The transparency laws aren't the cause of the discontent. The cause is the fact that current employees are underpaid compared to new recruits. Businesses are just upset that they can't shaft their workers.
It is a little bit of both, but the discontent is because workers find out exactly how much businesses are able to shaft their workers. I know I was upset when I found out a new hire got more than me after years of service. Boy did I learn a valuable lesson back then.
Well, "US pay transparency laws result in worker discontent," is just not what one should imply from a causal stand point.
"US pay transparency laws result in workers realizing that their employers are trying to underpay them and this results in workers being discontent," is the truth. This is the whole point of transparency, which I assume is what you are getting at. The transparency doesn't share any of the blame however, so the wording of the title is unfair.
People are always unhappy. My wife is an exec and most of her direct hires are clueless as to their worth. One of her direct reports got a promotion and when another found out, he complained. Meanwhile, he did less than half the work of the other. When she pointed that out, he got quiet. He’s probably still going to quit because most people can’t take the truth.
On a more serious note, does anyone knows how it came that talking prices for labor become a taboo at first place? Was it cultural? Did it become a thing with the industrial revolution or something? What is the history of "don't talk salaries"?
It's not the same everywhere so it must be for different reasons everywhere but IMHO its important to recognise the story behind it so to reason for what to do next.
When I was younger, I once had an employer (a major fast food chain) that had a document that explicitly said discussing wages with anyone but the franchise owner was forbidden. I didn't know better at the time, but that's super illegal.
Wonder what the effect would be of forcing companies to equalize salaries if someone with the same title is hired at a higher rate? Ignoring location based pay, though that would be interesting. Could be pretty powerful for labor rights, "rising tide lifts all boats", "decentralized union effect", etc.
Probably some effort by businesses to make everyone’s title include a random number followed by a government effort to force the use of some list of approved titles.
The fundamental problem is that businesses are focused on profits rather than employee satisfaction or producing quality products. Unless that is changed any regulations nibbling around the edges will just end up in a cat and mouse game between then businesses and the government.
Many companies traditionally have rigid pay bands, including many software companies. There are several problems you are overlooking. In job markets with highly volatile wages like software engineering, there is no practical way to budget for randomly giving most people large pay raises throughout the year. Many roles are necessarily budgeted multiple years out because of contracts. If you are a company that hires a lot of software engineers, salary is likely most of your cost basis for running the company. Your fixed costs have now become variable costs, which makes financing the business much more difficult. You are also imagining this as a ratchet where salaries can only go up but if salaries must track the market then they must track the market in both directions, which will make many employees unhappy. By adjusting salary to market conditions with each new hire, companies make the financial realities of rapidly adapting to changing market salaries more manageable.
What many companies with rigid pay bands do to handle this in practice, and what would undermine what you are proposing, is to continuously invent new titles/bands if the salary requirements change too quickly. I've seen companies that had hundreds of different titles for tech peoples for exactly this reason, creating new ones if the market salary moved too quickly.
It isn't just about how much people get paid. A policy of leveling up everyone automatically would massively increase the financial risk of the company, which has enormous downstream costs in terms of valuation, ability to borrow, etc.
Why can’t companies pay fair wages and share part of the profits with employees?
It’s very rare to see companies actually doing this. They usually don’t at all, and when they do it’s often so vague that the bonus is basically entirely at the superior’s discretion with no tangible basis.
I think it’s fair that the people who risked the most to create the company get a significant chunk of the profit but why should employees be reduced to leftover crumbs in the best case and typically nothing at all beyond their poorly negotiated salaries that didn’t track inflation over the years?
In a good year there is profit to spread around anyway, bad years there is nothing extra.
I don’t know how that would work in our insane industry through where it’s a valid business model to hemorrhage money for years (decades even) without any real path to profitability. But I’m sure we can find a solution, as founders rarely live in poverty past a certain company size.
And I’m not talking about the joke that equity is in most cases where it’s barely worth the paper it’s granted on.
Employees get a small chunk of the profits compared to the people who own the company and nothing on years the company doesn’t make a profit.
I don’t think this is a revolutionary idea, that’s how traders bonuses are paid, that’s how the variable part of CEO pay is calculated. Why not for employees too who frankly contribute the bulk of the work that generate said profits (and sometimes do so despite the managers and execs best efforts to lost the company money but get bonuses anyway)
Why not? CEO’s routinely get large bonuses no matter how profitable the companies they manage are. And they never have to return any of it if things go badly.
Well explained! We see the same phenomenon in bank "savings" accounts, which only pay a meager interest rate, but protect the saver from essentially all the downside risk. (Contrast with, for example, investing directly in the stock market, etc.)
