Sharing salary information can narrow wage gaps — but studies show more equality can mean less pay

The idea of sharing her salary openly, and finding out what her colleagues made in return, wasn't top of mind for Jen Aitchison when she went out for after-work drinks one night several years ago.

But it quickly became a priority for the Sutton, Ont., woman after she found out there was a significant discrepancy between what she was paid as an insurance broker versus her less-experienced male colleague.

"I found out that I was being paid 30 per cent less than he was, and so as you can imagine, I was not impressed with finding out this information," Aitchison told CBC Radio's The Cost of Living. She also said that while her colleague made more money than her, he actually brought in less revenue for the company, which CBC agreed not to name as she no longer works there.

Aitchison's situation is a classic example of what proponents of "pay transparency" want to fight.

Advocates say openly sharing salary and compensation information can help narrow the gap in pay between women and men, or between white and non-white workers. But studies and academics point out that pay transparency, while effective at closing that gap, is not a panacea and can introduce other issues to the workplace.

Cultural 'taboo' hard to break

Aitchison felt the biggest barrier to talking about salaries was the culture.

"It's been made taboo," she said. "You don't talk about certain things …  you don't want to be seen as boasting or trying to make people feel bad or being arrogant or pretentious."

Her experience may not be unique for many Canadians. Statistics Canada numbers show that in 2019, female employees between the ages of 25 and 54 earned 88 cents for every dollar a man earned, when looking at average hourly wages.

That represents a gap of more than 12 per cent, which widens further when looking at not just women, but other specific groups, such as Indigenous people, people of colour or those with disabilities.

Aitchison was eventually able to get a raise to address the gap in salary. But it took several months and she had to present detailed numbers to her now-former employer proving that she generated more profit for the company than all of her direct colleagues, regardless of gender. 

LISTEN | Getting paid $30k less than a man — and finding out over drinks: 

Cost of Living8:31Is pay transparency the key to pay equity?

The cultural inclination against speaking openly about salary can lead to tension in the workplace, according to Sarah Kaplan, a professor with the Rotman School of Management's Institute for Gender and the Economy at the University of Toronto.

"The problem with the way the system is now, let's say I brag about my wages and then everyone else around me is making less than me. Then it becomes very awkward," said Kaplan, who pointed out employees can feel demotivated and deflated in these situations.

However, Kaplan pointed out this cultural barrier has strong advantages for corporate entities — in theory. According to Kaplan, a culture that silences discussions around salary is better for "a capitalist system," because it reduces employee solidarity.

Who says we can't talk about it?

Pay transparency advocate Allison Venditti has a similar perspective to Kaplan when it comes to silence around salaries and benefits.

"It gives companies the upper hand in so many ways and allows them to pay individuals less. Those individuals tend to be marginalized communities and women," said Venditti, who runs the online network Moms at Work, where speaking openly about wages is a priority.

"It's held over you by saying, 'You know what ... we don't talk about that. That's not polite.' And my response to that is, 'Says who? Who says that's not polite? Who says we can't talk about it?'"

Advocates seek openness in job postings

It's a situation Krysti Beckett experienced before she even had a job, after applying for multiple positions, including some child-care roles.

"I asked in the interview, 'What is the pay for this position?' And they declined to answer and actually said, 'We will not be sharing that information with anyone other than the successful applicant,'" said Beckett when describing an interview for a position as a children's recreational programmer.

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The job ended up paying the equivalent of minimum wage, which Beckett did not find out until after she had spent days preparing her application and job-shadowing.

Beckett's experience is one that Venditti is hoping to fight, by launching a job board where all employers posting vacancies must include pay transparency in their employment offerings from day one, by including salary ranges on each posting. 

To Venditti, having open wage information available for a job is akin to including price tags on goods in a shop.

"When you go to the store, you have prices on clothing," said Venditti. "So what we're doing inherently [when wages are not transparent] is telling people, 'We're not valuing your time.'"

Pay transparency doesn't always mean pay increase

While breaking open cultural taboos around salaries can give marginalized groups more information, studies have shown it doesn't always lead to more money.

Wage transparency has been the law for public servants in some Canadian provinces by virtue of the salary disclosures often called the "sunshine list." This data was used as part of a comprehensive study, published in March 2021, looking at the wages of university faculty members in Canada.

It found pay transparency eventually narrowed the wage gap between women and men significantly – between 30 to 40 per cent after pay transparency was legislated for public sector wages above a certain threshold. In some provinces, such as British Columbia, Manitoba and Ontario, this began in 1996. 

The researchers attributed the narrowed wage gap, at least in part, to higher female salaries being bargained as a result of salary disclosures.

However, these researchers also noted that pay transparency laws caused overall faculty salaries to go down by one to three percentage points, on average.

This experience has been predicted in the United States, where a June 2021 working paper by the National Bureau of Economic Research analyzed non-unionized, private sector workplaces in several regions. It pointed out that when all wages are transparent by law, an employer would theoretically avoid paying its top performers a higher wage, to avoid everyone demanding more. 

Their prediction? Non-unionized wages could drop — by as much as two per cent — if mandatory pay transparency is in effect.

In situations where unions are involved, pay does appear to increase with salary transparency. Unions also have a marked effect on the gender pay gap.

The study of Canadian universities found that the gender pay gap was reduced by 35 per cent in unionized workplaces when salary disclosure came into play.

At non-unionized universities? The gender pay gap wasn't reduced at all.

Transparency not enough: expert

Public salary disclosure is becoming the law in more countries. Denmark introduced legislation in 2006 — large companies there must report wage statistics broken down by gender.

Since 2017, British companies with more than 250 employees must report pay and bonuses broken down by gender. 

Germany, France and Australia are considering similar laws. In Canada, the federal government will begin releasing anonymized salary information publicly, after legislation required data collection in 2021.

Ontario passed pay transparency legislation under the former Liberal government, but Doug Ford's Progressive Conservatives have not yet proclaimed the legislation, so it is not in effect.

Regardless, this data isn't going to be enough to make a difference when it comes to closing wage gaps, according to Sarah Kaplan at the Rotman School of Management.

"Pay transparency is one of the tools in the toolkit for achieving more gender equity or racial equity in pay. But it won't be the most predominant tool. It's not the thing that's going to solve the problem," said Kaplan.

According to Kaplan, pay transparency is an informational tool, but it needs to be paired with a focus on promoting equity-seeking groups to more senior positions within an organization.

I always just like to emphasize that the problem is not just a gender problem.- Sarah Kaplan, University of Toronto

The idea of different people being paid different amounts for doing the same job is "actually a very small percent of what's really driving the wage gap," Kaplan said. A bigger problem is that "women are not seen as the people who can be in the leadership positions."

Kaplan also pointed out this is far bigger than a gender issue. 

"If you intersect that with disadvantages that come from immigrant status, race, Indigenous [identity], disability or socioeconomic status, it really just gets worse and worse and worse. So I always just like to emphasize that the problem is not just a gender problem," said Kaplan.

She said companies ultimately need to address those gaps in addition to embracing pay transparency, and emphasized that organizations should "be focusing on diversity and inclusion in hiring and promotions into the high-paying roles."

Written and produced by Anis Heydari.
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The Cost of Living airs every week on CBC Radio One, Sundays at 12:00 p.m. (12:30 NT).