How Salaries Became Everybody's Business

Once a year in Norway, on a random day in October, the government releases an annual tax return that, to most people outside the country, would seem like a massive invasion of privacy. The list - which is published online and dates back to a decision made over 200 years earlier - allows everybody in the country to see what everybody else is earning as well as the tax they are paying, be it a politician, co-worker, neighbour or friend.

For readers of Norwegian tabloids, the day offers a glut of fun stories about the rich and famous. But for fans of transparency, it means something much more profound. It fosters, campaigners claim, a culture of openness that makes Norway one of the world's least corrupt countries with pay practices that are more equal than almost anywhere else. Because everybody knows what everybody else is earning, unjust and unfair pay practices are - campaigners say - much easier to spot and resolve.

While the appetite for public tax returns for all might be lacking elsewhere, the demand for pay transparency has been gathering momentum around the world according to Stephanie Thomas, economics Lecturer at Cornell University. "Part of it is a generational issue," she says. "Younger members of the workforce have grown up interacting with one another through technology and are far more comfortable sharing details about themselves. Another big contributing factor is the increase in inequality that we are seeing. I think everybody is starting to ask more questions about equity and whether people are really being paid what they deserve."

According to Sally Brett, Senior Policy Officer at the Trade Union Congress (TUC), at the heart of the pay transparency debate is the issue of fairness. "It's about basic principles of fairness and distribution of pay within the workplace and understanding how pay is set," she says. "You often find people who are most nervous about pay transparency are highly paid employees. We want to ensure that people are being paid according to just principles and there is some way of checking that those principles are being applied."

As well as revealing discrimination around race, and inequality between executives and the wider workforce, advocates of transparent pay policies say it could help reduce the gender pay gap: the difference in average pay between men and woman, which is as high as 18 percent in the UK, according to recent research by the Institute for Fiscal Studies.

"I think people now realise that despite all the decades we've had equal pay legislation, progress on narrowing the gender pay gap has been very slow," says Brett. "One of the reasons why the Equal Pay Act has had a fairly limited impact is because women just did not know what their male colleagues were earning. I think when we are talking about similarly situated workers or people who work in the same position and have the same relative skills and abilities, transparency really can go a long way in eliminating those kinds of gaps."

Last year, the Conservatives unveiled a new plan that will force companies with over 150 employees to disclose gender pay differences in their workplace. Similarly, in the US, new rules were recently announced that will require businesses with 100 employees or more to report payroll data on race, gender and ethnicity to the federal government.

For Brett, while the UK's new rules – which come into force in 2017 – are a "step forward", they don't go far enough. "Publishing a gender pay gap figure for the whole workforce that compares the hourly pay of all male and all female employees doesn't really tell you a lot," she says. "Take a large private sector employer like one of the big banks: Finding out that there is a 28 percent pay gap as a women working there, what does that tell you? It tells you probably that most of the women work part time, are mainly on the retail side and that the managers and probably a lot of highly paid investment bankers are men. It doesn't help you understand whether or not you are being paid equally to male colleagues. We want more detailed information to be published that shows comparisons of men and women at similar levels within an organisation."

Brett also worries that workers will be isolated in their calls for change once they actually find out what others are earning. "You'll get perhaps a couple of individual people questioning an employer which may be quite easily brushed aside," she says. "They'll say it's down to this factor or that factor which we can't really do anything about." One solution to that, according to Brett, is to push for greater collective bargaining: "If you are just publishing information and there aren't trade unions or collectively organised workers what are you going to get?" she says. "It's more likely that employers will take action if the workers in that organisation are collectively organised and paying attention to the information being published."

While most campaigners see state intervention as necessary for reducing different kinds of pay inequalities, some companies have introduced transparent pay policies of their own accord. The American supermarket chain Whole Foods has made compensation data available to its employees for the past 30 years while others companies like the US tech startup Buffer publishes salary information on a public spreadsheet. According to Thomas, companies are beginning to recognise that openness around pay has a number of benefits.

"If you are open about the way you make pay decisions that can give you a big competitive advantage in talent acquisition," she says. "The labour market right now is tight and one of the top challenges for any employer in any sector is getting the right people into the right positions the first time and keeping those people there. Being open and transparent about how you pay people means you are going to have more success at attracting and retaining the talent that you need."

The effectiveness of publishing individual salaries – the preferred method for various companies including Buffer – is, however, up for debate. For Thomas there is a "big difference" between what she calls "pay process transparency" and simply disclosing details at the individual level. "Being very clear, open and direct with your employees about how you make your pay and bonus decisions is very different to posting salaries by name that says John earns this and Sally earns this," she says. "I think that can actually do more harm than good. There's a big opportunity for hurt feelings and resentment."

Moreover, for every Buffer and SumAll, there are still a thousand executives who remain extremely reticent about disclosing salaries. A report back in August by the Financial Times' Andrew Hill called pay transparency "the last taboo in business". When he asked executives at a private breakfast discussion on "culture and transparency" how many were completely transparent about pay "just two or three out of more than 100" put their hands up. Likewise, when Erica Baker, a former Google employee caused a stir last year by asking co-workers to enter their salaries onto an internal spreadsheet she had created, management didn't exactly respond kindly.

It's hardly surprising then, that a recent report by Deloitte found that the gender pay gap in the UK won't be closed until 2069, a full 99 years after the Equal Pay Act was introduced. And even with increased calls for transparency the complex structural issues that women face in the workplace means that pay transparency - whether it's an entire country like Norway or an individual employer like Buffer doing it - will not, as Brett says, be "the silver bullet that will solve everything".

That certainly doesn't mean campaigners should stop pushing for it though. While a wider conversation around unequal pay is needed, for Brett, greater transparency could still have a major impact: "At the moment it's hard for individual women workers to even know whether they are getting paid less than men," she says. "Once they know that, then the negotiation and the campaigning can properly begin."

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Aviva.

@PKleinfeld

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