Transparency as a Way to Beat the Pay Gap

Last month the Equal Pay Act failed to pass in the Senate, but the topic of closing the salary gap between men’s and women’s wages continues to be a hot topic. An April report issued by the Institute for Women’s Policy Research showed that in 2013, median weekly earnings made by women were 82 percent of those made my men.

Ariane Hegewisch, IWPR’s study director, said the study showed how hard it seems to crack inequality in some of the most notorious industries, such as financial management.

“There’s always a new way for discrimination to creep in,” she said. Even though women have advanced in the workplace since the mid-1900s, “that doesn’t mean that any gaps we find now are no longer due to discrimination. That’s a way of explaining issues away even though they are very clearly on the face of it.”

But as America continues to grapple with gender discrimination, how else can organizations shrink the wage gap? Some say the answer is clear — literally.

Transparency could be a key to solving the issue, Hegewisch said. Although higher-profile positions, such as CEOs for major corporations, have publicized incomes, many other high-paid positions aren’t as transparent. Social convention makes it inappropriate and uncomfortable to talk about pay, but allowing employees to examine what each position makes brings the issue front and center.

Across the Atlantic, earnings transparency has already had its effects. Norway saw its gender gap shrink after disclosing its citizens’ tax returns online. It’s now ranked third for smallest wage disparity in the World Economic Forum’s 2013 Gender Gap Report – a list where the U.S. comes in at No. 23, one place lower than it was the year before.

But not every industry in the U.S. has a wage gap issue, and one of those that don’t happens to commonly have salary transparency.

According to the IWPR report, the technology industry is one of five that on average pay women the same or more than men. It’s also where many companies have adopted “open salary” policies, where employees — and, in social media management company Buffer’s case, the public — can see how much everyone working for the organization makes.

SumAll, a data analytics company, has all of its members’ compensations available to full-time employees. CEO Dane Atkinson said they instituted the transparency policy as a way to focus on meritocracy. He says not only has it worked so far, but he can’t see any members of his organization wanting to go back to a culture that doesn’t allow for open salary disclosure.

“When you see there’s no negative impact for asking for the salaries of your peers and you can see discrepancy without causality, if you see someone makes more money than you, you aren’t going to run around and pretend and play politics,” he said. That forces the organization to explain its rationale and face its own imbalances.

But being open comes with a price, both literally and figuratively. Atkinson said that a meritocratic culture sometimes means paying more wages. It also means a higher demand on leadership to communicate with employees quickly and clearly.

Others don’t see any drawbacks to open salary policies. Mark Ehrnstein, executive coordinator of team member services at Whole Foods Market Inc., wrote in an email that the food retail business has seen nothing but benefits, including an industry-low turnover rate of 10 percent.

“Wage transparency helps promote inclusiveness and ensure our compensation system is fair,” he wrote. “Team members can give feedback on what they find to be unfair, giving the company an opportunity to change and evolve it.”

Whole Foods’ policy includes an annual report documenting each member’s earnings as well as a cap that limits the wages of any employee — including executives — to no more than 19 times the average full-time salary. Anyone is allowed to access the report.

“It’s through obscuration that everyone else is able to create such evil,” Atkinson said. “They depend desperately on this weird cultural aspect that people don’t want to share salaries over coffee, or that companies have somehow managed to keep it quiet. Once it gets out, everyone’s in a place to act on it.”

Kate Everson is an associate editor at Diversity Executive. She can be reached at keverson@diversity-executive.com.