Trends and Considerations for Employees and Employers
As companies struggle with retaining employees, the issue of pay transparency (plus pay equity,) remains a major issue for management everywhere in the United States. Focus on these issues has been advanced during the so-called Great Resignation which followed the Covid-19 pandemic. The issue is also in the news frequently, from the much-publicized U.S. Women’s Soccer team’s successful fight for fair pay to recruitment woes across industries. Employees, empowered by staff shortages, are voicing powerful concerns over the non-level playing field of salary data espoused by companies and corporations alike.
A new qualitative and quantitative survey by The Intersectional Group explores attitudes around pay transparency and equity and outlines findings such as years of experience are not always correlated with pay and pay inequity is correlated with feelings of resentment. The findings also indicate the importance of further study. The key takeaway is that pay transparency and equity matter to employees, and that employers would be well-served to proactively launch policies in support of both.
Background
It’s no surprise that pay transparency is good for employees. Anecdotal evidence from companies that share pay data suggests that it can make workers more satisfied, says Todd Zenger, professor at the University of Utah’s David Eccles School of Business. Pay transparency also empowers employees to fight to close pay gaps. Take Lilly Ledbetter, who famously won $360,000 of back pay in a discrimination lawsuit after learning that she earned less than male colleagues in the same role. Or, consider four female Google employees who successfully won a $118 million settlement in a gender-based wage discrimination lawsuit. Even when employees experiencing a pay gap don’t seek higher pay from their current employer, the data suggests that they are confident in the current job market that they can secure higher pay elsewhere. That low pay was one of the top reasons why U.S. workers quit in 2021, according to a survey from Pew Research Center, supports this.
Pay transparency isn’t just positive for employees, it benefits employers too. For example, employees are creating pay transparency even without employer support. According to the YouGov Plc poll, 42% of Gen Z employees and 40% of millennial employees have shared their salary information with a coworker or other professional contact. “ If an organization doesn’t form its own pay method on transparency, someone else will — and it probably won’t be a complete message,” says Stephanie Penner, a senior partner at consulting firm Mercer. Pay transparency helps employers control the narrative around pay, in addition to avoiding embarrassing and costly controversies or lawsuits around perceived pay gaps as companies such as Uber, BBC and Google have experienced.
Additionally, negotiation and recruiting can become more efficient for both employees and employers with pay transparency, saving both parties valuable time during the job hunt/recruiting process. Predetermined bounds to the negotiation allow candidates whose salary needs fall outside them to self-select out of applying. Plus, "firms that firmly set a price for a particular job have a high degree of bargaining power in the sense that they are announcing to potential job candidates that, 'if you try to negotiate anything higher than this price, it is going to effect everybody else because I will have to publicly adjust the going rate for this job,'" according to Zoe Cullen, assistant professor of economics at Harvard University.
Companies that embrace pay transparency will also likely have an easier time finding and retaining workers and may attract a more qualified candidate pool. Buffer, a company that provides pay information to prospective employees, found that applications for open roles significantly increased after pay data was made public. Similarly, a 2021 report conducted by compensation software provider Beqom shows that almost two-thirds of workers surveyed were more likely to work at a company that shares its gender pay gap information. Industry leaders see the value in these tactics; Microsoft will start listing pay ranges on all advertised job postings and has reported equal pay data annually since 2014.
Of course, there are critiques of pay transparency. A Harvard Business Review article highlights that pay transparency can encourage dissatisfaction, turnover, and declines in productivity. Author Todd Zenger states that, for companies where pay is tied to performance, “the real problem with pay transparency is that it focuses individuals on comparing pay rather than on elevating performance.” It’s also argued that this applies whether or not pay is linked to performance. However, when facing a perceived pay equity gap based on race, gender, sexual orientation, physical/mental ability, etc. why should employees focus on improving current performance when past performance hasn’t been fairly rewarded compared to their peers? Where’s the incentive?
Another critique is that pay differences among employees will cause gaps in perceived value, even if pay differences are justified by performance or function. Jen Rubin and Joe Miller, both with law firm Mintz write that “an employer-sponsored pay broadcast could indirectly promote the reputation and status of some employees, but at the same time create a perception of reputational harm to others.” Likewise, “some people might not be motivated because they feel jealous. You can argue when everyone knows each other’s pay, people who earn less will be more likely to quit,” says Elena Belogolovsky, former assistant professor of human resources studies at Cornell says. But again, why would employees not quit when they believe they provide more value than they are compensated for and can earn more for similar work elsewhere?
Instead of shying away from pay transparency because differences in pay could cause increases in employee dissatisfaction, unproductivity, or turnover, employers should expect differences in pay to exist and be prepared to navigate them with employees. For example, companies can be prepared to provide transparent, bias-free performance reviews and share this data, along with data on other factors that may impact pay, when presenting pay data. “It’s important to give more information about why the pay is different for different jobs. If you don’t, it’s up for interpretation by each employee about why that’s fair,” says Stephanie Penner, a senior partner at consulting firm Mercer.
It’s also argued that there may not yet be enough research to definitively link pay transparency to pay equality. However, as we’ve seen in the case of employees across industries and decades (Automotive industry employee Lilly Ledbetter in the 1980s and four female Google employees today), it’s impossible to negotiate for higher pay when an employee isn’t aware that they are earning less than their peers for similar work. Continued investment in research around the link between pay transparency and pay equity and how to successfully implement such policies will be helpful. Such research will also be easier as more and more companies shift towards pay transparency policies.
