Mind the pay gap
Issue 95 - 5 April 2022 (8-min read)
If you are a fan of the American TV series The Office, you’ll remember Michael Scott to be a loyal employee of Dunder Mifflin, so much so that he ended up testifying against his own girlfriend to save the company millions of dollars in a lawsuit. But what makes him eventually question that loyalty is an honest conversation with a warehouse worker about his own salary.
Is that why our workplace cultures have created such a taboo around discussing our pay? Do companies fear most employees will walk out once they find out how much their colleagues are making?
This week in The Global Tiller, we take a look at why pay transparency is one of the 29 Big Ideas that LinkedIn believes will change our world in 2022 and why this year is being called the Year of Pay Transparency. How does it address gender and ethnicity pay gaps, and what are some thorny issues it can create?
At its core, pay transparency is a strategy for talking about employee salaries within the company. But the amount of transparency each company allows falls on a spectrum, starting from the bare minimum of telling employees how much they earn all the way to full salary disclosures of the entire workforce.
Buffer, a social media management startup, is one example of a company that has taken salary transparency to a whole new level by publicly sharing the salaries of all its employees, and even setting up a salary calculator to see how much you’ll make if you worked with them. Before you ask, I already checked their CEO makes $290,250 a year.
But Buffer is an outlier with its total transparency approach. The more common calls for pay transparency stick mostly to the middle of the spectrum —sharing overall pay philosophy and declaring salary ranges on job postings. Reed, a UK recruitment company, polled 2,008 working adults and 252 hiring managers for their views on salary transparency. The results showed that 78% of workers said they were less likely to apply for a role that didn't include a salary. One fifth (22%) said they only applied for roles listing pay. This explains why the MalaysianPAYGap Instagram account made waves when it launched in February with a post stating that "Malaysia’s median salary increase is below the Asia Pacific average of 5.4%."
Listing salary ranges for job postings isn’t just a smart move in a job market disrupted by The Great Resignation, but it brings other benefits as well. Employees are more satisfied when they know they are being paid the market rate, instead of feeling dejected under the assumption that they are being underpaid. It also levels the playing field in favour of employees. And it has great potential to reduce the gender pay gap.
The last reason is the main driver behind the European Commission’s efforts to legislate on pay transparency as the gender pay gap in the EU is still 14.1%. As of this morning, the European Parliament has decided to enter into negotiations with EU governments to adopt proposals, such as pay information for job seekers, a right to know the pay levels for workers doing the same work, as well as gender pay gap reporting obligations for big companies. The proposal also prohibits employers from asking job seekers for their pay history and a right to compensation for discrimination in pay.
No doubt this would be good news for women and ethnic minorities in advanced European economies who earn significantly less income than the "native white majority". But this phenomenon isn’t limited to Europe. In New Zealand, there are stark differences in salaries for migrant workers, with those coming from Canada, the United States, South Africa, the United Kingdom and the rest of Europe earning a higher hourly wage than migrants from Asia, the rest of the Americas and much of the Pacific Islands.
However, not everyone is buying into this call for increased transparency as we can see in the case of New York City, where businesses are pushing back. Many are concerned that the shock of discovering colleagues’ salaries could disrupt workflow, especially when older employees discover they are paid way less than new hires doing similar work. Some are concerned about salary inflation, with companies outbidding competitors’ employees, while others fear their blatant discriminatory practices may be exposed before they have a chance to make corrections.
Despite the concerns, pay transparency is likely to gain momentum going forward and it has the potential to change our job markets in favour of employees. If it forces companies to take a deeper look at their own values and claims of equitable pay, then I’d call it a win.
We’d love to hear your thoughts on pay transparency and how do you think your office dynamics will change if you knew what your colleague was earning. Do write back.
Until next week, take care and stay safe.
Hira - Editor - The Global Tiller
Dig deeper
Here is a quick summary of the pay transparency debate with a special focus on how the Malaysian workforce is responding to the change.
Mamta Chand on women's rights, representation and women's future in the Pacific
Don’t miss our latest Pacific Toks podcast episode in which Philippe sits down for a chat with Mamta Chand, a women’s rights activist in Fiji.
Here’s a note from Philippe: I’ve been following Mamta’s work and I’ve been amazed by her power, her strength, her ability to never give up on what is right, and on pushing for positive change. She has also been one of the many women who have helped me to continuously question my perspectives and to make sure that my ideas and views on women and women’s rights are based not only on what I think but on what is and what should be according to them. That’s why I wanted to talk to her and share it with you.
…and now what?
One thing I learned while helping our clients build lasting and sustainable motivation in their workplaces is that it’s not enough to do well in just one part of your business, or even in your business overall. A major factor that drives motivation is how people perceive their situation compared to others: those inside the organisation and those outside in similar positions, roles or organisations.
If the pay gap between you and your CEO is not that wide, that’s great. But if your salary is below the average in your profession, then you may end up demotivated. If you earn well above the average in your industry but you feel underpaid compared to your colleagues, then you may end up demotivated.
The question of salary in the workplace is a sensitive one and can vary according to the cultural context as well. I was born in France where it’s a taboo to talk about how much you earn, even within the family. Well, it is spoken about but often behind the curtain or behind your back based on assumptions. In Tahiti, it’s pretty much the same. Every now and then a study comes that tells us about the pay gaps, but it never sparks the necessary conversation about why public servants earn so much more than the private sector, why women are paid less than men.
Navigating as a leader, a manager in this situation is definitely not easy. So let me share what we do here at Pacific Ventury. I’d love to believe we’re transparent and, in many ways, we are. We discuss strategy, management and many other issues in front of our employees. But, when Hira told me about today’s topic for the newsletter, I realised that compensation is something we never clearly talked about within our team.
So today, in agreement with my business partner, we decided to present a clear situation of the finances of the business to our team. To be clearly transparent. Who earns what, what’s the impact on the company’s cashflow, what’s our overall situation…
It seems easy to do, but is it? How will our team react? Would they think that my pay as a CEO is fair? What if they don’t? How could this impact our relationships within our team, knowing how money can be a problem or a sensitive topic, it may eventually sparks difficult conversations. But isn’t that the role of a leader? To navigate tough conversations that eventually help everyone (including yourself) to grow?
But why do conversations around pay transparency have to be so tough? Does it have something to do with our relationship with money in general?
A few years back, I made the exercise to envision a world without money. And it was not an easy one as it stands at the heart of so many elements of our world. But money, which was once merely a tool, has now become the Graal for too many people. To the point where it decides the worth of someone: you have money hence you’re great, no matter how you earned it.
On the other hand, the world is changing deeply and systemically because of the reinvention of money through the blockchain technology that is creating so many conversations about the foundations of our societies. Clearly, money is defining the world itself!
As we’re walking into the year of pay transparency, how about we make it a year of transparency about money? What is really the role of money for an individual and for societies? Why has money taken such a big role in our world? Can we build a world not focused on money? If yes, what would replace it, if anything should? How can we take the issue of pay gap beyond our workplaces to address the poorest of the poor, those who cannot even fathom holding more than a few pieces of the coveted paper?
And then maybe this will loosen up our rigidities around pay discussions because then we will be sure that what we receive is fair to us, to our organisations and to all others around us. That will be quite motivating, wouldn’t it?
Philippe - Founder & CEO - Pacific Ventury
