David Burkus: Why you should know how much your coworkers get paid-1

How much do you get paid? Don’t answer that out loud. But put a number in your head. Now: How much do you think the person sitting next to you gets paid? Again, don’t answer out loud.

At work, how much do you think the person sitting in the cubicle or the desk next to you gets paid? Do you know? Should you know?

Notice, it’s a little uncomfortable for me to even ask you those questions. But admit it — you kind of want to know. Most of us are uncomfortable with the idea of broadcasting our salary. We’re not supposed to tell our neighbors, and we’re definitely not supposed to tell our office neighbors. The assumed reason is that if everybody knew what everybody got paid, then all hell would break loose. There’d be arguments, there’d be fights, there might even be a few people who quit. But what if secrecy is actually the reason for all that strife? And what would happen if we removed that secrecy? What if openness actually increased the sense of fairness and collaboration inside a company? What would happen if we had total pay transparency?

For the past several years, I’ve been studying the corporate and entrepreneurial leaders who question the conventional wisdom about how to run a company. And the question of pay keeps coming up. And the answers keep surprising.

It turns out that pay transparency — sharing salaries openly across a company — makes for a better workplace for both the employee and for the organization. When people don’t know how their pay compares to their peers’, they’re more likely to feel underpaid and maybe even discriminated against. Do you want to work at a place that tolerates the idea that you feel underpaid or discriminated against? But keeping salaries secret does exactly that, and it’s a practice as old as it is common, despite the fact that in the United States, the law protects an employee’s right to discuss their pay.

In one famous example from decades ago, the management of Vanity Fair magazine actually circulated a memo entitled: “Forbidding Discussion Among Employees of Salary Received.” “Forbidding” discussion among employees of salary received. Now that memo didn’t sit well with everybody. New York literary figures Dorothy Parker, Robert Benchley and Robert Sherwood, all writers in the Algonquin Round Table, decided to stand up for transparency and showed up for work the next day with their salary written on signs hanging from their neck.

Imagine showing up for work with your salary just written across your chest for all to see.

But why would a company even want to discourage salary discussions? Why do some people go along with it, while others revolt against it? It turns out that in addition to the assumed reasons, pay secrecy is actually a way to save a lot of money. You see, keeping salaries secret leads to what economists call “information asymmetry.” This is a situation where, in a negotiation, one party has loads more information than the other. And in hiring or promotion or annual raise discussions, an employer can use that secrecy to save a lot of money. Imagine how much better you could negotiate for a raise if you knew everybody’s salary.

Om Namah Shivay

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