Salary Transparency and the Gender Pay Gap

Salary Transparency and the Gender Pay Gap

Posted November 9th, 2015 in Equal Pay.

“If salaries are secret and only the boss knows what everyone makes, then the boss – the company – has all the negotiating power.” ~ NPR’s Planet Money, Episode 55 – When Salaries Aren’t Secret

Did you read Jennifer Lawrence’s October essay on Lenny about discovering via the Sony hack that she was paid less than her male co-stars when filming American Hustle, despite the fact that studio executives considered her the most bankable actor in that film? No? Go ahead and read it. I’ll wait.

Ah, the gender pay gap. It’s like Groundhog Day with this conversation. Some stubbornly argue the gender pay gap is a myth – that most men work harder, longer hours than most women and are therefore compensated more generously. Some data suggests that the gap is actually increasing. What’s the truth? Numerous factors are in play when compensation is negotiated, but data and anecdotes convincingly illustrate the existence of a pay gap running rather neatly along gender and minority lines.

Maybe you saw this short video released last week by Issa Rae (actress, writer, and creator of the YouTube comedy series Awkward Black Girl) in partnership with Make It Work. It illustrates 2015 average wage differences between white males, white females, African-American females, and Latinas.

Oversimplification? I don’t think so. I know women who have worked just as hard as their male counterparts for years only to discover they were being paid substantially less for it. I’m talking female executives working crazy, long hours, traveling whenever asked, and sacrificing home life in ways demonstrably on par with their male counterparts. If the gender pay gap isn’t real, it would stand to reason that at least these women would receive equal pay for equal work. But this scenario is still far too common in 2015.

So, what’s the issue here and how do we move past it? I think it has a lot to do with asymmetric information (when only one of the two negotiating parties has all the relevant information), coupled with a strong desire to be treated fairly. This issue becomes a non-issue when employees, regardless of gender or race, believe they have the information they need to strike a fair deal for the work they provide, and when they believe they are being compensated equitably.

Implementing salary transparency is one way to get there. The military, the government, and academia already employ it. Some private companies are beginning to use it to help create a culture where workers feel valued for the actual work they do as opposed to how good their negotiating skills on the front end are or what their gender or race is. NPR’s Planet Money podcast episode 550: When Salaries Aren’t Secret examined the effects of salary transparency and what happens in workplaces when salaries are made public. It’s worth a listen.

As, Dane Atkinson, CEO of the tech company SumAll put it in the podcast: “I have, on many occasions, paid the exact same skill set wildly different fees because I was able to negotiate better with one than the other.” But over time he witnessed the fallout (from tears to yelling in frustration) that occurred when people discovered the extent to which they were being underpaid compared to their counterparts, and the negative impact it had on the company’s culture. He decided the short-term benefit of keeping salaries secret so the company had a negotiating advantage simply wasn’t worth the long-term anguish it caused his employees who felt like the company was screwing them over.

In response to JLaw’s essay, her four-time co-star, Bradley Cooper, said that from here on he will tell his female co-stars what he’s making before they ink a deal. (As if we didn’t like the guy enough already!)

Here’s the thing about transparency: it’s not only easy to do, gender wage disparities shrink when salary information is made available to the people involved in negotiating the terms of a professional agreement. Here’s what we also know: when that information is kept secret, women are disproportionately hurt in terms of what they earn.

So, who’s up for a game of salary show and tell?