The pay gap between men and women has remained stubbornly present despite efforts to reduce it over the past few decades. Indeed, today, it’s estimated that women still earn around 18% less than men.
A new paper from Washington University in St. Louis highlights how a lack of transparency around pay contributes to the enduring pay gap between men and women.
“A lack of knowledge about who makes what within organizations contributes to this continuing disparity,” the authors explain. “Asymmetric wage information, whereby employers know more than workers about pay rates, undermines workers’ ability to negotiate for higher pay.”
Pay secrecy
The paper highlights that informal pay secrecy has actually been increasing in recent years, despite growing state legislation outlawing the practice. Indeed, the authors highlight that around half of full-time employees said they were either formally prohibited or informally discouraged from discussing their salary with peers when asked during 2017 and 2018.
What’s more, this approach is most likely to affect women, who the authors also suggest are more likely to violate the policy by talking about their salary with others.
“An emerging body of research finds that pay secrecy policies—workplace rules, informal or formal, that bar or discourage workers from discussing wages and salaries—disadvantage women in particular,” the authors say.
“First, these practices prevent women from finding out whether they are being underpaid. Second, in cases where women do discover a pay discrepancy by violating a pay secrecy policy and asking colleagues about what they make, their attempts to remedy the disparity could be met with retaliation from an employer.”
Common practice
The researchers surveyed 4,262 full-time employees from across the United States, with around half of them revealing either informal or formal attempts to stymie discussions around salary levels.
Despite both repeated conversations around the issue in the media and a number of states introducing legislation to bar restrictions on salary-related speech at work, the practice remains common. Indeed, even in states with such legislation, around 10% of workers reported being formally banned from discussing their income.
“Restrictions on workers’ freedom to discuss their pay are concentrated in private-sector, non-union organizations,” the researchers say. “While pay secrecy policies are not universally effective in stopping discussions about pay—a substantial share of workers report talking about their pay with colleagues despite restrictions—the presence of such a policy is associated with reduced pay discussions among workers.”
In the private sector, some 60% of workers operate under some kind of pay secrecy policy, with 16% formally prohibited from discussing their salary. While both of these numbers have fallen since 2010, they have largely been replaced by more informal discouragement, which has risen over the same timeframe.
Perhaps unsurprisingly, pay transparency is most common in unionized workplaces, which themselves are most common in the public sector. Indeed, 74.3% of respondents said that pay is transparent in the public sector, with unionized workplaces reporting similar figures.
Leaky legislation
The paper reveals that while the National Labor Relations Act technically enshrines the rights of workers to discuss their pay, it’s actually full of loopholes that exclude large groups of workers. What’s more, violation of the law by employers is typically met with a small fine, so there is little real incentive for employers to comply.
“Legislation alone might not be enough to shift entrenched workplace norms and practices regarding pay secrecy,” the authors say. “Many workers subject to a pay secrecy policy may not know that these policies are illegal, and employers imposing illegal restrictions may not believe that there is a realistic threat of enforcement. Legislation should be backed up by enforcement and information.”
The situation is particularly harmful to women as it undermines their ability to effectively negotiate. The authors highlight how negotiation outcomes between men and women are far less pronounced when things like pay are transparent and available. When there is more ambiguity, however, then the outcome gap from negotiations widens.
The authors don’t advocate demanding to see the pay of colleagues as the marginal penalties for pay secrecy are unlikely to prompt many employers to yield to such requests. Instead, they advocate more collective attempts to educate the workforce on their rights.
“I think that in the short-term a safer strategy would be to educate fellow workers on their rights regarding discussing pay and advocating for a strengthening of state and federal legislation on the issue,” they say.
The paper is also perhaps a salient reminder that employers need to get on board with this, as even if overt or discreet measures are in place to restrict pay-related discussions among the workforce, a growing number of people are happy to violate such policies. It’s better, therefore, to assume that your pay structure is open and work about how to justify that.
Affecting teamwork
This is important as previous research from Yale showed that when pay is transparent, teamwork and collaboration can be heavily affected when people find out that their peers are (unfairly) paid more than they are.
As disparities in wealth became visible, the researchers witnessed a drop in behaviors such as cooperation, interconnection, and ultimately, performance. These changes were not evident in networks where individual wealth remained hidden.
“Our results suggest that, surprisingly, the visibility of others’ wealth may have more of a social impact than the actual inequality of wealth,” they say.
As such, pay inequality should not be considered a dirty secret that can be brushed under the carpet by policies designed to muffle debate, but rather something that should be tackled head-on so that employees can have confidence that the workplace is a fair and equitable one.
