The date of Equal Pay Day is symbolic: It tells us how long into the new year women have to work to earn what men earned the previous year. This year it falls on March 24, 2021, because the gap between men’s and women’s pay is close to $0.20 for each dollar earned.
This could be narrowed if firms adopted pay transparency policies, where any worker in a firm could find out what every other worker in the firm gets paid.
National compensation data support this conclusion. In the U.S. federal government, where pay is public information, the gap between men’s and women’s pay is less than $0.10. Still imperfect, but a sizable step closer to the goal of equal pay. Now, a sea change is underway as employees are forcing the hands of employers in many different ways. The social norm that says pay should be kept private is more strongly believed by older workers than younger workers, who are used to sharing information about themselves on social media. Sites such as Glassdoor and salary.com are allowing workers to share information about their compensation anonymously with the public. The era of pay secrecy is gradually coming to a close. Companies need to start behaving as if their pay were transparent, because younger workers are taking steps to make sure it is.
Employers worry that making pay transparent will lead to conflict in the firm. Precious time that might have been used to serve customers will be devoted instead to managing pay disputes. They may be right, at least initially. There is evidence that, when firms make pay transparent, employee morale may be damaged and job dissatisfaction may increase. But if the dissatisfaction is appropriate (perhaps due to discriminatory or irrational pay policies), then the issue should not be left unaddressed. It is a chance for the company to right a moral wrong.