Healthcare Workers’ Pay Transparency and Patient Satisfaction

Pay transparency reduces wage information asymmetry among coworkers. By utilizing the staggered, state-level implementation of pay transparency laws in the U.S., we find that patient satisfaction is higher for hospitals in states that enact a pay transparency law than it is in states with no such legislation, consistent with the fair wage-effort theory. Specifically, within the healthcare context, this theory predicts that fairer wages for healthcare workers will incentivize efforts that lead to higher quality patient care. The positive effect of pay transparency on patient satisfaction is more significant for hospitals in Democratic states and in states where the hospital industry has a larger gender-based pay gap. The positive effect is also more evident in hospitals that are less profit-driven and those that exhibit a higher labor intensity. Overall, we offer novel evidence that workers’ pay transparency has a positive transmission effect on customer satisfaction.