What Pay Transparency Reveals

Yesterday was Finland’s “National Jealousy Day.”

Annually, on November 1, Finland does a tax data dump. You just need to visit the tax records office to find out what your neighbors earn. (Some say that their visit ruined their day.)

Where are we going? To deciding how we feel about pay transparency.

Pay Transparency

A New York City pay trans[parency mandate just kicked in. In all job ads for companies with more than four employees, the NYC law requires firms to post the pay range. So far, posts have included a rather wide band like the $158,400 to 434,000 for a tax services directior at an accounting and consulting firm. The Macy’s listing for a customer services manager quoted a salary range between $51,000 and $85,000. Meanwhile, the new California pay transparency law that starts on January 1 applies to firms with 15 or more employees.

Researchers tell us that when we all know someone’s salary, there is less of a chance that women and people of color will be paid less.

However, a 2008 study revealed some very human problems. Here, salaries at the University of California became public after a right to know law was passed. Before most employees knew they could access their peers’ earnings, researchers told a random sample and then compared their response to a control group. Sort of like Finland, the people that learned they earned less than the median displayed dissatisfaction. Some reported lower job satisfaction and others quit.

The situation was somewhat different in Norway. From 2001 to 2013, Norway made it unusually easy to get everyone’s tax data online. The data was also accessible through apps that mapped wealth geographically or by Facebook friends. In 2008, there were 29.4 million searches. However, in 2014, search inquiries plunged by 88% when website users had to provide their names.

Our Bottom Line: Incentive

For employers and employees, pay transparency changes incentivess. On the firm side, it could diminish gender and race disparities. Also, it means more paperwork, more regulations, more time and expense (and sensitivity). For employees, researchers have said transparency can create reseentment from the person paid less.

My sources and more: My Axios Markets email is always a source of some handy facts. Yesterday’s alerted me to the NY pay law. From there, I went to WSJ for more detail. Also, I did wamt to add a study that I remember blogging about several years ago but could neither find nor confirm its source. The results indicated that people preferred being paid less if it meant getting more than their peers. They rejected the higher salary/lower than peers alternative. Interesing (if accurate). Please note that several of today’s sentences were repeated from a past econlife post.