Another reason not to avoid pay transparency due to worries that such policies may be disruptive: anecdotal evidence suggests that fears about pay data haven’t come to pass. Before publicizing pay data, executives at Buffer feared that it would enable competitors to poach talent by offering more than Buffer’s publicly-listed pay. But, according to Buffer’s public relations manager Hailley Griffis, that didn’t happen. Instead of disproving the value of pay transparency, critiques highlight the challenges of implementing policies around a topic that has deep emotional and personal implications for employees.
Finally, that pay transparency legislation continues to be enacted at the municipal, state, and federal levels and is a trend that is likely to expand points to its value. Employers within New York City were required to post salary ranges with job listings as of April 2022. Similar pay transparency legislation also exists in California, Colorado, Connecticut, Nevada, and Rhode Island. According to Diane Domeyer, managing director at HR consulting firm Robert Half, "organizations have an advantage in being ahead of legislation and demonstrating to employees they're about equity and inclusion." She also says that with an increase in legislation prohibiting companies from discussing pay history during recruitment, salary transparency is likely to follow. As more employers offer pay transparency, employees will call for more, furthering the already growing trend.
Key Survey Findings
QUANTITATIVE FINDINGS
Our survey suggests that there may be a correlation between living with a disability and lower pay compared to those who identify as not living with a disability (See figure 1). The data also suggests that there may be a correlation between identifying as LGBTQIA+ and lower pay compared to those who identify as heterosexual (See figure 1).
Interestingly, we did not find that age is a strong indicator of pay across industries or within industries (See figure 2). Similarly, if we look at only engineers and developers in the tech industry, years of experience are not a strong predictor of pay. Both could represent pay inequity, which presents an opportunity for pay transparency to have a positive impact by giving employees the data to advocate for fair pay (See figure 3).
Another interesting observation is that, on average, although the tech industry pays better than others, higher average salaries did not quiet the resentment felt by employees in the sector. High salaries lose their appeal when employees perceive that they are not paid fairly. Employers should not expect employees to be content with high but inequitable pay.
These findings point to the potential power of pay transparency to have positive impacts on pay equity.
A SAMPLE OF COLLECTED QUOTES
Perhaps a better appreciation of the current landscape can perhaps be found by considering a few more actual quotations from respondents:
Summary and Recommendations
Pay transparency has the power to unlock pay equity by offering employees a valuable tool to negotiate fair pay. This is both true at and after hire, as our anecdotal findings suggest. Employees equipping themselves with tools to demand and negotiate equitable pay is crucial, as the quantitative data suggests that there may be a correlation between pay rate and factors such as mental/physical ability and sexual orientation. Pay transparency can also create other significant benefits: higher employee satisfaction, a more efficient job/candidate search and hiring process for both employees and employers, allowing employers to control the narrative about pay, and enabling employers to attract and retain quality employees.
It’s no surprise that new legislation mandating pay data be shared on advertised job openings is a growing trend and is an excellent first step. Although corporate policies are important, employees should also fight for timely and thorough pay transparency legislation at the national, state, and local levels of government to increase their chances of benefiting from pay transparency before and after hire. But, to maximize pay equity, such laws and regulations must also require companies to disclose pay data to existing employees.
There is much for employers to consider to successfully implement tricky policies such as pay transparency. Employers will need to determine accurate pay ranges. Current employees could become disgruntled upon learning that they earn lower salaries than new hires. Companies must consider how they use published wage information from other companies to avoid legal antitrust wage information exchange violations. Employers will need to swiftly and effectively address any race or gender pay inequities that become apparent. But, in the wake of more employees demanding accountability and recent legislative trends, the costs of not implementing pay transparency are high for employers. As Bloomberg Law’s Christine Hendrickson states, “If a pay transparency strategy is not on your 2022 road map, it should be.”
Below, we’ve outlined additional considerations for both employees and employers.
METHODOLOGY, CONSIDERATIONS, AND NEXT RESEARCH STEPS
The survey contained 25 questions and collected both qualitative and quantitative descriptive data on identities, demographics, role/industry, and compensation of respondents. Quantitative data was collected by asking respondents to select the option that best fit their identity/experience and qualitative data was collected by free-response. Such data was analyzed by plotting data points on an XY axis and identifying the line of best fit, using the R2 value to examine possible correlations. The survey was deployed via email and social media and the sample size was 86 respondents.
It’s worth noting that 52.3% of respondents earned more than $100,000 annually. The upper bound of salary allowed in the response was $110,000, which could skew data around age and length of experience. Although the respondent pool was diverse, most respondents identified as at least one of the following: female, cis-gender, citizens of the United States, and residing in the Pacific Northwest. Those who identified as Black, Latinx, South and Southeast Asian, and Native American represented a small portion of the sample size. These observations could have impacted the data, as certain groups were better represented than others.
Next research and advocacy steps are to expand and diversify the target audience; include demographic options such as “white-passing”, “presenting able-bodied”; include professionals who work in industries that may not have a higher pay standard such as academia, health care, general labor, etc; continue to follow legislative steps on both the federal and state level; continue to invite people to share their lived experiences with pay issues; continue to advocate for pay transparency and pay equity; acquire media and press attention on this critical issue.
Finally, several of this report’s authors and contributors identify as female and present as heterosexual, white, and able-bodied. They have experienced challenges around pay equity in the workplace and have used pay transparency and negotiation to help mitigate this in their own work lives. These lived experiences could have shaped how the authors approached the development of this report.
Acknowledgements
We wish to thank the following authors and contributors for their efforts in conducting and compiling this report:
Sponsor: Intersectional Group
Authors, Research, and Editorial Leads: Zhou Fang, Kathryn Kennedy
Design Lead: McKenna Burks
Research, Editorial, and Advisory Contributors: Greg Hoyos, Wren Fournier, Becca Ball, Alysha Rainier
Creative Contributor: Linda Lee