Pay secrecy is a corporate strategy to maintain information asymmetry
In short: Most people assume that salary transparency would trigger workplace chaos. However, management researcher David Burkus argues that keeping pay secret is a deliberate mechanism that allows companies to save money while making employees feel unfairly compensated. Breaking this taboo could actually foster a more equitable and collaborative environment.
Management researcher David Burkus challenges the cultural taboo surrounding salaries, suggesting that radical transparency could be a company's greatest virtue. While many fear that knowing what colleagues earn would lead to arguments or resignations, Burkus argues it could actually increase feelings of fairness and collaboration within an organization.
The primary reason for pay secrecy is what economists call "information asymmetry." This occurs when one party—the employer—holds significantly more information than the other. By keeping salaries hidden, companies can save money and make it harder for employees to negotiate effectively for raises. Without a benchmark, workers often lack the data needed to understand their own market value.
The psychological impact of this secrecy is significant. Approximately 66% of 70,000 workers surveyed in 2015 expressed feeling undervalued, despite receiving market-level compensation. Furthermore, secrecy can mask systemic issues like discrimination. A 2011 Institute for Women’s Policy Research study identified a 23 percent private sector gender pay disparity, whereas this figure drops to 11 percent within the US federal government due to transparent, tiered pay scales.
History shows a long-standing resistance to this transparency. Decades ago, Vanity Fair magazine issued a memo forbidding employees from discussing their pay. In response, literary figures like Dorothy Parker and Robert Benchley protested by showing up to work with signs hanging from their necks displaying their salaries. Burkus suggests that opening the payroll is a necessary step toward closing wage gaps and improving job satisfaction.
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Sources
- Summary by Intellect · source: Why you should know how much your coworkers get paid | David Burkus
- Also: Why you should know how much your coworkers get paid
- Also: www.npr.org — David Burkus: Would Work Improve If You Knew What Your Colleagues Get Paid?
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