Employer Learning and Informative Wages

We augment the standard asymmetric learning model with costly effort. With this adjustment, wages become fully informative of employee productivity, rather than merely reflective of public signals. Further, strategies designed to mask employee quality, commonly seen in standard models, become untenable. This augmented model allows analysis of policies such as wage controls and salary history bans. Permitting workers to disclose their wages to outside firms results in an equilibrium of symmetric learning. Where wage disclosure is forbidden (a current policy in many jurisdictions), the equilibrium reverts to one of asymmetric learning with reliance on noisy signals and inefficient mobility