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Why talking openly about how much you are paid for work is so important in this job market

Key Points
  • Pay transparency efforts were gaining momentum in recent years, helped by gender movements like Time's Up and #MeToo, and the drive for racial equality could force more action on salary disparities..
  • Employers are showing more empathy toward employees amid Covid-19, and new hires are bouncing back, with the latest nonfarm payroll report showing a huge gain, but 11% unemployment could be a headwind.
  • The wealth gaps experienced by women and people of color can add up to $1 million over the course of a career.
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Just a few months ago, before the coronavirus pandemic shut down much of the global economy, the unemployment rate in the U.S. hovered around 3.5%. The tight labor market meant skilled workers held the edge over employers, who had to pay big to entice top talent. At the top of many a job seeker's list, next to good money: salary transparency.

Proponents say the disclosure of how much money employees make not only opens up communication around equality within an organization but helps workers feel more confident about whether they're being paid fairly.

For some workers, openness indicates a corporate culture that values fairness and trust. It's also indicative of what many U.S. companies say they're striving for when it comes to standing for more than just their bottom line, especially in the midst of an unprecedented health crisis and new racial equality drive.

"If you want to have a culture of trust and collaboration and thus one of retaining and attracting employees, transparency is being asked for — not only by the workers, but it's also being driven by the senior management team and HR," said Paul McDonald, senior executive director at Robert Half, a staffing firm for the creative industry.

According to a recent survey from Robert Half, 77% of advertising and marketing hiring managers said their organization offers some level of salary transparency, with 34% reporting full transparency — salary data is available to everyone, inside and outside the firm. Numbers from a February 2020 Mercer report issued shortly before the pandemic shut down the U.S. are similar, with 67% of companies saying that openness about compensation is increasingly important.

McDonald said the changes have been taking place gradually, but now uncertainty weighs. "We've seen the movement toward pay transparency as being a component of culture shift over the past decade, although current events are certainly changing the dynamics of this conversation."

A changing job market and the push for better pay

Like many recent workplace trends, the pay transparency movement could be affected by unemployment caused by Covid-19, which at its peak reached a level not seen since the Great Depression. The job market is showing signs of recovery, according to the most recent data, and the nonfarm payroll gain reported Thursday was the largest monthly gain in history. Unemployment could level off at a rate equal to the Great Recession's 10%, according to Moody's chief economist, Mark Zandi — Thursday's jobs report showed it back down to 11.1%, from 13.3% in May.

But with initial jobless claims over one million for 15 consecutive weeks, large companies saying that a major move to remote work is underway, and expectations of more cost-cutting still to come from corporations, implications could include new salary dynamics as employers look to hire in less expensive markets across the country.

"I think any labor market slack will always hurt pro-worker practices," said Aaron Seyedian, founder of Well-Paid Maids, a Washington, D.C.-area home cleaning start-up known for its commitment to workplace equity. "I also fear that pay transparency will be crowded out given how many new health and safety issues workers will need to fight for in the next one to two years." 

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Up until the coronavirus took hold, which forced him to furlough all employees, Seyedian's cleaning company was a model for transparency. His 15 employees aren't part of an office culture where gathering near a break room coffee pot to speculate about everyone's pay raise is par for the course — Well-Paid Maids workers gather once a year at the company's annual picnic — but prospective workers know about its pay scale before being hired. Employees earn a living wage — at least $17 an hour, with eligibility for merit increases and 22 days of paid time off a year.

Seyedian, noting that consumers are likely tracking which companies do right by staff these days, said he's trying to stay hopeful the transparency movement will endure through the pandemic.

At some firms, the fact that job security is more tenuous for many workers has led management to become more open about pay during the pandemic. "I've seen companies increase efforts to provide clarity on pay as much as they can so that employees' concerns don't result in making decisions about their future careers with incomplete information," said Tauseef Rahman, a principal at HR consulting firm Mercer. "Right now employees aren't thinking, 'What's happening to my pay today?' or 'Are you going to reduce it?'—it's 'Will I get my pay?'"

Gender, race and salary gaps

The slow march toward greater workplace pay transparency started more than a decade ago, when sites like PayScale and Glassdoor came online, arming workers with salary data to help negotiate raises or pay at new jobs. "Every aspect of the workplace was opaque; there were a lot of assumptions — dark corners — that made it hard for employees to navigate," said Alison Sullivan, community trends expert at Glassdoor, where people have been anonymously posting company reviews since 2007.

The increasing amount of wage data from third-party sources uncovered something else: gender and racial pay gaps, which have become today's driver for salary transparency in corporate America. 

An Obama-era EEOC law requiring employers to report work data demographically (which has since stalled); the Time's Up and #Metoo movements; a handful of state laws banning employers from asking about salary history; and recent pressure from the investor community for public companies to disclose how they pay all employees are starting to narrow these salary gaps.

According to Glassdoor, women earned $0.79 for every $1 men earned in 2019. Things are bleaker for Black and Latina women, who earn $0.62 and $0.54, respectively, for every $1 men earn, according to data from the National Partnership for Women & Families. These numbers also reveal a lack of female and minority representation in both higher-paying jobs and leadership roles.

Getty Images

Currently, Glassdoor does not include salaries broken down by race, only across gender. And efforts to bring this data into sunlight have helped: The Glassdoor 2019 data showing women earned $0.79 per every $1 men earn was up from 2016, when women earned $0.76. After the momentum in the past few years, Glassdoor's CEO recently committed to expanding its own data to better shine a light on racial inequalities in the workplace.

