Salaries – An Open Book

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Last week marked the fiftieth anniversary of the Equal Pay Act. The Act made it illegal to pay people differently based on gender if they are doing substantially equivalent work. For instance, a female maid and a male janitor both working to clean an office building would have to earn the same pay.

When the legislation was enacted back in 1963, women earned 59 cents per every one dollar a man earned for the same job. The Equal Pay Act is credited for helping close this gap, but the gap still exists. Today, women earn 77 cents for every dollar a man earns for the same job.

The reasons for what is commonly called the pay gap run the spectrum. On one hand, there are those who believe that a bunch of white guys are sitting in a back room complete with a glass ceiling, smoking big fat cigars and colluding to keep women down by suppressing their wages. On the other hand, there are those who say that the pay gap is a myth, that it is based on the fact that men outperform women, or that women’s lower pay is simply due to the fact that they make different career choices than men (to work for a non-profit, or to stay at home to care for children).

Both of these theories are devised by people who want the causes of problems to tidily fit into their narrow world view. If there is some cigar-smoking mysoginists’ cabal, I want to know why I wasn’t asked to join. And I’ve known too many managers to make stupid comments to believe the pay gap is a myth. One once told me that we should lowball a job offer to a woman because the husband made good money as an attorney, and so she would probably take it.

As always, the true reasons for the pay gap are as complex and varied as the organizations in which it occurs. THe solution, however, is very simple: Require that everyone in an organization knows everyone else’s salary.

In most private, non-union employers, talking about pay is taboo. I’ve even had managers ask if we could have a policy forbidding it (We can’t. The National Labor Relations Act states that employers can’t keep employees from discussing work conditions, and pay is a work condition). And so no employee, and few in management, has a full picture of employee compensation. Without this knowledge, how can employees know if they are being paid fairly, and how can managers make fair pay decisions?

Look at what this same type of openness has done for used car buying. I remember purchasing my first car back in the early nineties. Back then, it was difficult, if not impossible, to find information regarding the true cost of the car, and almost no way to tell whether the car had been in an accident. Car dealers tightly controlled this information so they had the upper hand in any negotiation. Today, thanks to any number of Web sites, information on used vehicles is readily available to the buyer. Now, when I sit down to negotiate the price of a car, I’m doing so from a position of strength.

This same logic can work for pay. Let’s say Jane and Joe are both doing the same job for the same period of time. Jane looks at the published salary list and sees that Joe is earning 10 percent more than she is. She can then go to her manager and ask why. The manager is now in the position of explaining the discrepancy on the basis of sound business reasons, or remedying it. If the manager doesn’t, Jane can file suit against her company. Better yet, she can quit and go to work for someone who will pay her fairly. And if Jane is uncomfortable asking her manager about her pay? Well, then she has no one to blame but herself for the inequity. At best, her manager thinks about her pay once a year at raise time. At worst, her manager doesn’t think about it at all. She needs to speak up if she wants to see changes.

Employers have two reasons not to make pay information public. First, they keep it private for the same reason the car salesmen would keep car price information from you if they could. Their goal is to pay employees as little as possible while still getting the same amount of productivity. It would be harder to underpay someone if that person knew that his/her coworkers were earning a higher wage. In most cases, overall wages would rise.

Second, most employers don’t want to explain to employees why they are paid a certain wage because they have pay practices that are arbitrary. They base pay decisions on unreliable market data and subjective performance ratings. They don’t conduct the internal analysis necessary to determine whether pay is equitable among their own employees. Fixing these systems is hard work and requires constant maintenance. I know. I’ve done it. I’m still doing it. Why go to all the effort if they can simply pick a random number out of thin air?

I consider my pay a personal matter. No one knows what I earn except for my wife. It comes from that Midwestern work ethic. The job is what’s important and talking about money is somehow vulgar. I know that many others feel the same way. One of the main reasons we don’t publish employee pay at my current organization is out of respect for employees’ privacy.

But I am not talking about bragging about salary at parties, or even bringing it up in the company break room. Under this system, employees wouldn’t have to say a thing. The company would do all the disclosing.

Even though we do not have this system at my current workplace, I challenge managers to think as though we did. When determining pay increases or salary offers, I often ask, if an employee came to you to ask why he/she wasn’t making as much as someone else, could you explain it? If you can’t, it’s the wrong decision.

The one obstacle in opening up salary information is that many managers hate conflict. Rather than have uncomfortable discussions about pay, they would simply pay all similarly positioned employees the same regardless of performance. Productivity and morale could suffer if high performers see others being paid the same as them for poorer performance. Managers need to be willing to have those tough conversations about compensation. After all, that’s why they earn the big bucks.

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