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Comment by spamizbad | Hacker News Reader

I get why employers would hate this, but overall, wouldn't greater transparency in the labor market drive economic growth by virtue of making the labor market more efficient by doing a better job of connecting skilled, hard-working and motivated employees with employers who can pay more?

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Most won't directly voice this, but I believe the primary objection from many employers is that there kinds of salary transparency laws raise the floor, since you know (roughly) what all of your colleagues are making.

In other words: software (like most other industries) relies in part on employees low-balling themselves (and stigma around sharing salary information), which is harder to do when you know what the actual salary band is.

In my opinion -- and I have no hard data to back this up, merely some limited personal experience -- the biggest issue employers will have about salary transparency is that it makes paying high performers high salaries more difficult.

Typically having a high performer on staff is a huge win for the employer. E.g., at one previous company, the top couple sales people were 10X performers compared to the median sales person. And they were compensated maybe 5X the median. A disgruntled employee found and leaked a document that listed everyone's compensation -- and the negative feelings that were generated towards the company and towards the highly paid sales people was profound. Part of the issue is that the 10X sales people did not necessarily work 10X harder, they just had the right set of personality traits, industry experience, and je ne sais quoi that made them able to bring in more and bigger clients. But many people feel intrinsically that compensation should be tied to effort and to those people it was upsetting to see coworkers who did not necessarily put in 5X more effort get 5X more money.

Edited to add: to be clear, I do not personally have a problem with pay being tied to results instead of to effort, but I saw first hand that many people have a different opinion about this.

It can be dealt by creating high-paying higher rungs on career ladder and then promoting the 10x people there. So, regular SE position can have a salary range of say $120k-$150k, but principal senior staff ninja can have say $400k-$600k. That's how FAANGs do it basically.

I see that as being more helpful from a regulatory point of view (i.e., by providing a limited defense against claims of pay discrimination) than from an employee morale point of view. E.g., when people express dissatisfaction over the fact that those in the C-suite make X times what the average employee does, pointing out that the people in the C-suite have different titles or roles from the average employee doesn't seem to assuage anybody.

Most complaints I hear about C-level pay boil down to claims that the roles themselves are overvalued, not that individuals are overpaid for the role. I think the value of an extremely highly-performing engineer is likely to be more apparent to the "rank and file" than that of an executive, especially at a company where employee morale is a serious concern.

No, you have gotten it all backwards. You are only allowed to use the more efficient market rationale when are you defending low wages and higher prices for regular people. Regular people getting higher wages is seen as a disease that must be stopped at all cost. [1]

[1] https://www.bloomberg.com/news/articles/2022-03-17/powell-tr...

It makes sense though. Wages going up could easily lead to a wage-price spiral.

checkmate

An example is when companies have to increase their offers due to changing market conditions; currently they can just silently do that without telling existing employees. But with the new law existing employees have a way of finding it out so they will then go ask for a raise to match this range. Of course employeees are free to discuss salaries themselves but in America that’s still not normal and common.

Of course this is why current employees seem to leave all the time for other opportunities rather than getting raises and keeping knowledge inside the company.

HR: "Why do we have retention problems"

Also HR: "Pay the new people 1.5x, but don't tell anyone"

Companies profit from information asymmetry. Efficiency comes from reducing that asymmetry, but efficiency also means less ability to profit.

I don't think they'll hate it. If they know what a prospective employee is making, they can offer a minimal increment on that within their (wide) salary range.

Currently, only the employer knows their real budget (and that may change if they get the right candidate) and only the employee knows what they'll move for. Salary negotiation is based on those two secrets. This legislation makes the latter secret public knowledge.

The latter was already public knowledge, your entire salary history is probably available via The Work Number. This makes the former secret public knowledge.

Blimey, if your current salary is available at salary negotiation time then that's a much bigger problem then advertising salaries.

To your point: companies can advertise a big range, or create a new job title, for a job, or level you based on undecided job levels according to what they want to pay you. I don't think this legislation adds anything.

> only the employee knows what they'll move for ... This legislation makes [that] secret public knowledge.

Not everyone's motives is the same on this, so it's still secret. Some people will require more than a small bump to move into the risk of an unknown new employer.

Also, some people value flexibility (or rigidity), autonomy, etc. more than money - to the point where some people will pass substantial amounts of money if it means sacrificing real time with the fam.

I totally agree, but the new employer doesn't have to know any of that.

I suspect employers are more interested in attracting talent by _appearing_ to pay highly than by actually doing so.

Companies get a huge financial lift by underpaying some percentage of their employee base. Consider any company whose main cost is people, and revenue is roughly proportional to headcount. (Consultancy, school, security, etc)

Let’s say they can utilize an information asymmetry to underpay half their workforce by 10%. That cuts their cost by 5%, and it’s all to the bottom line. If they were a 10% net margin business, now they’re 15%.

This is why they fight transparency. It’s a form of price discrimination.

A libertarian might say “It’s a free market, and everyone enters the contract willingly.”

I am sympathetic to that, though markets tend to work most efficiently when there is more information.

The one downside is some remote jobs might not be available in New York any more. NYC wage levels make remote work more difficult from a cost arbitrage anyway.

Exactly, I'm a bit surprised that this needs to be legislated. Many people will not apply/respond to recruiters if the salary isn't posted. I'd think employers would be doing this simply because it makes things easier for them.

By what mechanism does legally enforced transparency make the labor market more efficient?

Pricing transparency eliminates economic triage and uncertainly: if you want to make $XXX, you don't have to apply to 10 different jobs and spend everyone's time determining whether they'll pay you $XXX.

You still don't know if they'll pay you $XXX. You only know that they claim that there exists some hypothetical employee to whom they'd in good faith imagine paying $XXX.

Ranges have lower bounds. There is some subset of people for which this reduces the uncertainty to zero.

In general, pricing transparency increases market efficiency (and vice versa).

By the same mechanism that makes it work for commodities and public equity markets.

Um, that mechanism is the printing of the actual trades and an open-outcry (now electronic) market-making process for definitionally fungible assets.

One of the criteria of a Perfectly Competitive Market is "Perfect Information":

"In economics, perfect information (sometimes referred to as "no hidden information") is a feature of perfect competition. With perfect information in a market, all consumers and producers have complete and instantaneous knowledge of all market prices, their own utility, and own cost functions. "

Transparency is literally one of the requirements for a theoretical efficient market. If buyers (companies) have asymmetrical information with sellers (laborers) there is room for inefficiency. Remove that and the market becomes more efficient.

This efficiency is seen as higher wages and lower profits, as we see with the skyrocketing in executive compensation after it was legally mandated to be public.

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