They don't call it the private sector for nothing. And if there's one thing the private sector likes to keep private, it's how much employees get paid.
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Employees at many companies can get into big trouble for dishing their dosh.
Salaries are strictly on a need-to-know basis.
Unions, politicians and some think tanks argue that scrapping this secrecy would help reduce the pay gap between men and women and could even help get our stubbornly stagnant wages moving again.
Are they right?
Luckily, we can stop guessing. Multiple countries and multiple jurisdictions within countries have now experimented with different models of pay transparency. The results are not always what you might expect.
These models of pay transparency range from cracking open the door to ripping it clean off its hinges.
Many US states have stopped businesses from punishing employees for discussing their salaries. Some require businesses to report on their gender pay gaps.
Europe goes further. Businesses in some countries are required to publish how much they pay employees at each level. In Norway, every Norwegian's salary is made public.
Want to know how much your neighbour earns for a living? Just jump on the internet and you can find out (although turns out this was a bit much even for the Norwegian's who, in 2014, changed the rules so your neighbour can at least see who has been snooping on their salary).
Economists instinctively like the idea of wage transparency. After all, wages are a price and markets don't function very well if prices aren't readily transparent.
So, is pay transparency a good idea?
Harvard's Zoe Cullen, who reviewed these case studies, says that it depends on what your objective is and who you are.
If your objective from pay transparency is to reduce the pay gap between men and women, then I have great news for you. The research suggests that increased pay transparency reduces the gender pay gap.
But if your objective is to raise real wages - the stated objective of some politicians who tout this policy - then the news isn't so great.
Cullen finds that pay transparency reduces wages by an average of 2.2 per cent. People with university degrees and above suffer the most.
How are both findings possible? Turns out, the reason the gender pay gap is reduced by pay transparency isn't because female wages rise. It's because male wages fall.
Cullen shows that pay transparency changes the way employers bargain.
Put simply, employers can't be flexible and offer a pay rise to their prized employees or people they are desperately trying to recruit without then having to give the same pay rise to everyone else.
The line "I'd love to, but ..." becomes the punchline of every performance discussion.
The evidence shows that pay transparency reduces the individual bargaining power of workers. This is highlighted by Cullen's finding that pay transparency has a limited effect on unionised workforces who, by virtue of their collective bargaining, already have limited bargaining power as individuals.
Those with a university degree, however, see their bargaining power diminish. Pay transparency effectively moves them into collective bargaining.
But wait, I hear you ask, can't employers just get better at justifying their decisions on why one employee gets paid more than another?
A study by Elena Belogolovsky and Peter Bamberger shows that this is easier in some industries than others.
MORE ADAM TRIGGS:
A lack of pay transparency is less of an issue in industries and businesses where performance is easily measured, like where pay is based on how many shirts you sell or how many houses you sell.
But in industries where performance is harder to measure - industries which prioritise innovation, creativity and culture and where employees don't necessarily deliver outcomes that are easy to measure - having pay transparency caused problems.
In an economy dominated by services, this is most of us.
There are other unintended consequences, too. Turns out, increased pay transparency is a bit of a downer.
A review of the survey literature by The Economist found that people overwhelmingly believe that their secret salary is higher than everyone else's. When pay transparency is introduced, they get a rude shock.
The result is that pay transparency reduces the happiness and morale of workers, even after they get over the initial shock that their salary isn't as high as they thought.
This was the finding in the University of California when pay transparency was introduced there. Studies of wellbeing from Norway's experience found the same result.
Pay transparency had another unintended consequence back in the 1990s.
Outraged by how much CEOs and executives were getting paid, regulators demanded more transparency over their salaries. The goal was to see these exorbitant salaries reduced. The result was the opposite.
Turns out, businesses didn't want their CEO to be seen to be getting paid less than their competitors. They worried that their CEO might come across as being less talented or, even worse, that the company was running short on cash. CEO remuneration increased as a result.
None of this is to say that pay transparency is necessarily a bad idea.
What this research highlights is that we need to be clear on what our objectives are and whether there is evidence that pay transparency will deliver it. We also need to be mindful of unintended consequences.
Until we're clear on these things, you might want to keep your salary to yourself. After all, your salary is probably less impressive than you think.
- Adam Triggs is senior research manager at the e61 Institute, a non-resident fellow at the Brookings Institution and a visiting fellow at the Crawford School at the Australian National University.
Adam Triggs
Adam Triggs is a partner at the economics advisory firm, Mandala, a visiting fellow at the ANU Crawford School and a non-resident fellow at the Brookings Institution.
Adam Triggs is a partner at the economics advisory firm, Mandala, a visiting fellow at the ANU Crawford School and a non-resident fellow at the Brookings Institution.
