Ideasroom

Equal pay starts with transparency

If everyone knows what their peers are getting paid, it is much harder for women to remain underpaid relative to their male colleagues, argues the University of Auckland's Dr Ryan Greenaway-McGrevy

Mary* first learned that her colleague was paid significantly more than her when she was dispatched to fix a big problem that the colleague had created. Needless to say, Mary was incredulous. Not only was this person paid more than her, she could not even do her job properly.

Mary called her manager and demanded a raise on the spot. Although she got it, the damage had been done. She did not feel like her employer had been treating her fairly, and she quit soon after.

I am sure many of you know that feeling when you learn that you are paid less than your peers. Equal pay for equal work is something that most of us would agree is fair.

Sadly, it isn’t happening. For example, research by economists at Motu concludes that a significant proportion of the gender pay gap is due to discrimination in the workplace.

But there is, perhaps, a simple solution: make pay transparent. If everyone knows what their peers are getting paid, it is much harder for women to remain underpaid relative to their male colleagues. Motivated by these concerns, the Canadian province of Ontario passed pay transparency legislation earlier this year.

Sunlight, as they say is, the best disinfectant.

Closer to home, a variety of commentators have recently been describing Working for Families as corporate welfare. The argument – as once put forward by John Key – is that employers can pay parents less because the government will step in to pick up the difference. To my mind, the real headline here is ‘Employers accused of discriminating against parents’. Regardless, it becomes much harder to pay Bill less just because he has two kids when Bill knows what everyone else is getting.

It is terribly short-sighted to underpay your most hard-working employees – and to overpay the people that shirk. The underpaid will eventually find out that they have been ripped off.

Of course, it is not only women and parents that are potentially undervalued in the workplace. Many of us find negotiating salaries difficult. It is hard to know what you should be getting paid, and how to ask for more.

My friend Mary asked for 20 percent more when negotiating her salary at her next job. She was not going to be fooled twice. She got her pay bump, and she deserved it. Good for her.

But it is perfectly understandable why so many other people choose not to be aggressive during salary negotiations. This is your future employer, after all, and you hope to have a constructive working relationship. Agreeableness is a good quality in a potential colleague – but it often does not serve people well in negotiations over salary.

So why not give applicants a helping hand? Firms that disclose salary bands help current and potential colleagues to value their work appropriately.

Firms could also ultimately benefit by being more open about compensation packages. It is terribly short-sighted to underpay your most hard-working employees – and to overpay the people that shirk. The underpaid will eventually find out that they have been ripped off.

Employers who voluntarily chose to disclose salaries would be sending a clear message that they reward effort and talent, and that they care about equity in the workplace. That, in turn, will help them attract the most productive workers – the Marys of the world – and discourage applicants who just want to put in the minimum possible effort. Win-win.

It could also attract customers who care about fairness in the workplace – and that’s where all of us can play a role. If you do care about workplace equity, consider buying goods and services from firms that publicly commit to policies that promote equal pay for equal work.

*Not her real name

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