“Openness is both economically inefficient and likely to cause conflict”
NO
There are many problems linked to determining pay and which criteria to use. For any level of pay transparency to work, you must be able to explain and defend your system. You need to decide how much information about pay is communicated to employees or the public, and to be aware of the consequences. Although secrecy generally breeds distrust and transparency signals integrity, some studies show that pay secrecy is prevalent in most organizations and that some workers actually want it. Why? Because secrecy not only improves organizational control but reduces conflict. Pay differences can and do cause jealousy, debate and disenchantment. When differences in pay are exposed, some people feel angry and unfairly treated. Their easiest means of retaliation is simply to work less hard.
Secrecy increases fairness in the equity sense, because people can more easily be rewarded for the full range of their outputs. Openness is both economically inefficient and likely to cause conflict. Secrecy, on the other hand, may increase loyalty and retention. If people can’t compare their salaries, they may be less inclined to switch to jobs that are better paid. You get what is called “continuance commitment” through lack of poaching. Pay secrecy allows organizations to correct pay-equity anomalies more easily. Managers can both minimize unfairness and discrimination as well as perceptions of those matters more easily by secrecy.
Secrecy benefits teamwork, particularly with competitive individuals, environments and cultures. It encourages interdependence rather than “superstardom”. Secrecy is really another word for privacy, which is of increasing concern today. Perhaps this is why surveys show people are generally in favour of pay secrecy: they are willing to trade off their curiosity about the salaries of others for not having their own information made accessible. Once you move away from pay secrecy, the path back is nearly impossible.