In 2012, David Card, Alexandre Mas, Enrico Moretti, and Emmanuel Saez conducted a study of University of California employees. Randomly selected employees were shown a website with their colleagues' salaries.
The logic seemed simple: more information leads to a greater sense of fairness.
However, the effect turned out to be asymmetric.
Employees who saw that they earned below the median of their peers became less satisfied with their jobs and considered leaving more often. Those who were above the median did not experience a comparable boost in satisfaction.
Why is that?
Before salaries were made public, individuals compared themselves to the market, their past experience, and their own sense of fairness. Afterward, they compared themselves to a specific colleague who might sit right next to them and perform similar work.
From that moment on, it is no longer just the amount that matters, but also the explanation for the difference:
why one role has a higher grade;
what factors yield a higher range;
what earns higher pay: the scope of responsibility, scarcity of skill, or impact on the bottom line;
how an employee can grow to the next level.
For HR, this means that salary transparency without clear logic can amplify dissatisfaction.
Yet, a closed system does not solve the problem. It simply leaves comparisons in the form of rumors, random anecdotes, and assumptions.
What helps: not showing the salaries of specific individuals, but rather the system's architecture—salary bands, grade transition criteria, rules for placement within a range, and actual growth steps.
Then the conversation shifts from "Why did they get more?" to "What determines the difference, and what do I need to do next?"
In grading, this is especially critical. Fairness is not about having the same salary for everyone. It is about the ability to explain differences through role, criteria, and contribution, rather than through bargaining power or proximity to the manager.
The main takeaway: transparency on its own does not create trust. Trust is created by transparent, verifiable logic.