Workers often remain in their jobs even when they know they may get higher wages elsewhere, raising questions about the effectiveness of pay transparency laws. This column draws on a large German survey to examine how information frictions shape labour market outcomes. The findings suggest that workers are better informed than many policymakers assume, but prefer to stay unless an outside offer is markedly higher, citing personal ties, reluctance to change, and location as key reasons. Women are less likely than men to ask for salaries at the upper end even when presented with identical pay ranges. Information transparency alone may not lift wages or close gender gaps – measures that make firm transitions easier may be needed.
Do workers know what they could earn at other firms? Policymakers often assume they do not – and design interventions accordingly. Pay transparency laws and bans on salary history questions rest on the idea that workers are uninformed and thus underpaid. But are information frictions the main driver of wage stagnation and inequality?
Economists have repeatedly shown that workers are often reluctant to leave their firm in response to changes in pay at outside firms – a firm that cuts its wages by 10% might see only 30% of its workforce leave (Sokolova and Sorensen 2021). Some economic models suggest that limited mobility is due to information frictions (Manning 2011). Other models suggest workers have idiosyncratic preferences for their firm and would not leave, even if fully informed about pay (Card et al. 2018, Berger et al. 2022).
Drawing on a large survey of German workers, we explore the role of pay information in shaping labour market outcomes (Caldwell et al. 2025a). We examine what workers know about salaries at other firms, how they value job offers, and whether more information leads to better bargaining – especially for women. We find that workers are more informed than many policymakers assume, and information alone is not enough to overcome the frictions that limit job mobility and perpetuate pay gaps.
Why information might matter
Economists and policymakers alike have long argued that information asymmetries affect wage setting. If workers underestimate what they could earn elsewhere, they may accept lower pay at their current firm. Likewise, when employers ask for salary expectations – a common practice even in jurisdictions where requesting prior salary history is illegal – workers with less information may ask for too little (Agan et al. 2020, Cowgill et al. 2022).
Yet pay remains opaque. Most US job ads do not list salary ranges, and even when they do, the ranges are often wide and uninformative, typically spanning about 30% (Batra et al. 2023). Social norms also discourage workers from discussing pay with colleagues (Cullen and Perez-Truglia 2023), further limiting informal channels of information. Recent research shows that providing workers with more specific comparative pay information can improve job mobility (Card et al. 2012), gender equity in hiring (Roussille 2024), and workers’ willingness to seek raises (Jäger et al. 2022).
Still, knowing that better-paying jobs exist is not the same as being willing or able to move. To disentangle the role of information from other frictions, we surveyed more than 9,000 full-time workers in Germany in collaboration with the Institute for Employment Research (Institut für Arbeitsmarkt, or IAB). We asked respondents about their knowledge of pay at other firms, their preferences over hypothetical job offers, and their expectations during job applications. We then linked responses to administrative firm-level wage data to assess accuracy and behavioural implications.
What do workers actually know?
Contrary to the common assumption that workers are uninformed, we find that most have meaningful insights about pay across firms. Nearly half report knowing the salary they would receive before they applied to their current job, and over 70% had at least some sense of pay within their region or industry.
Figure 1 Stated knowledge of pay at time of application
Notes: This figure shows workers’ stated knowledge of the pay when they joined their current firm. Respondents could choose only one of four responses: exact knowledge of how much the position pays, having at least a rough idea of how much the position pays, only having a rough idea of pay in their industry/region, and no or very little idea. Each row presents results for the indicated group. Results are weighted using sampling weights. The number of observations is listed at the end of each row.
Pay knowledge varies across groups. Men, workers covered by collective bargaining agreements, those who know a current or former employee at the firm, and workers with a college degree are all more likely to report detailed knowledge of pay when they applied.
Moreover, workers’ perceptions of firm pay are largely consistent. We find substantial agreement across workers about the pay hierarchy of large German employers. The perceived rankings also align with what we see in social security records: the firms that workers think pay higher wages indeed pay higher wages! Workers at low-wage firms tend to be more optimistic about the ease with which they could find a better job, suggesting they are aware of better opportunities. These findings suggest that many workers use available information to actively target higher-paying employers.
Is mobility shaped more by information or preferences?
If (at least some) workers recognise better-paying alternatives, why don’t they move? We asked respondents to choose between their current job and hypothetical offers from known higher-paying firms. These offers specified the pay associated with the outside firm and the incumbent firm. Most workers preferred to stay at their incumbent firm – even when the alternative came with a substantial pay boost. Our estimates imply that a firm that cut its pay by 10% would see only 30% of its workers leave. The similarity between our results and estimates from other contexts, where pay details are not typically specified, suggests information frictions are not the primary barrier to mobility.
Why are workers reluctant to switch firms? Geography plays a role, but even after telling respondents they will have the same commute and route to work if they switch firms, many prefer to stay with their incumbent employers. When we asked respondents why they felt people would be reluctant to leave their current firm, they mentioned personal ties, reluctance to undergo change, and location (56%–60% for each option, Figure 2). Fewer cited low outside pay or a lack of alternatives (31% and 13%, respectively).
Figure 2 Why don’t workers switch firms?
Notes: This figure shows the reasons respondents believe people may be reluctant to switch firms. We asked respondents to select the top two reasons. This figure presents the share of respondents who selected each option. Whiskers present 95% confidence intervals. Results are weighted using sampling weights.
Taken together, these findings highlight the importance of non-monetary considerations in job mobility. Even informed workers often prefer to stay put unless they receive a much higher outside offer.
Does information reduce the gender pay gap?
Previous work has found that pay transparency policies generally tighten the gender pay gap (Cullen 2024, Wolfenzon et al. 2020). To probe the mechanisms behind this, we examined whether women are less informed and whether this contributes to persistent gender gaps in pay and negotiation outcomes.
We found mixed evidence that women are less informed about pay. Women in our survey were more likely than men to report having no pay information at the time they applied to their current firm (29% versus 24%, Figure 1). However, men and women agreed in the pay ranking of large German firms.
To test whether information affects what workers ask for in negotiation and whether providing information could close gender gaps, we randomly assigned workers to see hypothetical job ads with different salary ranges (Caldwell et al. 2025b). Workers who saw higher salary ranges provided higher expectations – but men responded more strongly. Even when presented with identical pay ranges, women were less likely to ask for salaries at the upper end.
Implications
Our findings challenge the common narrative that workers are stuck in bad jobs simply because they lack information. Many do know what they could earn elsewhere and still choose to stay. Even workers who are uninformed often say they would prefer to remain at their current firm, rather than move for a pay raise. Limited mobility is driven by preferences, inertia, and risk aversion.
This means that policies aiming to boost mobility or bargaining power through transparency alone may have limited impact. To encourage more movement, policymakers may need to make it easier for workers to transition between firms. To the extent that entry-level workers are uninformed about pay, information policies may help workers form better initial matches.
When it comes to gender disparities, information is a helpful tool but not a cure-all. Complementary interventions – such as showing what other applicants request, structured negotiation guidance, or revising norms around self-promotion – may be necessary to fully close the expectations and ask gaps.
Conclusion
Pay transparency laws have gained momentum across countries, premised on the belief that information empowers workers. Our research reveals a more nuanced picture: while many workers are surprisingly well-informed, they often stay put due to frictions unrelated to information. Transparency remains a worthy goal, but must be paired with broader reforms to unlock its full potential.
Source : VOXeu