Just for fun, I'm going to poke at this:
> ... [T]here is no practical way to budget for randomly giving most people large pay raises throughout the year
I think we can find examples of labor markets that do expose more "upside" to workers, and then see how the "downside" is handled in those instances. Contractors (1099 in the U.S.) comes immediately to mind... They typically make a lot higher rate (I'd guess around double although I often hear lower numbers, which I personally think is too low to make it a good deal) but must pay their full income tax (instead of half), their full health insurance, and are subject to be the first to be let go when the company needs to cut costs, i.e. higher risk of termination, so must be able to save for time between jobs.
"Boom" economies can drive labor prices very high. I think we've been seeing this in temporary nursing lately, where the wages go very high, especially if you're willing to travel or locate in remote places. Of course, the "boom" doesn't last forever, and eventually wages will stabilize at a lower rate. Note again that these temporary positions.
(So far it seems like the higher wages come with more "risk" put onto the laborer.)
It's the case since forever in many companies I though? As an example level E42 at $LOCAL_BANK has pay range 125-145k/year target bonus 12-15% which means variability is only (or whopping) 15% for the 'same' job title.
I think very rigid predefined pay bands are very common for large companies, at least in Canada.
You'd see a labor market that more closely resembles those of high income European countries. Lower wages with less variation. Employees rarely going above and beyond. Employees staying in positions longer. Overall, stability over hustle.
They will simply introduce many flavours of titles that pretty much mean the same thing. So that they can pay the 10% who does 50% of the work more than the rest.
Most people know changing employers is the most reliable way to get promotions and raises, even though as employees gain experience with a company’s systems they should be more valuable to their existing employers than new ones. Counting on information asymmetry is the only possible explanation.
At my startup, not a particularly rich one, we’d try and benchmark salaries for our key staff and adjust it to be competitive.
Literally the whole point of pay transparency is to make it so employers can't screw employees. The result of pay transparency is that existing employees are now discovering that they've been being screwed. The pay transparency isn't producing the discontent, it's the worker abuse causing the discontent. The fact that the report is "pay transparency causes discontent" and not "employees discovering unfair compensation causes discontent" makes me question the impartiality. Especially given they're quoting business leaders saying that they're being forced to pay market rates for labor.
> The labour shortage sparked by the Covid-19 pandemic has inflated salaries, meaning that in order to land new hires, companies are offering higher salaries than many of their existing staff are making for similar roles.
That's a long way of saying that inflation requires higher salaries and that employers are particularly hostile to matching inflation for their existing employees. Just because they're used to shoving their fingers in their ears and ignoring employees asking for money because things are getting expensive doesn't mean it's normal or okay.
> Before New York City enacted its own pay transparency law, lobbyists warned that they could create conflict in teams and remove incentives for employees to work hard.
That's the intent. People will get mad that they are not being paid the same as others doing the same or similar work. No more secrets.
> Activists and community leaders argue that the laws provide vital information to women and employees of colour who otherwise might not have the professional connections to know what kind of salary to negotiate for. Illinois, Oregon and Kentucky are weighing pay disclosure rules of their own.
I don't know what activist they found to argue that these laws are only for women and employees of color. That's a terrible take on these kinds of laws. They benefit everyone, everyone at some point or another has experienced a pay deviation from the norm, some people repeatedly, some people for most of their careers. This includes companies that routinely underpay compared to industry norms. This should even start to highlight how awful cost of labor is; someone based on their geography can be paid more than you simply for existing.
> But those most upset about the disclosures are the firms’ existing staff. Alan Goldstein, a New York-based executive recruiter, said that Wall Street human resource executives blamed the transparency for a wave of resignations after bonuses were paid out at the end of February.
That's quite a silly take on this situation. Maybe they should pay better, and have incentives that keep employees around since they can't rely on the mystery of the future anymore?
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I moved out of Texas because of a salary sharing thread on Twitter. I realized I made a third of what someone doing my same, if not lesser, job in San Francisco made. Asset prices are also higher in SF, so by the time these folks retire, they're sitting on a very fat nest egg. I've since left California, but I do side hustles that bring in some income to match what my SF salary used to be. If I hadn't seen that thread, I would've never known that the normal salary and benefits were so high there. It also helped me develop the opinion that cost of labor is an awful mechanism whereby we justify paying certain people more based on their geography, a geography that's often tied to exclusivity and high barrier to entry.
If business leaders are mad that the story is unraveling and they'll have to pay all or most of us fairly at some point then that's just tough luck I guess.
It’s wrong to say (or imply) that pay transparency only benefits women and people of color, but it’s good to point out that they especially benefit because they face pay discrimination.
Agreed. I felt like it downplayed the idea that this is important to all of us at a baseline. I may be contextualizing that with the rest of the body of the article which also had odd interpretations. It's also not the first time I've seen something advertised as for x, y, and z group and fails to mention why it matters for the rest of us.
When I became a manager I found my reports were being underpaid by 30% for their job level’s pay band. It was eventually “corrected” to bring them to the minimum of the pay band, but it definitely upset me to see how the sausage was being made. Of course they never asked for a raise or brought an offer from elsewhere so I guess they were fine with it.
