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How much do you get paid?

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Don't answer that out loud.

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But put a number in your head.

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Now: How much do you think the person
sitting next to you gets paid?

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Again, don't answer out loud.

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(Laughter)

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At work, how much do you think

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the person sitting in the cubicle
or the desk next to you gets paid?

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Do you know?

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Should you know?

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Notice, it's a little uncomfortable for me
to even ask you those questions.

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But admit it -- you kind of want to know.

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Most of us are uncomfortable with the idea
of broadcasting our salary.

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We're not supposed to tell our neighbors,

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and we're definitely not supposed
to tell our office neighbors.

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The assumed reason is that if everybody
knew what everybody got paid,

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then all hell would break loose.

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There'd be arguments, there'd be fights,

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there might even be a few people who quit.

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But what if secrecy is actually
the reason for all that strife?

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And what would happen
if we removed that secrecy?

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What if openness actually increased
the sense of fairness and collaboration

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00:01:04,614 --> 00:01:05,836
inside a company?

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What would happen if we had
total pay transparency?

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For the past several years,

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I've been studying the corporate
and entrepreneurial leaders

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who question the conventional wisdom
about how to run a company.

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And the question of pay keeps coming up.

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And the answers keep surprising.

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It turns out that pay transparency --

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sharing salaries openly
across a company --

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makes for a better workplace
for both the employee

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and for the organization.

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When people don't know how their pay
compares to their peers',

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they're more likely to feel underpaid

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and maybe even discriminated against.

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Do you want to work at a place
that tolerates the idea

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that you feel underpaid
or discriminated against?

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But keeping salaries secret
does exactly that,

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and it's a practice
as old as it is common,

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despite the fact
that in the United States,

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the law protects an employee's right
to discuss their pay.

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In one famous example from decades ago,

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the management of Vanity Fair magazine

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actually circulated a memo entitled:

46
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"Forbidding Discussion Among
Employees of Salary Received."

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"Forbidding" discussion among
employees of salary received.

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Now that memo didn't sit well
with everybody.

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New York literary figures
Dorothy Parker,

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Robert Benchley and Robert Sherwood,

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all writers in the Algonquin Round Table,

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decided to stand up for transparency

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and showed up for work the next day

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with their salary written on signs
hanging from their neck.

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(Laughter)

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Imagine showing up for work

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with your salary just written
across your chest for all to see.

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But why would a company even want
to discourage salary discussions?

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Why do some people go along with it,
while others revolt against it?

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It turns out that in addition
to the assumed reasons,

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pay secrecy is actually a way
to save a lot of money.

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You see, keeping salaries secret

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leads to what economists call
"information asymmetry."

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This is a situation where,
in a negotiation,

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one party has loads more
information than the other.

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And in hiring or promotion
or annual raise discussions,

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an employer can use that secrecy
to save a lot of money.

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Imagine how much better
you could negotiate for a raise

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if you knew everybody's salary.

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Economists warn that information asymmetry

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can cause markets to go awry.

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Someone leaves a pay stub on the copier,

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and suddenly everybody
is shouting at each other.

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In fact, they even warn

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that information asymmetry
can lead to a total market failure.

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And I think we're almost there.

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Here's why:

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first, most employees have no idea
how their pay compares to their peers'.

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In a 2015 survey of 70,000 employees,

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two-thirds of everyone who is paid
at the market rate

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00:03:50,113 --> 00:03:52,345
said that they felt they were underpaid.

82
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And of everybody who felt
that they were underpaid,

83
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60 percent said
that they intended to quit,

84
00:03:58,916 --> 00:04:01,804
regardless of where they were --
underpaid, overpaid

85
00:04:01,828 --> 00:04:03,407
or right at the market rate.

86
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If you were part of this survey,
what would you say?

87
00:04:06,684 --> 00:04:07,960
Are you underpaid?

88
00:04:07,984 --> 00:04:10,309
Well, wait -- how do you even know,

89
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because you're not allowed
to talk about it?

