Wage disclosures lead to salary cuts, job change

In the era of transparency, publicly disclosing personal information - such as government officials' income - may result in unintended consequences.

According to a new research, the highest-paid city employees in California saw an eight percent reduction in pay after their salaries were disclosed to the public.

These cuts also triggered a 75 percent increase in the quit rate among city managers.

The findings suggest that top salaries are cut because they appear excessive, regardless of whether the reductions in pay are good policy.

Additionally, the research suggests that media exposure restrained high wages in cities where the top salaries were already disclosed.

"This paper shows that there may be unintended effects from these policies. If the public has an averse response to large salaries, regardless of whether these salaries are justified, there might be adverse consequences," explained Alexandre Mas, professor of economics and public affairs from Princeton University's Woodrow Wilson School of Public and International Affairs.

For the study, used an internet database of historical webpages and newspaper archives to research which cities disclosed wages, and he used public records requests to gather payroll information.

He then compared the evolution of wages between cities that had and previously had not disclosed city manager wages.

Once their wages were disclosed, city managers saw an average pay cut of about eight percent, according to Mas' calculations.

Interestingly, Mas found that wage declines mostly came from male managers.

On average, compensation did not decline for female managers.

The findings were released by the US National Bureau of Economic Research.