Paul L. Caron

Tuesday, September 27, 2022

If Legal Education Embraced Pay Transparency, Would Law Professors Emulate Hockey Players And Focus More On Scholarship And Less On Students?

Wall Street Journal, Success at Work Is Warped by Your Co-Workers’ Salaries:

Like most people with regular jobs that don’t require wearing skates to work, professional hockey players had no idea how much money their colleagues made—until one morning in 1990 when a newspaper published the salary of everyone in the National Hockey League.

It was an extreme case of a topic that captivates economists: pay transparency.

So not long ago, intrigued by the consequences of that overnight shock, a researcher decided to exploit this natural experiment hiding in plain sight. It led to insights that have never been so relevant about how one industry’s wage disclosure affected the performance of those employees and their entire teams.

Now a version of what happened in hockey is on the verge of happening across the U.S.

The country is nearing a crossroads in the battle over salary transparency that would bring major changes to some of the nation’s most powerful companies from Wall Street to Silicon Valley.

small number of states already have wage-disclosure laws that require most workplaces to list pay ranges on their job postings. These policies meant to narrow gender pay gaps could become more common, as New York City is set to enact sweeping legislation in November and California sent a bill to the governor’s desk for a decision by the end of September.

Talking about money in the office used to be taboo. But younger workers are more comfortable discussing how much they make, a phenomenon their older colleagues find as befuddling as TikTok. As it turns out, there are hidden effects of pay transparency that warp the way people view success, and that’s why hockey’s unplanned experiment is worth another look today: We could all learn a thing or two from a few hundred people a few decades ago.

That moment of mass disclosure in the NHL is the focus of a new paper by James Flynn, an economics Ph.D. candidate at the University of Colorado [Salary disclosure and individual effort: Evidence from the National Hockey League]. Plenty of studies have shown that salary transparency affects employee satisfaction. This one measures their production.

The employees who discovered they were paid less than their peers didn’t suddenly put in less effort at work. They just exerted a different kind of effort.

In a likely response to what they perceived as unfair pay, these NHL players sacrificed defense and shifted their attention to offense, since players who were better at offense commanded higher salaries in contract negotiations. They had seen the skills their labor market rewarded—and they were following the money. But this was counterproductive. The performance of their teams suffered when they altered their individual play. ...

They took more shots and scored more goals, but that didn’t make them more productive. In fact, the opposite. When they were on the ice, their teams were outscored by a wider margin. They had changed their play at the expense of their colleagues.

It was as if simply knowing how the market valued talent made them want to be entirely different people at work. These players couldn’t resist the incentives “to produce whatever the boss is measuring and rewarding,” as Mr. Card wrote in an email, even if those bosses were measuring and rewarding the wrong numbers. ...

It’s not hard to see how those findings generalize to any business. When people feel undervalued, they prioritize the flashier parts of their jobs that are easier to measure, even at the risk of costing their organizations.

This behavioral change reflects a deeply human impulse. We want to be paid well, but we really want to be paid well relative to others. We care less about what we make than what we make in the context of our peers.

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