You’re at a party, meeting someone new. What you ask that other guest probably depends in part on where you live. In New York City, it’s common to inquire about a person’s job title within a few minutes of meeting. The city that never sleeps stays awake by going to parties that double as networking events every night of the week.
In Colorado, the question of, “What do you do?” might generate a discussion of outdoor sports. “Oh, I snowboard!” Or, “I mountain bike, but in the winter, I’m all about downhill skiing.”
Regardless of where you live, one conversational opener that is pretty much off-limits? A discussion of salary, as in, “Nice, to meet you. How much do you earn?”
In a recent column in The New York Times, two people asked 400 strangers on the city’s streets to share their salaries. Only 27 were willing to say what they earned—and some of those had government or union positions with publicly-available remuneration.
Politeness matters, yet our lack of comfort talking about money, and even outright secrecy, has at least one serious side effect; it allows gender and racial pay gaps to persist. Women earn only about 83% of what men do in the U.S.; in Australia the gender pay gap is nearly as high: 14.1%. Without pay transparency, a tendency to underestimate our value in the market gets free rein. We may be doing the same work for less pay, and go for years without realising our true market value.
Salary Secrecy: An Equal Opportunity Offender?
While salary secrecy clearly hurts women, men can be unfairly under-compensated, too. As a leader, pushing for salary equity over time can help you retain your best employees. Failing to do so can mean losing valuable employees.
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A civil engineer in his late twenties whom I’ll call Clive liked his company. He recommended that the talent acquisition team at his company meet a student he knew who would soon complete his civil engineering degree. The team interviewed the student, agreed that he would be a good fit at the firm, and offered him an internship. When that ended, the company offered him a full time position, which he accepted.
This sounds like a win for everyone. But then Clive learned that the starting salary of the new civil engineer was the same as his own, despite Clive’s five-year seniority and strong performance. This was upsetting, but also useful information. After all, five years into the job, with positive evaluations, he shouldn’t be making the same amount as a new hire. He asked for a raise.
The company refused, claiming that if Clive got a raise, a lot of other people would want salary increases too. This was probably true, but that didn’t make the situation more palatable for Clive. Instead, it motivated him to look for a new role outside. He found a better compensated position elsewhere and left the company. For all the secrecy around it, salary matters. In a recent English workforce survey by Talent.com, 78% of job seekers placed salary as their main concern.
Sharing the Knowledge Is Power for Employers
Clive’s departure was a bad outcome for the company; having to replace a productive employee is time-consuming and expensive, especially in today’s job market. More transparency in the first place would have protected the company from finding itself in this situation. Pay transparency requires companies to be honest and thoughtful about how they are calibrating value internally—or continually lose people. In this case, that might have translated into retaining both valued employees.
Over the long term, pay transparency can create trust between employer and employee. It can raise morale and improve engagement, because workers know they are being equally compensated for the same work as others, and believe their salaries are fair.
When You Don’t Like What You See
There is one big potential downside of more transparency around salary: you may find yourself suddenly dissatisfied with how much you earn. The old saw, “compare and despair” certainly can apply to salaries, as a study about Norway’s country-wide pay transparency found. This article on the American Economic Association website explains, “higher transparency in Norway increased the gap in happiness and life-satisfaction between richer and poorer individuals.” The study authors wrote, “higher transparency increased the gap in happiness between richer and poorer individuals by 29 percent, and it increased the life satisfaction gap by 21 percent.”
What should you do if you find out that friends who took different career paths make more money than you do? First, do not measure your worth as a human being by your salary. Generally, what we earn reflects the type of role we’ve chosen, not our actual value or the importance of the job. Teachers make less than bankers, but helping educate the nation’s youth is a critical job. If you’ve chosen this path, do not gauge your success as an educator by the yardstick of a banker. Benchmark yourself against your goals, not someone else’s.
Second, when it comes to comparing yourself to those within your field, when you landed your job can impact what you earn. The job market fluctuates, and employers can pay more in a tight job market or less when many people are looking. Similarly, your current salary may be affected by your ability or willingness to negotiate when you were offered the position. Again, you shouldn’t measure your value by your earnings, but if data and transparency show that you are being poorly compensated, you may want to negotiate or move.
Use Data to Negotiate for More
If you like your work but learn you could earn more, consider doing some “job dating” to see what roles are available. If the demand is high, that’s a great time to find a similar role with a better salary. The best time to negotiate pay is when you are joining a company. Once you’re at a firm, there are almost always caps on salary increases and parameters on raises, so it’s much harder to get your compensation changed.
Job searching is also a good time to get data from others about their salary and the range for their role. People may be more forthcoming about their salary and the firm more willing to share salary ranges before you’ve signed on.
The Future Looks Transparent
More salary transparency is likely the wave of the future. In California, current law requires companies with 100 or more employees to submit data on pay to the state’s Department of Fair Employment and Housing, broken down by sex, race, and ethnicity, in certain job categories. Similar laws have been passed in Colorado, Washington State, and New York City. Some legislators in California are pushing for pay transparency laws to go further, covering contract workers, and requiring salaries to be made public.
As an article on the Equal Rights Advocates’ website puts it: “This type of pay data is key to closing the gender and racial wage gap that persists in most industries. It’s also necessary information to properly enforce existing equal pay laws. After all, we can’t fix what we can’t see.”