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Opinion | It’s time to initiate a conversation about wage transparency

When salaries are transparent, employees work harder and are more motivated, shows research


Network Capital has an anonymous posting feature where millennials seek advice from community members without disclosing their identity. Usually, such posts are about exploring jobs and pursuing higher studies. Since the risk of being identified by their managers and colleagues is mitigated, people tend to be more forthright.

Last week, a message came from a senior product manager with a distinguished academic and professional record. In 2016, she joined a large fintech company and was among the top performers for three years straight.

Things were going great until she accidentally learnt that the newly hired associate she was supposed to mentor would be joining at the same stock level and making more money than her current salary. This baffled her as they graduated from the same engineering school and worked under the same professor. She had more work experience, more patents and strong performance indicators on the job. The only apparent difference was gender and colour.

Her instinctive reaction was to write a scathing mail to her manager. But she remembered Abraham Lincoln’s “hot letter", a practice famous for turning rivals into allies. Lincoln would pile all his anger in a note and put it aside until his emotions cooled down. She drafted an angry mail but didn’t send.

Across the world, women are paid less than men, despite the attention the issue of wage gap has received.

One solution is wage transparency. In Sweden, you can find out anyone’s salary with a simple phone call. Businesses with 25 or more employees have to establish an equality action plan, and companies with big pay gaps face fines if they ignore it. Naysayers might suggest that examples from Nordic countries aren’t representative. Let’s explore if that’s the case.

In a 2015 survey of over 70,000 American employees, PayScale found that the more people knew about why they earn what they earn, especially in relation to their peers, the less likely they were to quit. To study the impact of mandatory wage transparency, INSEAD professor Morten Bennedsen collaborated with Columbia Business School and Cornell researchers and found that in almost every context, disclosing gender disparities in pay narrows the wage gap. Further, employees are more motivated when salaries are transparent. They work harder and collaborate more with colleagues.

No matter how compelling the case for wage transparency, we can’t ask the community member to wait for it to become standard practice. She needs to act now. What should she do?

The first step is to congratulate herself for not sending that angry email. With a clear mind, she should write down her negotiation goal and talk to peers in other fintech companies. With her track record, she is likely to get competing offers from other companies in no time. This will serve as the basis for her counter-negotiation. In the off-chance she doesn’t get a competitive offer in time, she should keep looking and reach out to her tribe of mentors for leads.

With an offer in hand, she should have an honest conversation with her manager where she makes her case and explains how this episode made her feel. Of course, bringing her salary equal to the new hire is unacceptable. Why? Her company never wanted her to find out that she was being underpaid. It is time for them to take corrective action otherwise their colourful diversity poster will be nothing more than a sham.

Wage transparency may not lead to wage equity in the short term but it is certainly going to initiate a meaningful conversation in the much-hyped era of disruption.

Millennial Matters discusses the skills needed to survive and find meaning in the workplace of tomorrow.

Utkarsh Amitabh is founder of Network Capital, a global peer mentoring community and a WEF Global Shaper.

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