers. Employees generally accept wage differences when productivity differences exist, but it seems to lower work motivation when the degree of wage differentiation becomes stronger than considered as appropriate.