90
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Next, information asymmetry, pay secrecy,

91
00:04:16,534 --> 00:04:19,313
makes it easier to ignore
the discrimination

92
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that's already present
in the market today.

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In a 2011 report from the Institute
for Women's Policy Research,

94
00:04:25,938 --> 00:04:28,062
the gender wage gap
between men and women

95
00:04:28,086 --> 00:04:29,824
was 23 percent.

96
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This is where that 77 cents
on the dollar comes from.

97
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But in the Federal Government,

98
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where salaries are pinned
to certain levels

99
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and everybody knows
what those levels are,

100
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the gender wage gap
shrinks to 11 percent --

101
00:04:41,388 --> 00:04:43,964
and this is before controlling
for any of the factors

102
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that economists argue over
whether or not to control for.

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If we really want to close
the gender wage gap,

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maybe we should start
by opening up the payroll.

105
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If this is what total
market failure looks like,

106
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then openness remains
the only way to ensure fairness.

107
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Now, I realize that letting people
know what you make

108
00:05:02,799 --> 00:05:04,445
might feel uncomfortable,

109
00:05:04,469 --> 00:05:05,984
but isn't it less uncomfortable

110
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than always wondering
if you're being discriminated against,

111
00:05:08,912 --> 00:05:12,674
or if your wife or your daughter
or your sister is being paid unfairly?

112
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Openness remains the best way
to ensure fairness,

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00:05:17,317 --> 00:05:19,230
and pay transparency does that.

114
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That's why entrepreneurial leaders
and corporate leaders

115
00:05:22,695 --> 00:05:25,488
have been experimenting
with sharing salaries for years.

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Like Dane Atkinson.

117
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Dane is a serial entrepreneur
who started many companies

118
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in a pay secrecy condition

119
00:05:32,458 --> 00:05:35,811
and even used that condition
to pay two equally qualified people

120
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dramatically different salaries,

121
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depending on how well
they could negotiate.

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00:05:40,091 --> 00:05:43,422
And Dane saw the strife
that happened as a result of this.

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So when he started
his newest company, SumAll,

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he committed to salary transparency
from the beginning.

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And the results have been amazing.

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And in study after study,

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when people know
how they're being paid

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00:05:55,970 --> 00:05:57,999
and how that pay compares to their peers',

129
00:05:58,023 --> 00:06:00,956
they're more likely to work hard
to improve their performance,

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00:06:00,980 --> 00:06:03,829
more likely to be engaged,
and they're less likely to quit.

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That's why Dane's not alone.

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From technology start-ups like Buffer,

133
00:06:07,915 --> 00:06:11,261
to the tens of thousands
of employees at Whole Foods,

134
00:06:11,285 --> 00:06:14,452
where not only is your salary
available for everyone to see,

135
00:06:14,476 --> 00:06:17,476
but the performance data
for the store and for your department

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00:06:17,500 --> 00:06:19,419
is available on the company intranet

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for all to see.

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Now, pay transparency
takes a lot of forms.

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It's not one size fits all.

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Some post their salaries for all to see.

141
00:06:28,613 --> 00:06:30,914
Some only keep it inside the company.

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00:06:30,938 --> 00:06:33,523
Some post the formula for calculating pay,

143
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and others post the pay levels

144
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and affix everybody to that level.

145
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So you don't have to make signs

146
00:06:39,220 --> 00:06:41,744
for all of your employees
to wear around the office.

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00:06:41,768 --> 00:06:44,682
And you don't have to be
the only one wearing a sign

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that you made at home.

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But we can all take greater steps
towards pay transparency.

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For those of you that have the authority

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00:06:52,285 --> 00:06:54,079
to move forward towards transparency:

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it's time to move forward.

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00:06:55,943 --> 00:06:58,411
And for those of you
that don't have that authority:

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it's time to stand up for your right to.

155
00:07:01,263 --> 00:07:02,988
So how much do you get paid?

156
00:07:04,186 --> 00:07:06,813
And how does that compare
to the people you work with?

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You should know.

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00:07:09,312 --> 00:07:10,587
And so should they.

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Thank you.

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(Applause)