US State Pay-Secrecy Bans (Right to Discuss Pay) — Evidence of ~2% Lower Wages in Econometrica Study

Several US states have passed laws protecting private-sector workers' right to discuss their pay with coworkers, banning employer pay-secrecy policies. The aim is to expose and reduce unexplained pay differences, including by gender.
Zoë Cullen and Bobak Pakzad-Hurson (Econometrica, vol. 91(3), May 2023; NBER Working Paper 28903) exploit the staggered adoption of these state laws in an event study and pair it with a bargaining model. They find that the laws lead wages to decline by approximately 2%. Their explanation is that transparency weakens individual bargaining power: employers refuse high pay to any one worker to avoid costly renegotiation with others.
The decline is smallest where workers have low individual bargaining power, for example under collective bargaining agreements or posted wages, so the effect is concentrated where individual negotiation matters. The paper reports average wage effects; this entry does not claim a measured effect on the gender pay gap.
Lesson for transfer: disclosure rights alone can change wage-setting equilibria in unintended ways; designs that pair transparency with posted ranges or collective frameworks may avoid wage compression. Presented as a cautionary, evidence-based case, not as proof the laws fail on equity grounds.

Read the full analysis: https://econometricsociety.org/publications/econometrica/2023/05/01/Equilibrium-Effects-of-Pay-Transparency