If more employees knew the salaries of their colleagues, would the gender pay gap shrink?
Disparities between women’s and men’s pay persist at least in part, say experts, from campaign groups to academic researchers, because they are cloaked in secrecy.
They believe that the growing trend of making salary information public, even though it is a small one, could lead to greater gender pay equality.
Pay transparency — in which employees’ compensation is revealed inside, and possibly outside, the organisation — creates an impression of fairness and openness, making it easier to deal with allegations of sexism. Some fear that such transparency could lead to envy and ructions.
Employers that do already practise some form of pay transparency tend to be smaller — such as Spiber, a biotech business in Japan — or operate in the public sector (see chart). Most disclose salary ranges — pay bands — for certain roles, but others such as US social media company Buffer, take a more radical approach to reveal the figures in more detail.
Transparency is the future for pay negotiations, says Scott Torey, chief executive of Seattle-based PayScale, which makes software for employers to manage compensation data.
“Both employers and employees will openly share objective, market-based data to agree on compensation,” he argues. “Already, more employers are using compensation data to price their talent fairly and, similarly, more employees know what they’re worth when they go to the negotiating table.”
PayScale data research manager Sudarshan Sapath points out that pay transparency can backfire in certain cases. Pay bands can still lead to “pricing the person and not the job title”, he says. That would mean “unconscious bias can still creep in”.
In PayScale’s view, fairness will result when pay for jobs is dynamically priced — in accordance with supply and demand, rather than relying on levelling ranges.
Evidence shows that transparency in smaller ways can have an impact. In the 1990s, the Canadian provinces of British Columbia, Manitoba and Ontario introduced disclosure laws requiring universities to report the salary of any employee earning more than C$50,000 per year — $100,000 in the case of Ontario (see chart).
Recent research on what happened found that the law helped reduce the male-female wage gap by around 30 percent, mainly because of higher female salaries.
Members of the European Parliament asked the European Commission in January to consider enforcing pay transparency for both the public and private sector, as part EU measures to ensure equal pay for equal work. Many countries have adopted less dramatic forms or transparency. For example, in the UK, companies with 250 or more employees are required to disclose their average gender pay gap since 2017.
Despite this, “women still find it really challenging to access the information they need [in order]To find out if they are being paid equally [to men]”, says Gemma Rosenblatt, head of policy and campaigns at the Fawcett Society, a UK women’s rights organisation (see below).
While there is general agreement that pay transparency benefits female workers, a study done in Denmark in 2018 found that male employees experienced slower pay growth due to pay transparency.
This is backed up by research into the effects of pay transparency on hiring and bargaining carried out by Zoë Cullen, an assistant professor at Harvard Business School. It encourages employers to “bargain aggressively with the highest earners”, she says, and they happen to be mostly men.
At the same time, making salaries public could potentially protect companies from the costs of pay discrimination claims, points out Angela Cornell, director of the Labor Law Clinic at Cornell Law School, by “minimising the risk of disparate treatment claims”.
As more workers upload information about their salary, job and workplace online, pay transparency will become more common. But “the form that it will take is more likely to be anonymous”, Prof Cullen says.
“Third party sites like Glassdoor . . . have made it very clear that there is demand for this type of information,” she adds. It would be difficult for them to stop gathering and publishing such information.
Source: Financial Times