Ideas

Ideas | Amy Crawford

Why everyone should know how much you earn

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Over the last decade, the gap between what American women earn compared to their male counterparts has hovered around 20 percent — that is, for every $1 a man gets, a woman gets 80 cents. It’s one of the most hotly contested statistics in the United States today: Progressives point to that broad nationwide average as evidence of structural gender discrimination, while conservatives claim that life and career choices account for any discrepancies between the sexes. And this disagreement about what causes the pay gap has led to a predictable political stalemate over how to close it.

To the average worker, the reasons why are perhaps less important than how the inequity might be remedied. After all, that missing 20 percent adds up to lots of money over the course of a working lifetime. (The losses are even greater for women of color.) That’s why more than a dozen states have introduced bills this year that would tackle the problem in one way or another, from guaranteeing equal pay for equal work and preventing gender discrimination, to paid leave policies that disproportionately aid women.

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There may be another way to fix the problem, though — not mandated equality, but radical transparency.

In a 2013 paper in the Harvard Journal on Legislation, Bentley University law professor Marianne DelPo Kulow laid out the case for a law that would require businesses to disclose to their employees, as well as to government regulators, how much every worker on the payroll makes. In the years since, Kulow has heard from legislative staff around the country who are exploring ways to close the pay gap. It’s an idea that is gaining momentum among academics, advocates and policy-makers — but to make it happen will require overcoming one of Americans’ strongest cultural taboos: talking about money.

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As conservatives point out, some of the inequity women face in the workplace can be chalked up to choosing lower-paying fields like education and social work, and to the greater likelihood that women will take time off to care for children or family members. (Government statistics show women who have never married make 94 cents to the male dollar, much closer to par than married mothers.) But while these differences may also be rooted in sexism, most people who study the issue agree that flat-out discrimination, whether intentional or not, accounts for as much as a third of women and minorities’ lagging wages. Fighting that bias requires bringing it into the open — a challenge when secrecy is reinforced by official policies and entrenched customs at every level of corporate America.

In a new paper in the journal Social Science Research, Jake Rosenfeld, a sociologist at Washington University in St. Louis, shows just how persistent that culture of secrecy remains. Using a 2010 survey of 2,746 employed Americans, he found that more than half of workers operate under tacit or official pay secrecy policies, including more than two-thirds of employees at private sector, nonunion companies. And this is despite the 1935 National Labor Relations Act, which bars employers from retaliating against workers who discuss their pay. “Given that it’s been illegal for 80-plus years, that was a big surprise,” said Rosenfeld.

And these policies can have real consequences. Rosenfeld first became interested in pay secrecy when one of his students was fired from an off-campus part-time job for accidentally dropping her pay stub on the floor at work.

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“I really was reluctant to tell her it was illegal,” Rosenfeld said, “given that the best thing she could hope for from the law was that, after the company dragged it out — likely involving lawyers and such — she would be rehired and offered back pay. That’s the stiffest penalty there is for violating this type of legislation.” That’s how employers get away with it, he added. “They can absorb the penalties pretty easily. And also, many businesses — and certainly many employees — have no idea that this practice is illegal. Americans in particular are very reluctant to discuss wages and salaries, and so when their boss tells them these things are off limits, it makes a certain natural sense to them.”

Aside from the occasional employee who finds herself in trouble with management, what is the effect of this secrecy? We need more research, but it’s safe to say that in many cases it obscures pay discrimination. That’s what happened to Lilly Ledbetter, a supervisor at a Goodyear plant in Alabama who learned after nearly 20 years that her male colleagues were making significantly more money than she was. Had someone not slipped her an anonymous note, Ledbetter would never have known. By the time she found out, according to the Supreme Court’s decision in her case against the company, it was too late for her to sue for discrimination.

The Lilly Ledbetter Fair Pay Act, signed into law by President Obama in 2009, lifted the statute of limitations on lawsuits. But it did nothing to ensure that victims of discrimination would be able to uncover the injustice in the first place. Some states, including Massachusetts, have taken further steps, passing laws that establish stiffer penalties for employers who punish their workers for talking about pay. But that would still require workers to open up to one another.

But what if the onus was on employers? “If everyone had access to the company’s pay distribution,” Rosenfeld said, “it makes it much more difficult for employers to have gender and racial disparities on the books.”

Of course, not everyone is excited about pay transparency. Many employers dread the idea, and not necessarily because they want to discriminate with impunity. “People have massively inflated perceptions of their own performance,” said Todd Zenger, a University of Utah business professor who recently made the case against transparency in a Harvard Business Review essay. “When you advertise pay, you are telling half of the world that they’re below average.”

Zenger acknowledged that pay transparency might help ferret out discrimination. But he said it could also open a Pandora’s box of discontent, depressing productivity and sending workers fleeing. As a cautionary tale, he pointed to a 2012 study published in the journal American Economic Review, in which researchers at the University of California-Berkeley conducted an experiment to determine what would happen when university employees suddenly found out how much they and their colleagues were paid.

In 2008, after a court decided that the information should be publicly available, the Sacramento Bee set up a website listing the salaries of every state employee, including employees of the University of California system. The Berkeley researchers emailed a random selection of UC faculty and staff to tell them about the website, then followed up afterward with a survey about job satisfaction. It turned out professors who were informed about the website, and who used it to determine that their pay was low compared to their colleagues, were significantly less happy than lower-paid professors who had no basis of comparison. They were also more likely to look for a new job.

The taboo on pay talk may be loosening, especially as millennials share more and more of their lives online.

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“It creates a playground for social comparison and envy,” Zenger said. “We do have a societal norm around transparency, but we also have a societal norm around privacy.”

Transparency has long been standard at most public sector workplaces, since the allocation of tax dollars is a matter of public information. Recently a handful of private companies have also begun to publicize pay among workers. The grocery chain Whole Foods, for example, gives workers in every store access to a binder with their colleagues’ salaries. The tech startup Buffer goes several steps further, listing salaries for all 65 of its employees on a publicly-available website.

Zenger noted in each of these cases, pay tends to be formula-driven and fairly flat, without the subjective performance bonuses that corporate bosses use to recruit and motivate top workers. However, the pay gap also tends to be narrower in these workplaces — at Buffer, for example, women make just 2.5 percent less than their male colleagues.

Atypical employers like tech startups and progressive supermarkets aside, the average American might blanch at the idea of neighbors, potential dates, and strangers on the Internet looking up her salary online. Americans consider income on par with weight when it comes to sensitive information, and money beats out even death on a list of most dreaded conversation topics, according to one recent survey. Blame our Puritan roots, or the degree to which identity is tied up with work in a hyper-capitalist nation.

Still, the taboo on pay talk may be loosening, especially as millennials share more and more of their lives online. Full, public transparency is not necessarily required to shrink the pay gap. In her 2013 paper, Kulow proposed requiring companies to disclose their payrolls only to employees and government regulators, who would be able to flag any patterns of bias. It’s an idea she believes may not be too far away, at least at the state level.

“I see it coming for government contractors first,” she said. “There are just so many companies that do business with the government. That will, indirectly, pull in a lot of people. Once you get enough individuals whose information is being shared, then moving to the private sector won’t seem like a big deal to legislate or will happen voluntarily. There will be a tipping point.”

What of the consequences for company morale?

“People should be allowed to react to that information and do with it what they will. . . We’re all adults. I would rather know,” Kulow said.

In a world where knowledge is power, radical transparency may be the best way to share that power fairly.

Amy Crawford is a writer living in Michigan. Follow her on Twitter @amymcrawf.
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