Salary Transparency: Is Honesty the Best Policy?
There’s a controversial new programme on Channel 4. No, it’s not the one about deciding who to date based on their genitals or another live ecstasy trial, it’s “What Britain Earns.”
The premise is straightforward enough: Mary Portas, the Mary Berry of business and retail, interviews everyone from firemen to multi-billionaire business owners and asks them the simple question: “How much do you earn?” Seems fairly harmless in comparison to baring your bits or taking drugs in front of the nation, so why is this so controversial?
As Portas herself tells us, “Brits are seven times more likely to tell someone we’re having an affair than tell them what we earn.” Why we’re so reluctant to talk about money is another article for another time but, despite our discomfort, we need to start sharing. All the evidence suggests that until businesses and employees start discussing pay more openly, we’re all less productive and financially worse off. And it’s an even bigger problem it you’re a woman.
I am fortunate enough to have had experience of both the public and private sectors. When I first started teaching there was a set pay scale that you simply worked your way up. For example, in 2010, every newly qualified teacher working in outer London was on a salary of £25,111. That wasn’t a secret; this was something you could look up online, if it wasn’t already pinned to the notice board in your staffroom. Each year, all being well, you would progress one point up the pay scale. For better or worse, this system also meant we all knew what our colleagues were earning, from the newest member of staff to the head teacher. This freed us up to talk about money in way I haven’t seen since: if something didn’t look right on my pay slip, I wouldn’t think twice about showing it to a colleague to ask what they thought. Knowing one another’s salaries meant we could advise each other on everything from mortgages to promotions.
At the time, I was renting a flat in Zone 4 with my friend Phil (because £25,111 does not get you a place of your own in London, even if you’re living in Zone 4.) He was working for a large PR firm in the city. One evening he came home and told me he’d found out that he was earning nearly £6,000 more than the girl who shares his desk (and his job title.) I was completely stunned; I suppose I was naïve because at that point it hadn’t occurred to me that two people would be doing the exact same job for such different money. Worse than that, the girl didn’t know he was earning more than her and he was struggling with whether he should tell her. I explained how the system worked in education and he laughed, “There’s no way people would want their salaries published. It would just be too awkward.”
That was six years ago, and I think it’s fair to say public attitudes are changing. Earlier this year, Glassdoor carried out a Global Salary Transparency Survey and found that 69% of people wish that they had a better understanding of what fair pay is for their position and skill set, both at their company and in their local market. The same percentage of people also believe that salary transparency is good for employee satisfaction.
But whilst the public may be warming up to the idea, salary transparency is still taboo in business, with 23.1% of companies going as far as to formally ban any discussion of salaries or wages within the workplace. So what are the arguments for honest, open discussions about pay?
Firstly, it would help to address the gender pay gap and attract an increase in female applicants. It is a well-known fact that men are more likely to negotiate their salary than women. Quite why this is true we don’t know, but what studies show is that this “negotiation gap” disappears when information about salaries are made publicly available information. Perhaps if that girl had known she was earning £6,000 less than her male counterpart she could have approached her employers to find out why. Did he have experiences or skills she didn’t, or was it simply that he drove a harder bargain? Of course, what could have happened is that she felt unappreciated, pissed off, and started looking for other jobs, but even that could be a positive if it means employers must address the gender pay gap or risk losing staff.
It’s not just women who would benefit, either. There is evidence to suggest that salary transparency helps address other hard-to-justify pay gaps such as those between managers and staff. A 2014 study by Princeton University found that salary transparency ended up compressing the pay of top city managers by over 8%. Add on to that the fact that workers are more productive when salary information is shared, as at present they often overestimate what their peers earn, and it’s hard to see why more companies don’t embrace it.
The benefits are well documented and attitudes are changing, and a lot of this is to do with the new generation of workers: millennials. Millennials are sharing everything with one another, from their smashed avocados to their pay checks. Add in the introduction of websites such as Glassdoor and Salary Expert, both of which encourage people to share their salaries online, and surely it’s only a matter of time before companies are sharing this information themselves?
Hopefully it won’t be long before salary transparency is the norm and no longer an idea controversial enough to be a Channel 4 programme.