Effects of Pay Transparency on Application Intentions through Fairness Perceptions and Organizational Attractiveness: Diversifying the Workforce by …

Summary

In the context of the "Great Resignation" and the ongoing need for organizations to attract and retain talent, particularly younger women who contribute significantly to organizational performance, Phan-Armaneous's 2022 dissertation explores the impact of pay transparency (PT) on application intentions. The study posits that PT can serve as a strategic tool to recruit effectively by fostering increased fairness perceptions among potential applicants. It highlights the attitudes of younger generations (Millennials and Gen Z) who tend to favor openness in compensation discussions, viewing it as a means to reduce inequities and promote ethical practices. The methodology involved an experimental study with 301 women aged 18 to 45. Participants were randomly assigned to one of two conditions: reading a company profile that promoted pay transparency or one that did not. The aim was to understand how these different pay policies influenced applicant attitudes. To analyze the data, serial mediation and exploratory factor analyses were conducted. The exploratory factor analysis revealed that "organizational attraction" and "intent to apply" could be combined into a single construct, termed "employment desire." The key finding from the analysis was a significant difference in fairness perceptions between organizations with PT and those without, with transparent organizations scoring much higher (t(210)=15.54, p<.001; d = 1.78). Furthermore, pay transparency was found to positively influence employment desire through these enhanced fairness perceptions (Ba*b = 1.31; BC 95% CI = 1.03 to 1.63). These results suggest that applicants infer an organization's commitment to equity and justice based on its pay transparency policy. The implications of this research are significant for organizations seeking to attract qualified applicants and diversify their workforce. By implementing pay transparency policies, companies can signal their commitment to fairness and equity, thereby increasing their attractiveness to potential employees, especially younger women. This strategy can be particularly effective in competitive job markets, aiding recruitment efforts and potentially contributing to a more equitable workplace by addressing wage gaps and fostering trust and loyalty. The study suggests that pay transparency, by making pay differences more visible and justifiable, can help reduce discrimination and promote fairness, aligning with the values of younger generations in the workforce.