Can pay transparency enhance mental health and pay equity in the workplace?

What’s more taboo in your workplace: Clocking out a few minutes early, stealing someone’s food from the common fridge, or asking your coworkers how much money they make? I’d venture to guess that most people would sooner risk taking a colleague’s cookie than asking their manager for the figure on their paycheck.

Last year the job site Indeed produced an eye-opening video about wage gaps. They asked people with similar job titles and job descriptions to participate in a Zoom experiment. The video opens with a grid of diverse faces. The moderator instructs, “If you make more than X dollars per year, turn off your camera….If you make more than Y dollars per year, turn off your camera.” The annual salary continues to drop until only a few faces are left on the screen. And those remaining faces look crushed, disheartened, demoralized. Those faces also tend to belong to women and people of color. And that is precisely why this is a mental health issue.

Here’s the lowdown on why many modern companies are opening up their payrolls in an effort to eliminate gender and race wage gaps, improve employee morale, and reduce bias in the workplace. 

What Does Salary Transparency Mean?

Salary transparency refers to the practice of communicating clearly about salary ranges in the workplace. People can implement varying degrees of pay transparency, from revealing a starting salary on a job posting, to publishing each employee’s wages online, as the social media company Buffer does. (FYI: The CEO of Buffer makes $290,250/year.)

Sure, people can already see crowd-sourced data about wages online, but you can’t always rely on the accuracy of this information. Meanwhile 41% of employers in the private sector continue to “actively discourage” their workers from telling each other what they make, and 25% make it a punishable offense. Yet a Glassdoor study showed that American workers on average should be making 13.3 percent more than they’re currently earning a year. 

Salary transparency laws are picking up steam nationwide. For example, starting this May, employers in New York City will be required to post the minimum and maximum salaries for each job posting. And states like Colorado, Nevada, and Maryland already have similar pay equity laws on the books. Work culture seems to be trending toward increased pay transparency, and for good reason.

What Are the Pros and Cons of Pay Transparency?

Advocates of pay transparency contend that employee compensation is more fair when workplaces are more open about who gets what. Consider the gender wage gap and the racial wage gap in the United States. Women still make 83 cents to every dollar men make, and Hispanic women only make 57 cents to that same dollar. Black women make 64 cents to every dollar a white, non-Hispanic man earns. Wage gaps also exist between “typical workers” and LGBTQ+ workers. And bias can creep into all aspects of a career track. One study showed that Black job seekers were perceived as pushier when they negotiated their salary offers, even when they spent the same amount of time negotiating as white applicants. And though women are just as likely to ask for a raise, they’re less likely to receive it. 

Salary secrecy can make it much harder for both employees and employers to recognize structural inequalities in the workplace. In the best case scenario, well-meaning executives don’t recognize their company’s implicit bias against women and minorities. With pay transparency, they conduct a pay equity audit and open their eyes to underlying sexism and racism in their compensation practices. Perhaps they become motivated to correct inequities, especially if pressured by employees. They start using objective data to establish fair salary ranges.

Numerous studies have determined that pay transparency reduces the gender pay gap and overall pay inequality. And when pay secrecy is outlawed altogether, research shows that women earn more. Research has also shown other benefits of pay transparency, like increased motivation and increased productivity in the workplace. Employees tend to work harder when they know what their managers make, and they tend to feel demoralized when they know that their peers are undeservedly making more. 

One advocate of pay transparency emphasizes that younger people will especially benefit from knowing exactly what jobs pay and what they deserve to make in their first positions. For example, they may choose a career that they’d initially dismissed as underpaid, or they may start their life-long earning trajectory at a much higher salary. 

What are the cons of pay transparency? Some employers cite research suggesting that open salaries reduce the link between performance and pay. That is, compensation might become less merit-based. But companies can counter this by basing performance metrics more on the collaborative work of teams rather than individual projects. 

And what good is employee performance if you can’t keep employees? Research shows that 58% of employees (and 70% of Gen Z employees) would consider leaving their current job if they had an opportunity with more pay transparency. So salary secrecy comes with a higher risk of turnover. 

What to Do When You Find Out You’re Underpaid

Top Hollywood actresses make about $1 million less per film than their male counterparts. It’s no wonder that they’ve been fighting for pay equality for years. But they have agents and public relations teams and you probably don’t. So what happens when you find out that you’re underpaid? 

1. Ensure your data is accurate. Use market research to identify the average salary for your position and your job description. Remember that people can still have pay differentials based on things like geography, seniority, experience, etc. 
2. Talk to trusted colleagues, workplace allies, or mentors. Even if they won’t share their salaries, they might give you valuable context about your company’s culture. Job recruiters might also have a good idea about what your work is worth. Once you’re confident in your analysis, it’s time to set the gears in motion.
3. Schedule an in-person meeting with your supervisor. Ideally you have a performance review coming up. 
4. Be professionally prepared. Present your in-depth market analysis without calling out coworkers. Make the case for yourself: your achievements and your potential. Before the meeting, decide on your asking price, the price you’ll settle for, and the price that will make you walk out the door. 
5. Be emotionally prepared. Know your value. Know that you’re deserving. And rather than getting angry about peoples’ gender and racial biases during salary negotiations, some experts recommend taking them into account in pragmatic terms. 
6. If you love the job, keep asking for as long as you can tolerate. This might be a week or a year. Or until you have something else lined up! Which brings us to…
7. Resign. If you’re still not fairly compensated, find another position where you’ll be paid what you deserve. You can refrain from discussing your salary history at future job interviews. 

Remember: You can’t maintain your mental health in the workplace if you’re grossly underpaid, underappreciated, and undervalued. Your paychecks will never be an accurate reflection of how special you are, but they should at least approximate your professional worth.