Wage Transparency—Is Your Workplace Ready to Open the Books?

One of the most personal and sensitive topics in the workplace—and, indeed, even in social situations—is someone’s salary. The “how much money do you make?” question is seen as one of the rudest things one can ask someone. At the same time, some argue that such transparency may actually be good for the workplace.

“These select instances aside, many workers have no idea about their relative pay. Part of the problem is that when it comes to knowing what their counterparts earn, private-sector workers have few reliable resources,” writes Benjamin Harris in an article for Harvard Business Review. Employers clearly have the edge, with access to a variety of inputs about compensation benchmarks available through salary and compensation surveys. These, writes Harris, “are widespread among employers—with one source estimating that over half of North American companies utilize the sources.”
Some state and local governments have passed various laws aimed at increasing wage transparency. The results have been mixed in terms of impact on employee pay, according to Harris. “Can this sort of transparency help?” he writes. “The nascent literature tells a complex story: wage disclosure can raise wages for underpaid employees, and in cases where there is public backlash against high salaries—such as with city executives—it can cause pay compression.”
Others suggest that transparency can lead to low morale—for example, when people who think they are top performers (and most think they are) realize that their compensation is average.
Salary discussions can be uncomfortable. Many people don’t like the idea of others knowing how much money they make. At the same time, wage transparency has many benefits for employees. In particular, wage transparency helps employees gauge whether they are being fairly compensated. While it may be a touchy subject, the benefits of such transparency can far outweigh the discomfort. Ultimately, of course, specific situations will differ and call for different practices; still, it may be a concept worth considering.