Ambiguity in advertised compensation: Recruiting implications of nominal compliance with pay transparency legislation.

Summary

Kristine M. Kuhn's 2024 research paper, "Ambiguity in Advertised Compensation: Recruiting Implications of Nominal Compliance With Pay Transparency Legislation," investigates the unintended consequences of pay transparency laws when organizations disclose compensation using broad salary ranges. The study posits that despite legislative mandates increasing the prevalence of wage information in job postings, the common practice of advertising wide pay ranges introduces a significant degree of ambiguity. Drawing on decision and signaling theories, the paper hypothesized that highly ambiguous pay ranges would elicit negative reactions from prospective applicants, diverging from contexts where individuals might prefer vaguely specified gains. The methodology involved three preregistered experiments designed to rigorously test these hypotheses. In Study 1, business students were presented with job postings where the width of the salary range was manipulated between subjects, allowing for an examination of its direct effect on perceptions. Study 2 further explored the moderating effects of explanations provided for salary ambiguity, utilizing a within-subjects design with college graduates experienced in the workforce, comparing responses across job postings with varying pay range widths. Finally, Study 3 engaged a diverse sample of recent job seekers who predicted salary offers based on a hiring vignette that manipulated both the advertised pay range's ambiguity and the candidate's qualifications. This study also analyzed participants' qualitative impressions of the organizations. A key experimental manipulation involved showing participants job ads with the same salary midpoint (e.g., $40,000-$90,000 versus $60,000-$70,000), allowing for direct comparison of the impact of range width. The findings provided converging evidence for a "modal aversion to high ambiguity" in advertised compensation, indicating that job seekers generally react negatively to broadly defined salary ranges. A crucial finding was the significant negative impact on perceived organizational trustworthiness; participants viewed organizations with wide pay ranges as less trustworthy than those with narrower ranges, even when the central salary expectation was identical. This led to skewed predictions of salary offers, with job seekers tending to predict lower offers when faced with greater ambiguity. Kuhn's research suggests that individuals may interpret vaguely specified pay ranges as being potentially biased against them, particularly when the information comes from a self-interested party like a prospective employer. While participants did expect some flexibility in high-level positions due to factors like bonuses, they also noted that clear explanations for salary variations (e.g., based on experience or location) were important. The study's implications extend to practical recruitment strategies, suggesting that while employers nominally comply with transparency laws, their methods can inadvertently deter desirable candidates and foster distrust.