"It's encouraging to see companies around the globe discussing how to improve representation and diversity, and it's important that pay equality is included in these discussions too," Sullivan said"Achieving full-pay equity means companies must recognize all who experience pay gaps and how it's exacerbated for those in underrepresented groups. To date, there has been a disconnect in broader discussions acknowledging the amplified effects of the racial pay gap among companies."

Natasha Lamb, managing partner with Arjuna Capital, an investment firm focused on socially responsible investments, said the importance of pay transparency is simple: "When companies publish their numbers, gaps shrink," she said.

Since 2016, Arjuna has collected gender pay gap disclosures from 22 leading consumer, financial and technology firms; its most recent scorecard awarded only Citigroup, Mastercard and Starbucks with an A. Half of the firms earned an F for their lack of quantitative reporting about median gender and racial pay gaps.

When companies publish their numbers, gaps shrink.
Natasha Lamb
managing partner at Arjuna Capital

Investors, said Lamb, want to see that companies are putting best practices in place when it comes to equal pay for equal work, especially today. Some public firms — but not enough, she said — are closing pay gaps with annual audits that track all pay, hiring more women and people of color and moving them up the ladder into higher-paying jobs.

"Gender and racial pay equity is more important now than ever, as it is the most economically vulnerable among us that are at the biggest risk in this pandemic," she said. "The wealth gaps experienced by women and people of color can add up to $1 million over the course of a career — that's the difference between security and insecurity when crisis hits."

While the work Mercer has done in this area has always focused on gender and race, clients clearly were more focused on gender in recent years, said Gail Greenfield, a principal at the consulting firm's Washington, D.C., office who specializes in pay equity. 

"Frankly, there just has not been attention on race and ethnicity. It took a second stage to gender," she said.

But now Greenfield is getting far more inquiries than they ever have about racial diversity and Black employees. "It's coming up in requests from clients that I didn't see a month ago," she said.

Ending the taboo of talking salary

Lifting the taboo of talking about money at work and being as open as possible with workers is something that most firms say is important, but they're still pretty bad at it.

According to the Mercer survey, only 14% of companies have approached pay transparency beyond a moderate level and 60% say that managers are not trained to effectively deliver pay communication. Robert Half research shows that about one-third of companies offer full transparency — wage info is shared within and outside an organization — while the bulk of firms either disclose all or some wage data internally.

"Most employers are being partially transparent, sharing compensation philosophy with staff and publishing salary ranges, but there's still lack of transparency with sharing pay ranges for all positions including director level and up," said Amber Clayton, a director at the Society for Human Resource Management.

This could be partly due to a generational divide, where young Gen Y and Gen Z workers who share everything on social media clash against Boomer and Gen X senior managers, who were taught young that they shouldn't go around talking about money, which some associate too closely with self-worth.

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Mercer's Greenfield said even with a combined focus on gender and race, don't expect companies to embrace full salary transparency across all employees. "In my experience, when they reveal pay equity, they reveal as much as they can to satisfy the viewer, so to speak, but not more than they need to."

Broad studies and data points showing how much women or people of color were paid compared to white male employees lack specific detail. Greenfield said it is still a fraction of companies, less than 100, that actually reveal full pay equity data, and an even smaller number of firms which disclose that information for both gender and race.

"Most companies are asking themselves if they are willing to share a range for a person's role," Greenfield said. "That's the level of transparency we are talking about now. … We are a long way from moving to a world where we know what other people are paid exactly," she said, but she added that employers do recognize how much information is now available to employees and prospective employees because of sites like Glassdoor and Salary.com.

She said for employees in discussions with managers, sticking to inquiries about salary ranges for positions and what determines where a candidate fits into that range — rather than efforts to push for full disclosure of each specific employee's pay — is a good approach.  "Put the onus on the employer," she said. But she added, "There's more momentum toward pay transparency, but not a lot of transparency." 

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Only 4% of companies in the Mercer research said that pay transparency is of the highest importance. These are firms that view pay transparency being key to their brands, their employees and customers, said Mercer's Rahman. These include companies like Boston Scientific, Salesforce and Vista, and California organic soap maker Dr. Bronner's.

"If you want to have a prosperous society, you have to increase the prosperity of all — we put that on our labels," said Michael Bronner, president of Dr. Bronner's, a firm with more than 260 employees that caps the total compensation of its highest-paid employees and executives at five times that of the lowest-paid position, which rings in at $19.23 an hour. All workers get bonuses, profit-sharing, and a no-deductible health insurance plan, as well as other benefits that match executive offerings.

Bronner, whose firm, classified as an essential business, is currently making roughly seven times more hand sanitizer as it was last year and that's not even enough to meet demand, said the collective awakening during the pandemic about treating each other with more ethics and care is especially important when it comes to employers and their workers. The racial injustice issues compounds the importance of this goal.

Bronner's has an existing diversity, equity and inclusion approach in HR, "but recent events have definitely galvanized us to further our commitments," the CEO said. 

More than half of its staff (59.3%) and 40% of its managers are people of color, and hold a variety of director & senior manager level positions — including Bronner's director of operations and director of human resources. But noting that the company wants its workforce to be reflective of the demographics of the North County San Diego community where it is headquartered, Bronner said, "We do have room to grow and we are committed to growing and improving."