Why Companies Keep Pay a Secret

If “Jackass 3D” is
anything like prior triumphs in the franchise, its band of raunchy,
anarchic daredevils will make high art of low humor and leave no mishap
private – especially if it involves someone's privates. But just try to
get Johnny Knoxville and his gang to talk about how much each is paid.
In America, money is the last conversational taboo.

That's probably a good thing for workplace morale. A new
study by researchers at the University of California at Berkeley and
Princeton University suggests that if all of our salaries were made
known tomorrow, half of us would be made miserable and the other half
would be made no happier.

That's more or less what happened at the
University of California. Faculty and staff there are on the state's
payroll. The passage in California of a right-to-know law in March 2008
enabled the Sacramento Bee to publish state worker salaries on its web site.
Authors of the aforementioned study, now circulating as a working paper,
contacted a random set of workers at three UC campuses and informed
them of the web site. A few days later, they surveyed all campus
employees on how they used the Bee’s site, on their satisfaction with
their job and pay and on whether they had job search intentions.

The
findings: Usage of the site spread quickly, and 80% of new users said
they looked up salary details on colleagues in their department. Among
workers whose pay was below the median for their department, job
satisfaction plunged and likelihood of searching for a new job
increased. Interestingly, among those who were paid above the median,
there was no meaningful change.

The findings fit neatly with
something called the inequality aversion theory, proposed in 1999 by
researchers in Zurich and Munich. In experiments, human subjects proved
willing to sacrifice potential rewards if they could block others from
receiving superior rewards. In other words, subjects in many cases cared
more about fairness than gain. (A 2003 study involving monkeys showed similar behavior –
and a bit of monkey rage displayed toward scientists who created
the conditions.)

The University of California finding suggests
employers have more to lose than to gain from publicizing salaries.
Inexpensive workers might leave and costly ones aren't made more loyal.

That
explains why some employers tuck secrecy clauses into their new hire
contracts. Such clauses are losing their teeth, however. In the U.S.,
several states ban them, and in ones that don't, court decisions suggest
enforcement is made difficult if not impossible by Section 7 of the
National Labor Rights Act, which protects workers who engage in
concerted activity for mutual aid and protection. In the U.K. as of Oct.
1, the Equality Act 2010 bans enforcement in cases where workers are
trying to determine whether they're being discriminated against –
something employers would find difficult to disprove.

As for
workers, many of whom seem all too keen to share gritty personal details
with colleagues, maybe it's time to dish about pay. Half will leave the
conversation frowning, but if dissatisfaction is a motivator, they'll
end up better off.

From SmartMoney.com | Oct 15, 2010