Pay transparency fails to close gender wage gap

Researchers in Hungary and Austria examined whether making pay information public reduces differences in earnings between men and women.

They studied Austria’s decade-old law requiring large companies to report pay gaps by job category. The team compared companies subject to the law with those that were not, before and after the reform took effect. They found the law had a limited impact, the wage gap shrank by less than half a percentage point over four years.

The researchers determined that because the pay reports remained internal documents, they did not influence job seekers or pressure companies to change practices. Public disclosure of the data, as seen in the United Kingdom, could have created reputational pressure and encouraged competition among employers. Austria’s law also did not require companies to correct any identified pay disparities, leaving resolution to individual negotiation. The European Union is now implementing a new pay transparency directive.

This directive requires companies with at least 100 employees to share salary range information with job applicants and report on gender pay gaps. If gaps exceed 5 percent, companies must justify them or create a plan to correct the imbalance. The directive places the burden of proof in discrimination cases on employers and requires neutral pay systems, and member states must enact it into national law by 2026.