Analysis of the Wage-CPI Relationship Under the California Wage Privacy Act Based on DID Model

Abstract

In 2018, California initiated the implementation of the California Wage Privacy Act, which aims to promote gender and racial equality in employment issues. This paper explores the impact of the implementation of this law on the relationship between wages and the Consumer Price Index (CPI). The research employs a Difference-in- Differences (DID) model, utilizing annual data from 2015 to 2024 sourced from the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of St. Louis. The data from Los Angeles, serving as the treatment group, is used for comparison with the data from four control cities-Boston, Chicago, New Jersey, and St. Louis. Empirical results indicate that although visual analysis shows that the policy has mitigated the wage-CPI relationship in Los Angeles, the key coefficients in the DID model are not statistically significant. This suggests that the impact of the policy on the overall CPI through channels such as increasing wage transparency and reducing the anchoring effect may be limited. Further research reveals that the influence of wage transparency legislation may be more pronounced within specific industries rather than at the overall economic level. This provides an important reference for evaluating the macroeconomic impact of labor regulations and suggests that the policy effects may be more evident at the industry level rather than the overall economic level. Therefore, this paper recommends that policymakers consider formulating industry-specific regulations and establishing a dynamic monitoring system to better evaluate and guide policy effectiveness.