Pay transparency: Empowering or embarrassing?
On a cool, sunny January noon-hour, Gustavo Arcia and his son are having a packaged lunch near the Prado Bridge in Balboa Park. A transplant from Miami, Arcia used to manage a company that worked on government contracts. KPBS asked him whether he thought that revealing people’s salaries was an invasion of privacy.
“I think it’s up to people. Whether they think it touches something very personal to them. For me, I don’t care,” Arcia said.
As information technology makes data more accessible, pay transparency is a growing movement. Revealing an organization's paychecks is meant to shed light on pay disparities, which historically have put women and people of color at a disadvantage.
Studies estimate American women earn 84 cents for every dollar men make.
University of San Diego Law professor Orly Lobel said privacy laws that hide information like rates-of-pay go too far and run contrary to public interest.
“We’ve also seen over the years privacy used not just as a shield, but as a sword to hide from public accountability,” Lobel said. “Privacy oftentimes serves the more powerful. For example, in scholarly papers, I show that the gender and racial pay gaps have been very stagnant, basically because people don’t know they’re being underpaid.”
Lobel is the author of "The Equality Machine: Harnessing Digital Technology for a Brighter, More Inclusive Future." She said that transparency allows us to make better, and more equitable decisions when it comes to policy in the workforce and elsewhere.
What pay transparency can achieve
Elizabeth Lyons is a professor of management at UC San Diego and she has studied the effects of pay transparency on gender wage gaps, which she says is clearly a problem.
“We may think it’s unfair. But beyond that it impacts women’s willingness to enter and stay in the labor market. That has implications for the economy as a whole,” Lyons said. “It could impact women’s productivity, if they know they’re earning less.”
Lyons took a look at a situation where women did know they were earning less than their male colleagues.
A law in the Canadian province of Ontario required all organizations that received government funding to make public the name, position and salary of those making over $100,000. The information was available on a searchable public database.
Lyons told KPBS Midday Edition the law did create more pay equity in the universities she examined, raising female pay by about 4% — but not for the reasons they expected. They did not see individual women acting empowered and negotiating for higher pay.
“Organizations were proactively reducing gender pay gaps in ways that are consistent with reputation management,” she said.
In other words, the organizations corrected the pay gaps because they were concerned about their public image.
California just passed a law that requires employers to reveal their pay range in job postings. Employees must also be told, upon request, the pay range of their own positions.
The downside of transparency
Pam Dixon is a privacy advocate and founder of the World Privacy Forum. She says pay transparency is fraught with difficulty.
Revealing the fact that someone is poorly paid doesn’t always empower them, she said, in fact it can have the opposite effect. If people become classified as low-income, it’s harder for them to get good credit terms when they buy something.
And what if they apply for a job?
“Employers will look at their past pay and say ‘Oh, this is what you were paid doing X work. We’re going to pay you along these incremental lines,’ When that’s not what’s needed. What’s needed is pay equity,” Dixon said.
Back in Balboa park, KPBS approached the public who said when you enter the labor market, you should know what the “going rate” of pay is. That gives you leverage in negotiations.
Benjamin Arcia told KPBS the price of labor should be regarded in the same way as prices of consumer goods. You need transparency to make comparisons.
"I think that just as technology has increased the transparency in real estate or in other realms,” he said. “We’re just seeing communications technology take place in the labor market as well.”
Felicia, who didn’t give her last name, said she’s seen workplaces where knowing the salaries of your fellow workers has led to low morale and hard feelings.
“The only people that have shared their salary with me, is if they’ve left the company I was working with ... Then they feel more comfortable because it’s not as competitive, I guess,” she said.
It’s hard to say how meaningful California’s plan to mandate the publication of salary ranges will be. If the salary range is very broad, for instance, it is a poor indication of what a person will actually be paid.