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A Case for Pay Transparency in the Workplace

My childhood was frittered away in a heavily unionised industrial town where workers had a good idea of standard weekly pay rates. Overtime and staggered shift work offered up big money to a willing worker. Or somebody could languish on the day shift earning a fraction of that amount. Pay transparency offered the worker a choice. Effort for reward.

My adult work background is one where the wages have also been transparent. As a junior sales assistant in a department store the wage was identical to my peers. As a sailor in the Royal Australian Navy we enjoyed the same pay transparency. On fishing boats the deckhands knew the wage/share of each crew member; working for Government there were fixed pay rates and as a freelance web developer I’d often discuss pay rates with other freelance developers.

If I haven’t known the take-home pay of my peers, I’ve at least had some idea of their hourly rate and general remuneration package.

So I’ve never perceived pay rates as intrinsically private information in the workplace. And I’m not shy to ask somebody how they are remunerated… especially post-MBA, because remuneration is closely aligned to perceptions of equity. And, if I did do a PhD at any point in the future, equity is something that I could chew my gums on for three long years.

On the other side of that pay transparency discussion is a purely private sector view that pay rates should be (and are) sacrosanct secrets. And, like NPR’s Planet Money episode titled When Salaries aren’t Secret reminds us – whoever has the most information in a negotiation nearly always comes out way in front. Because information really is power. In pay negotiations the management knows everything; the candidate knows zero. It’s not an equitable competition.

So, from a private sector employer’s perspective, it suits the company to have all the information and negotiate from a winning position. If they can employ one of the candidates for $20,000 less, then that money remains with the company and shareholders. The key is to sew the idea of sacrosanct privacy around pay within the organisation so that nobody questions the outcomes. The company pockets a profit.

Consider that secrecy around pay rates enables discrimination against women, minorities and people with low self-esteem at the time of pay negotiation. Within the ranks of current employees pay secrecy also fosters the higher remuneration of in-group employees over the out-group employees through a general management bias described in Leader-Member Exchange Theory.

In contrast, pay transparency allows these groups to know and demand their true worth in remuneration. And pay transparency prevents the company from replacing high paid positions with lower remuneration packages. For example, a manager leaves a position paying $90,000 per year and is replaced by a person in the department currently earning $55,000 per year. The company could just offer $65,000 per year and the new manager would be none-the-wiser. In other words, pay transparency removes the power (or temptation) for that kind of management-profiteering pay manipulation in the workplace.

When we frame our opinion about pay transparency we need to consider that it’s a regime that suits employers. Multiply those wage savings across a decent sized corporation and you have a mighty fat wad of cash to invest in infrastructure and assets, or hand back to shareholders as dividends.

The down side of pay transparency is that equity is an individual and fickle beast at the best of times. There’s a trade-off. And culture, if we don’t already have pay transparency in the workplace, is a difficult change to implement. However, I’d argue that equal and transparent pay is best for most workers. Pay secrecy is just another example of profit maximising corporate strategy to screw over the workforce.

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About the Author

Steven Clark Steven Clark - the stand up guy on this site

My name is Steven Clark (aka nortypig) and I live in Southern Tasmania. I have an MBA (Specialisation) and a Bachelor of Computing from the University of Tasmania. I'm a photographer making pictures with film. A web developer for money. A business consultant for fun. A journalist on paper. Dreams of owning the World. Idea champion. Paradox. Life partner to Megan.

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