Salaries: A push for pay transparency
A wave of new legislation requires companies to be more open about what they pay, said Adam Hardy in Money.com. Seven states—California, Washington, Maryland, Colorado, Nevada, Connecticut, and Rhode Island—have or will soon enact laws related to “salary transparency” on future job listings. That includes “banning the use of applicants’ salary history in determining what to pay them” and even allowing job applicants and current employees “access to a company’s salary ranges for a particular role.” Colorado’s new law applies even to “national companies who are hiring remotely,” including Amazon and Apple. The push for greater transparency is motivated mostly by the gender wage gap. The federal Equal Pay Act, which bans sex-based pay discrimination, has been in effect since 1963, yet “deep pay inequities persist.”
Scandinavian countries already offer a degree of transparency that Americans would find startling, said Therese Raphael in Bloomberg.com. Both Norway and Finland make tax returns public. Norway has one of the lowest gender wage gaps in the world. In Finland, on the other hand, women earn 17 percent less than men, a bigger gap than most other wealthy countries— despite the fact that Finland “was ranked the third most genderequal country in the world by the World Economic Forum in 2020.” The Finnish government recently proposed a bill allowing workers to view the salaries of their colleagues if they suspect they are being discriminated against. It’s an experiment worth watching.
Workers appreciate honesty, said
Kate Morgan in BBC.com—“up to a point.” Many “people support the idea of companies publicizing pay” until it’s their own salary that’s put out in the open. But some companies are now pivoting toward “radical transparency,” a term coined by Bridgewater Associates founder Ray Dalio, who lets anyone in the company “access everything from financial records to the minutes of meetings among executives.” This sounds great in theory, but in practice can make executives look for work-arounds to keep information off the record.
A little more transparency can still go a long way toward motivating and retaining workers, said Lisa Rabasca Roepe in Fast Company. One paradox about pay is that “even when employees are paid above market, they tend to believe they are being paid below market.” Without a reliable sense of pay scales, employees turn to online pay surveys in which respondents often “inflate what they’re actually making.” So, many firms that hide information about pay are actually encouraging well-paid employees to look around for other options. And if workers think they are underpaid, it’s far better to let them have an honest conversation about salaries than to find out when they quit.