The date of Equal Pay Day is symbolic: It tells us how long into the new year women have to work to earn what men earned the previous year. This year it falls on March 24, 2021, because the gap between men’s and women’s pay is close to $0.20 for each dollar earned.
This could be narrowed if firms adopted pay transparency policies, where any worker in a firm could find out what every other worker in the firm gets paid.
National compensation data support this conclusion. In the U.S. federal government, where pay is public information, the gap between men’s and women’s pay is less than $0.10. Still imperfect, but a sizable step closer to the goal of equal pay. Now, a sea change is underway as employees are forcing the hands of employers in many different ways. The social norm that says pay should be kept private is more strongly believed by older workers than younger workers, who are used to sharing information about themselves on social media. Sites such as Glassdoor and salary.com are allowing workers to share information about their compensation anonymously with the public. The era of pay secrecy is gradually coming to a close. Companies need to start behaving as if their pay were transparent, because younger workers are taking steps to make sure it is.
Employers worry that making pay transparent will lead to conflict in the firm. Precious time that might have been used to serve customers will be devoted instead to managing pay disputes. They may be right, at least initially. There is evidence that, when firms make pay transparent, employee morale may be damaged and job dissatisfaction may increase. But if the dissatisfaction is appropriate (perhaps due to discriminatory or irrational pay policies), then the issue should not be left unaddressed. It is a chance for the company to right a moral wrong.
However, it’s not just about doing the morally right thing. Making pay transparent in a company is a chance for the company to adopt a more rational and acceptable compensation scheme. Employees can get upset when they find out they make less than others, but not when they see these differences as justified. Adopting a pay transparency policy is like shining a light in a dark corner of your basement. You might not like what you see, but it’s the first step toward cleaning it up. Moreover, the continued wage disparity of underpaid employees forces these workers to turn to government-funded assistance, culminating in a constant (and costly) feedback loop.
One of the things that might need cleaning is illegal wage discrimination. Pay discrimination lawsuits have been lodged against some of our country’s most powerful and prestigious companies, including Disney, Google, Microsoft, Nike, and Goldman Sachs. If firms were transparent about pay, they couldn’t get away with pay discrimination. If women knew that their male coworkers were paid more for doing comparable work, they would rightfully complain, and employers would have to make it right. Some companies may not even realize that they are paying women less than men. Pay transparency will force them to take a hard look at their practices.
To be sure, some employees may wish to keep their pay private. But the price of this privacy is the continued injustice of sex discrimination—a price far higher than we should be willing to pay year after year.
Hundreds of thousands of federal government workers’ salaries were made public to ensure our tax dollars are wisely spent. Isn’t helping to end sex discrimination in compensation at least an equally deserving cause?
The law gives most employees the freedom to disclose their pay to their coworkers. A group of 21 employers, including Starbucks, Accenture, and PepsiCo, have publicly committed to recognizing this freedom. This is a start, but it’s not enough. Even among the closest of friends, inquiring about pay can seem gauche or rude. If we want people to know what others in their firm are getting paid, firms should provide this information proactively to employees.
We have assumed to this point that firms and regulators have a choice when it comes to pay transparency. Right now, they do. A handful of firms, including Whole Foods and Buffer, share information about pay with their employees, but most don’t, and when they don’t, employees don’t have access to this information.
But things are changing. While these changes may cause some disruption at first, in the long run, pay transparency will be good, for workers and their firms.
Jeffrey Moriarty is executive director of the Hoffman Center for Business Ethics and a professor of philosophy at Bentley University in Waltham, Massachusetts.