Would Knowing Everyone’s Salaries Demotivate You?

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knowing others salaries

There’s been a lot more talk about the “need” to openly share ones salary with the world. This is particularly coming from the more liberal leaning folks, suggesting that knowing what others are paid will lead to more equal pay for equal work (among other things).

But is it truly the right thing to do? And, even fair?

Surprising truths about pay transparency

Awhile ago, I came across a Harvard study done by Zoë Cullen and Ricardo Perez-Truglia who looked into whether knowing your peers’ and manager’s salary was demotivating OR motivating.

In the sample test of 2,060 employees, the pair found that knowing what a one’s manager earns tends to motivate employees (especially if it was more than originally thought, as it was also discovered that employees tended to underestimate their manager’s salary by 14%).

“To our surprise, finding out that their managers got paid more seemed to make employees work harder than those who did not find out the true salary. Our estimates suggest that discovering that the boss’s salary is 10% higher than originally thought causes employees to spend 1.5% more hours in the office, send 1.3% more emails, and sell 1.1% more. (The higher the surprise, the larger the effect — finding out the boss earned 50% more led to effects five times larger.)”

Apparently, if an employee feels like he/she could occupy that position in (say) 5 years or so, it motivated them to work harder.

On the other side of this study (and not as surprising to me at least) was the discovery that knowing what their co-workers made had a reverse affect (in the same title / position / unit):

We saw that finding out peers get paid more does have a negative effect on the employee’s effort and performance. Finding out that peers earn on average 10% more than initially thought caused employees to spend 9.4% fewer hours in the office, send 4.3% fewer emails, and sell 7.3% less.

So, learning about the guy down the row from you in the same job gets paid more than you for the same work, will demotivate you.

My guess is that once we learn about others salaries, we start to compare our work with theirs or the time we put in – and start to build resentments (causing dissatisfaction in our work, etc).

Charlie wrote about pay transparency awhile back. Read more.

If you really want to know…

I once did temp work at a company where I was able to see all the employee’s salaries. It was eye-opening for me as a young adult as I discovered the value placed on different roles. Some, I thought may have deserved more, while others I expected would be paid less.

I’ve often thought about what if all those salaries were revealed to the workers. What would the response be? Disbelief? Relief? Anger?

My guess is that many of us realize that life isn’t fair. Positions our society values (sports, entertainment, entrepreneurship: risk-takers), often have higher value placed on them than truly valuable roles in our society (teachers, doctors, social workers, etc).

Knowing what others earn, may not be as shocking as it once was. Given the rise of websites like Glassdoor – which allow you to see what others are making at your company in a similar / the same role – OR individual state economic departments which can tell you what you can expect to earn in a chosen profession – a lot of the mystery has already been lifted.

Thoughts?

Personally, I’m opposed to making it mandatory that all employers should reveal worker’s salaries. If they wish to / feel like it is in the employee’s best interest (and have consulted with them), so be it. But, I don’t think it will do the good people are expecting it to do.

I think most of us are intrinsically motivated to do good work and whether we know / don’t know our coworkers or managers salaries will not have that great affect on our efforts (and like it’s been studied, could have the reverse, negative affect). When we see our efforts paying off via spot bonuses or other rewards, we will likely continue to pursue excellence.

What do you think? Is it important that salaries be shared to increase pay equality? Do you share your salary with others? Why/why not?

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9 comments

  1. Steph says:

    Different perspective here-I think you should discuss salary generally particularly similar positioned people at different companies to make sure that you are being paid market. It tends to be better than sites like glassdoor. Some company’s are moving to 100% pay transparency; e.g., Whole Foods. If the company cannot justify what they are paying you and that pay is not equitable, there may be something wrong with how they are doing compensation. This is similar to Arnon and Charlie’s post in the past to occasionally interview for new jobs to see what is pay/benefits.

    “Fair Compensation” is an art not a science; make sure to investigate. Note to that no matter what your employers says (at least in California) your salary is NOT your company’s confidential information. You can always tell a co-worker. Trust if you are like me GenX or older and manage people-the younger generation of workers are sharing their salary information. Be ready for questions to come up.

    • Aaron says:

      This is a helpful perspective, Steph. I like the idea of interviewing at other companies for similar positions to see what fair market is.

  2. I enjoyed reading about the research into the effects of knowing everyone’s salary, interesting but not completely unsurprising. I agree with the other two commenters that the company deciding to release everybody’s salary information is a bad idea. There are many variables that decide who gets paid what. Though in certain industries (teaching) we’re paid according to a grid so it’s not difficult to figure out.
    I have seen company cultures before where employees were strongly discouraged from disclosing their salaries. I think the only thing that’s good for is for companies to get away with underpaying staff. If someone is comfortable disclosing their salaries then go for it.

  3. Nicole says:

    You know, this is a funny/touchy subject for me. I understand my superiors receive double my salary; however, when a CSR and I received the SAME bonus (me being a Mgr), I was highly upset and very demotivated after that. I am not the one that likes to discuss salaries so I would say, leave it to HR/Bosses. It is not something to be shared. Actually, I feel a little irritated now just thinking about it. lol

  4. Mrstangblb says:

    I worked as a Graphic Designer in the mid to late ‘90s, and management called us all together for a meeting one morning. There were probably 60 people in the meeting with varying stages of responsibilities.

    I’m not sure what management book of the week they were into then, but one by one they started disclosing the salaries of each of us. At that point I may have been in the mid-$20s, but I SURE didn’t want everybody to know my salary! Customer Service was on hourly wages, and a lot of them were friends of mine. Several of them were shocked with how much more we were making than they were and had their feelings hurt.

    I actually was more motivated by my managers’ salaries, but this situation should have been handled completely differently. If nothing else, they could have disclosed each Department’s salary within the department itself.

    I’m still shocked at how they handled everything – I even lost a friend or two because they were jealous of what I made.

    I ended up leaving the company not long afterwards for a better offer the Lord opened up for me because of some of the misguided decisions the younger management was making.

    Needless to say, I don’t think it’s a good idea at all to disclose salaries.

  5. steveark says:

    I knew what everyone made because I ran the company. But I do not think it would have been helpful to most workers to know what I made or what their peers made. We paid purely on merit so there were times that we had hot shot young talent that out earned people with much more experience because they were just way more valuable in terms of what they produced. I think the more experienced employees would have been crushed if they knew what I was paying some of the top younger talent.

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