Why you should know how much your coworkers get paid | David Burkus

206,454 views ・ 2016-10-11

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00:13
How much do you get paid?
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Don't answer that out loud.
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But put a number in your head.
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Now: How much do you think the person sitting next to you gets paid?
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Again, don't answer out loud.
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(Laughter)
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At work, how much do you think
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the person sitting in the cubicle or the desk next to you gets paid?
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Do you know?
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Should you know?
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Notice, it's a little uncomfortable for me to even ask you those questions.
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But admit it -- you kind of want to know.
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Most of us are uncomfortable with the idea of broadcasting our salary.
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We're not supposed to tell our neighbors,
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and we're definitely not supposed to tell our office neighbors.
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The assumed reason is that if everybody knew what everybody got paid,
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then all hell would break loose.
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There'd be arguments, there'd be fights,
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there might even be a few people who quit.
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But what if secrecy is actually the reason for all that strife?
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And what would happen if we removed that secrecy?
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What if openness actually increased the sense of fairness and collaboration
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inside a company?
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What would happen if we had total pay transparency?
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For the past several years,
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I've been studying the corporate and entrepreneurial leaders
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who question the conventional wisdom about how to run a company.
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And the question of pay keeps coming up.
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And the answers keep surprising.
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It turns out that pay transparency --
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sharing salaries openly across a company --
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makes for a better workplace for both the employee
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and for the organization.
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When people don't know how their pay compares to their peers',
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they're more likely to feel underpaid
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and maybe even discriminated against.
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Do you want to work at a place that tolerates the idea
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that you feel underpaid or discriminated against?
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But keeping salaries secret does exactly that,
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and it's a practice as old as it is common,
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despite the fact that in the United States,
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the law protects an employee's right to discuss their pay.
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In one famous example from decades ago,
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the management of Vanity Fair magazine
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actually circulated a memo entitled:
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"Forbidding Discussion Among Employees of Salary Received."
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"Forbidding" discussion among employees of salary received.
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Now that memo didn't sit well with everybody.
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New York literary figures Dorothy Parker,
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Robert Benchley and Robert Sherwood,
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all writers in the Algonquin Round Table,
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decided to stand up for transparency
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and showed up for work the next day
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with their salary written on signs hanging from their neck.
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(Laughter)
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Imagine showing up for work
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with your salary just written across your chest for all to see.
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But why would a company even want to discourage salary discussions?
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Why do some people go along with it, while others revolt against it?
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It turns out that in addition to the assumed reasons,
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pay secrecy is actually a way to save a lot of money.
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You see, keeping salaries secret
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leads to what economists call "information asymmetry."
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This is a situation where, in a negotiation,
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one party has loads more information than the other.
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And in hiring or promotion or annual raise discussions,
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an employer can use that secrecy to save a lot of money.
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Imagine how much better you could negotiate for a raise
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if you knew everybody's salary.
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Economists warn that information asymmetry
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can cause markets to go awry.
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Someone leaves a pay stub on the copier,
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and suddenly everybody is shouting at each other.
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In fact, they even warn
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that information asymmetry can lead to a total market failure.
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And I think we're almost there.
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Here's why:
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first, most employees have no idea how their pay compares to their peers'.
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In a 2015 survey of 70,000 employees,
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two-thirds of everyone who is paid at the market rate
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said that they felt they were underpaid.
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And of everybody who felt that they were underpaid,
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60 percent said that they intended to quit,
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regardless of where they were -- underpaid, overpaid
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or right at the market rate.
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If you were part of this survey, what would you say?
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Are you underpaid?
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Well, wait -- how do you even know,
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because you're not allowed to talk about it?
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Next, information asymmetry, pay secrecy,
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makes it easier to ignore the discrimination
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that's already present in the market today.
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In a 2011 report from the Institute for Women's Policy Research,
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the gender wage gap between men and women
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was 23 percent.
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This is where that 77 cents on the dollar comes from.
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But in the Federal Government,
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where salaries are pinned to certain levels
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and everybody knows what those levels are,
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the gender wage gap shrinks to 11 percent --
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and this is before controlling for any of the factors
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that economists argue over whether or not to control for.
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If we really want to close the gender wage gap,
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maybe we should start by opening up the payroll.
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If this is what total market failure looks like,
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then openness remains the only way to ensure fairness.
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Now, I realize that letting people know what you make
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might feel uncomfortable,
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but isn't it less uncomfortable
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than always wondering if you're being discriminated against,
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or if your wife or your daughter or your sister is being paid unfairly?
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Openness remains the best way to ensure fairness,
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and pay transparency does that.
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That's why entrepreneurial leaders and corporate leaders
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have been experimenting with sharing salaries for years.
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Like Dane Atkinson.
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Dane is a serial entrepreneur who started many companies
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in a pay secrecy condition
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and even used that condition to pay two equally qualified people
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dramatically different salaries,
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depending on how well they could negotiate.
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And Dane saw the strife that happened as a result of this.
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So when he started his newest company, SumAll,
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he committed to salary transparency from the beginning.
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And the results have been amazing.
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And in study after study,
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when people know how they're being paid
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and how that pay compares to their peers',
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they're more likely to work hard to improve their performance,
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more likely to be engaged, and they're less likely to quit.
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That's why Dane's not alone.
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From technology start-ups like Buffer,
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to the tens of thousands of employees at Whole Foods,
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where not only is your salary available for everyone to see,
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but the performance data for the store and for your department
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is available on the company intranet
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for all to see.
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Now, pay transparency takes a lot of forms.
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It's not one size fits all.
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Some post their salaries for all to see.
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Some only keep it inside the company.
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Some post the formula for calculating pay,
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and others post the pay levels
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and affix everybody to that level.
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So you don't have to make signs
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for all of your employees to wear around the office.
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And you don't have to be the only one wearing a sign
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that you made at home.
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But we can all take greater steps towards pay transparency.
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For those of you that have the authority
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to move forward towards transparency:
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it's time to move forward.
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And for those of you that don't have that authority:
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it's time to stand up for your right to.
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So how much do you get paid?
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And how does that compare to the people you work with?
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You should know.
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And so should they.
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Thank you.
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(Applause)
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