Why honesty is the best policy when it comes to salary

Why honesty is the best policy when it comes to salary

If you believed every survey and article floating through your news feed, you’d think millennials just arrived from another planet. This generation has unique attitudes toward everything from hygiene to pet ownership to careers. Well, three professors at the George Washington University decided to put that last notion to the test. They analyzed 20 studies on generational attitudes toward work—and guess what: They found no meaningful differences between millennials and previous generations.

Yet one millennial workplace trait rings true to me. According to research, millennials are supposedly more willing to break one of our biggest money taboos: sharing our salaries. There might be something to this—in part because the shift toward “pay transparency” isn’t just generational but also institutional. A 2015 survey of HR professionals found that more than half of them support greater openness about salary. Recent changes in the law have made this easier. In 2000 federal courts ruled that the National Labor Relations Act (NLRA) of 1935 protects workers’ rights to discuss salary. Employers can’t retaliate against employees who share what’s in their paychecks. A 2016 executive order from President Obama made the same assurances to employees of federal contractors.

Managers have traditionally put the kibosh on salary talk for a number of reasons. For one, it can cause friction in the workplace. For another, it can cost them money. Say you find out you’ve been making less than a colleague one cubicle away—time to ask for a raise. Some argue that, while transparency does make bosses pay their staff more equally, when everyone gets paid the same, there’s no incentive for staff to work harder.

Research, though, is showing that lifting the veil on pay has real benefits—for employees and companies alike.

Fairer salaries

For one, transparency can narrow the gender gap. A white woman makes, on average, 80 cents for every dollar her white male peer brings home. The gap is even wider for people of color. The Institute for Women’s Policy Research has concluded that this imbalance gets worse when salaries are kept secret. As three business school professors at the University of Baltimore (Richard Trotter, Susan Zacur, and Lisa Stickney) put it, “Pay discrimination is supported by pay secrecy and is more difficult to sustain under conditions of pay transparency.” In other words, a boss will be less inclined to discriminate when he knows his biases are out there for all to see.

Better work

While some argue that leveling pay across the board kills our drive to work harder, the opposite appears to be true. A 2014 study by Elena Belogolovsky of Cornell University and Peter A. Bamberger of Tel Aviv University discovered that pay secrecy actually hurts work performance. They created a simulated office and set 280 “workers” on a computer task. Bonuses were given for each successful performance. Some groups knew what their coworkers were making and how well they performed, others did not.

The result: Pay transparency made for better performance. How could this be? The authors suggest that when we understand the connection between how hard we work and how much money we might get paid, we’re more likely to work harder to make that extra cash.

Happier workplace?

Even the old argument that pay transparency breeds jealousy and resentment might not be entirely true. A white paper from human resources consulting firm KnowledgePay found that employees actually work better together when salary is out in the open.

Look, no one should ever feel compelled to share how much they earn, and bragging is obviously not okay. Yet when we talk openly about money matters of any kind we can help each other sort out our financial issues—and develop a better grip on our own. And maybe managers shouldn’t worry so much about millennials demanding raises. According to a 2017 survey by the online salary resource PayScale, millennials aren’t very comfortable negotiating higher pay. But that’s a subject for another day.

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