Secrecy about salaries may be waning

08/30/2014 8:00 PM

08/31/2014 7:20 AM

Next time you’re lunching with your colleagues, try this: Ask everyone their salary. You might end up dining alone in the future.

Discussing money, as it is often said, is the last taboo. But that taboo, especially against revealing what we earn, has been slowly eroding. The question is, Will that make for a happier or more miserable workplace?

Concerns about pay transparency have been around for decades, but the issue is gaining momentum. One reason is a push at the federal level. President Barack Obama has long made equal pay one of his priorities; he recently signed several executive orders regarding pay equity and transparency.

On a broader level, the Internet – with sites that compare salaries, such as Glassdoor.com and Payscale.com – and the changing nature of the workforce mean long-held assumptions about what is private and what is not are disappearing.

“In today’s world, generally speaking, younger workers share more of their lives publicly,” said Debra Friedman, a lawyer who specializes in labor and employment law. “Older workers would consider it private and impolite to ask co-workers what they are being paid.”

But knowing a general range of pay, and more exactly what the guy sitting next to you makes, is a big difference. After a lawsuit to make California state employee pay more public, The Sacramento Bee created an online database of state workers’ salaries.

To see how this affected workers, David Card, a professor of economics at the University of California, Berkeley, and colleagues surveyed about 6,400 University of California employees and professors. One group was asked general questions about pay equity; the other was asked the same questions, but a line was added mentioning the online database.

“What we found is that people who were told about the website were much more likely to use it, more likely to believe their wages were set unfairly and more likely to say they plan to look for another job,” Card said.

As is human nature, those who made more than their co-workers were not noticeably happier, he said, but those below the average were much unhappier.

So does this mean being too open about pay is a bad thing? Not necessarily, Card said.

“In the long run, the effects of pay disclosure aren’t negative,” he said. “But there is a cost.”

Cultural taboo

Elena Belogolovsky, an assistant professor of human resource studies at Cornell University, said openness about pay could be a good thing, but it could also lead to tense and envious employees.

“I don’t believe everyone should know everyone’s pay,” Belogolovsky said. Rather, she said, it’s important that management be clear about how it determines its pay levels “so I know how and what to do in order to get more money.”

She also doesn’t think complete transparency is likely to come soon.

“It’s such a cultural taboo,” she said. “The majority of my students don’t even know what their parents make.”

Neil Gussman, a communications consultant, wouldn’t mind if that day never came. He has worked in places where all pay is public – the military, a Teamsters job on a loading dock – and where they are not. And he much prefers the latter.

In the first instance, he said, no matter how hard you worked, you knew the other workers at your level – no matter how much lazier – were making exactly what you did.

“Envy is what destroys community,” he said.

He acknowledged that in his particular situations, it was almost impossible to work his way up the ladder through merit because pay was set by seniority and rank.

In other cases, finding out someone was making more for doing the same work, “could inspire an energetic person, but I think in many cases it will do the opposite,” Gussman said. “It will be dispiriting.”

Full disclosure

That’s not what Dane Atkinson, chief executive of SumAll, a data analytics company, has discovered. When he helped found the company about three years ago, a decision was made to disclose all salaries and equity shares.

The company has grown from 10 employees to about 50, and the policy remains in place.

“I’ve learned a lot as we’ve grown,” he said. “It’s a burden to manage and I have to explain my thinking. I can’t make extravagant hires. But there’s much more trust and much less politicking.”

SumAll doesn’t publicize salaries on the Web because “some of the team didn’t want the whole world knowing what they make,” Atkinson said, but job applicants are informed of salaries at a certain point in the hiring process.

When pay isn’t public, but it leaks out somehow that one co-worker is making more than another for the same work, the code of secrecy usually prevents the disgruntled worker from approaching the boss, Atkinson said.

In those cases, he said, employees might leave, slack off or even steal from the company to try to even things out. When pay is open, however, a worker can directly ask why someone is earning more and how to equalize the salaries. It’s then up to the employee to decide whether to stay or leave.

“In this way, more money goes not to those who negotiate better, but those who work the hardest,” he said. The people who resist making salaries more transparent, he said, “are usually those who think they’re making too much.”

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