Why you should know how much your coworkers get paid

How much do you get paid?

Don't answer that out loud,

but put a number in your head.

Now, how much do you think the person
sitting next to you gets paid?

Again, don't answer out loud.

At work, how much do you think
the person sitting in the cubicle

or the desk next to you gets paid?

Do you know?

Should you know?

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

But admit it, you kind of want to know.

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

We're not supposed to tell our neighbors,

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

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

then all hell would break loose.

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

there might even be a few people who quit.

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

And what would happen if we
removed that secrecy?

What if openness actually increased
the sense of fairness and collaboration

inside a company?

What would happen if we had
total pay transparency?

For the past several years,
I've been studying

the corporate and entrepreneurial leaders

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

And the question of pay keeps coming up,

and the answers keep surprising.

It turns out that pay transparency,
sharing salaries openly across a company,

makes for a better workplace
for both the employee

and for the organization.

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

they're more likely to feel underpaid
and maybe even discriminated against.

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

that you feel underpaid
or discriminated against?

But keeping salaries secret
does exactly that,

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

despite the fact that in the United States
the law protects an employee's right

to discuss their pay.

In one famous example from decades ago,

the management of Vanity Fair Magazine

actually circulated a memo entitled

"Forbidding discussion among
employees of salary received."

Forbidding discussion among
employees of salary received.

But that memo didn't
sit well with everybody,

and New York literary figures
Dorothy Parker,

Robert Benchley, and Robert Sherwood,

all writers in the Algonquin Round Table,

decided to stand up for transparency

and showed up for work the next day

with their salary written on signs
hanging from their neck.

(Laughter)

Imagine showing up for work
with your salary

just written across your chest
for all to see.

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

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

It turns out that in addition
to the assumed reasons,

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

You see, keeping salaries secret
leads to what economists call

"information asymmetry."

It's a situation where,
in a negotiation,

one party has loads
more information than the other.

And in hiring or promotion
or annual raise discussions,

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

Imagine how much better you
could negotiate for a raise

if you knew everybody's salary.

Economists warn that information asymmetry

can cause markets to go awry.

Someone leaves a pay stub on the copier,

and suddenly everybody
is shouting at each other.

In fact, they even warn

that information asymmetry

can lead to a total market failure.

And I think we're almost there,
and here's why.

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

In a 2015 survey of 70,000 employees,

two thirds of everyone who is paid
at the market rate

said that they felt they were underpaid.

And of everybody who felt
that they were underpaid,

60 percent said that they
intended to quit,

regardless of where they were,
underpaid, overpaid,

or right at the market rate.

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

Are you underpaid?

Well wait, how do you even know,

because you're not
allowed to talk about it?

Next, information asymmetry, pay secrecy,

makes it easier to ignore

the discrimination that's already
present in the market today.

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

the gender wage gap between men and women

was 23 percent.

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

But in the Federal Government,
where salaries are pinned

to certain levels and everybody knows
what those levels are,

the gender wage gap shrinks to 11 percent,

and this is before controlling
for any of the factors

that economists argue over
whether or not to control for.

If we really want to close
the gender wage gap,

maybe we should start
by opening up the payroll.

If this is what total
market failure looks like,

then openness remains the only way
to ensure fairness.

Now, I realize that letting people know
what you make might feel uncomfortable,

but isn't it less uncomfortable
than always wondering

if you're being discriminated against,

or if you wife or your daughter
or your sister is being paid unfairly?

Openness remains the best way
to ensure fairness,

and pay transparency does that.

And that's why entrepreneurial leaders
and corporate leaders

have been experimenting
with sharing salaries for years.

Like Dane Atkinson: Dane
is a serial entrepreneur

who started many companies
in a pay secrecy condition,

and even used that condition
to pay two equally qualified people

dramatically different salaries

depending on how well
they could negotiate.

And Dane saw the strife that happened
as a result of this.

So when he started
his newest company, SumAll,

he committed to salary transparency
from the beginning.

And the results have been amazing.

And in study after study,

when people know how they're being paid
and how that pay compares to their peers,

they're more likely to work hard
to improve their performance,

they're more likely to be engaged,

and they're less likely to quit.

That's why Dane's not alone.

From technology startups like Buffer

to the tens of thousands
of employees at Whole Foods,

where not only is your salary available
for everyone to see,

but the performance data
for the store and for your department

is available on the company intranet

for all to see.

Now, pay transparency
takes a lot of forms.

It's not one size fits all.

Some post their salaries for all to see.

Some only keep it inside the company.

Some post the formula for calculating pay,

and others post the pay levels

and affix everybody to that level.

So you don't have to make signs
for all of your employees

to wear around the office.

And you don't have to be the only one
wearing a sign that you made at home.

But we can all take greater steps
towards pay transparency.

For those of you that have the authority
to move forward towards transparency,

it's time to move forward,

and for those of you
that don't have that authority,

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

So how much do you get paid?

And how does that compare
to the people you work with?

You should know,

and so should they.

Thank you.

(Applause)