Pay equity for all

I see the Labour party has recently said it wants to require employers to provide data on what they pay their employees so it can determine whether men and women are being paid the same for doing the same work. The Greens are keen on something similar and want to have workplaces investigated, expecting to find that there is a pay equity problem, i.e., a gap in pay between men and women doing the same work that is caused by gender discrimination.

I think this is a marvelous idea, as well as a terrible idea.

Some of this is marvelous

The marvelous part is ensuring employees are given better information on what their co-workers are paid. Employees are chronically under-informed when negotiating pay with employers, and are therefore at a major bargaining disadvantage in this age when fewer than 20% of people belong to unions. More informed employees would be more powerful employees earning higher wages (and the extra information would increase the efficiency of the labour market – no doubt meaning this change would attract wide support from economists).

The terrible part is the idea of a survey or some requirement to provide data to the government. This isn’t so much terrible, as just unnecessary. Employees can sort it out for themselves if they have information. All that is necessary is that employers provide to employees (and prospective employees – but that is less of an issue given there are lots fewer of them) information on what their co-workers are paid. Armed with this information, employees can sort out how they think they compare, and argue for it.

I don’t want to downplay the gender pay gap (more data on this once the next Income Survey comes out on October 6), but there are likely all sorts of other pay gaps in workplaces too, e.g., between people who have just started and those who have been around a while, between those who are comfortable talking about money and the value of what they do and those who are not, and those who are coming from a job where they were paid more and those who are just happy to accept whatever they are offered.

The heart of the matter

The core thing that ensures that all these inequities in workplaces continue is the lack of information on what others in the same workplace are paid. Helping to solve this problem at source (by ensuring employees are informed) seems a better way to approach it than another investigation or a government survey.

Of course there are lots of good reasons for differences in pay, like differences in skills and productivity, for example. But I suspect a fundamental cause of pay gaps in general is cultural: many of you readers are already shaking your heads. You do not like talking about how much you are paid and, in particular, revealing it to strangers. Pay is tied up with status and perceptions of value. But in the absence of this information, your position as an employee is seriously undermined because you have no information to  counter an employer saying to you “what we are offering is in line with what we are paying others”.

It was therefore fascinating to read in the media recently the results of a survey:

33 per cent say even their partners don’t know what they earn. Just a quarter have told their parents, and a fifth have told their kids. 15 per cent say no one knows how much they earn.

Given how ingrained it is the culture not to talk about how much you are paid, I suspect a general rule requiring employers to give employees information would not work. A more credible solution would be opt-in, i.e., if you are prepared to let other employees see your payslips, you get the opportunity to look at their payslips as well.

Sure, you would have to get over your squeamishness about others knowing how much you earn, but in return for that, you would know how much others in your workplace get. If curiosity overcame fear, the result could be fewer unjustified pay gaps and without the hassles of more government intervention.

Follow the Norwegian star

Interestingly, in Norway they release tax data that enables you (if you read Norwegian, and at least for the 2008 year) to find out online how much your neighbour earned and how much tax they paid. In this country we already know pay rates for politicians, CEOs, senior public servants, super-annuitants and beneficiaries. Why not for the rest of us too, and in a way that would actually help?

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