Is Pay Transparency The Best Way To Tackle Gender Inequality In The Workplace?

We sat down with two of our Women In Strategy speakers to discuss their thoughts

16Feb

You'd be hard-pressed to find someone who hasn't seen the famous statistic that women earn 79 cents to every man's dollar. It's been topical for a long time, yet very little traction has been made in changing it. According to the most recent statistics from a report by the Joint Economic Committee Democratic Staff, the current figure hovers at around 80% in both the US and the UK. The inequality goes beyond pay too, with just 6% of CEOs in the S&P 500 being female. A highly contentious and often controversial issue, the reasons offered for the disparity are wide-ranging, from family commitments and varying job aspirations, to unconscious bias in the workplace. Various solutions have also been offered to deal with the sensitive issue, but an idea that many companies today find themselves returning to is introducing pay transparency across the board.

Yet it's something that leaves many managers nervous. The concern is that if everybody was openly aware of their colleagues' salaries, chaos would ensue - leadership would be inundated with raise demands, tensions would run high among colleagues, and disgruntled employees would commit a mass exodus.

Susan Brennan, Associate Vice President of University Career Services at Bentley University in Waltham, Massachusetts, argues that 'sharing salary information can create tension between colleagues and resentment toward management — so it can really lead to a toxic work environment.'

John Malloy, President of executive search firm Sanford Rose Associates in Santee, South Carolina, agrees. 'It doesn't do anybody any good to share that information,' he says. 'All that can happen is potential jealousies.'

We spoke to two of our speakers at the Women in Strategy summit on February 27 & 28, in New York, about their opinions on whether pay transparency has the potential to make the gender pay gap history.

'I'm not a fan of total radical transparency in any setting - organizations, families, relationships,' says Laura Freebairn-Smith, who teaches leadership at Yale's Drama School, and diversity and team building in the Executive MBA program at Yale's School of Management. 'It's not always beneficial and often becomes self-serving.'

'I am a fan of measured transparency in structured conversations. But, with that said, I'm not sure that pay transparency will solve the problems of gender equity in any field. It's important to remember that gender equity is problematic in almost all fields dominated by men. In the "demeaned" (read: undervalued and underpaid, mostly female) functions such as teaching and eldercare, there might be gender income parity within the field, but the fields as a whole are underpaid, if you weigh positive social impact against salaries.'

In an effort to increase pay transparency, in July 2017 the BBC - arguably very tactlessly - released the salaries of its top presenters. There has been an uproar of controversy over the disparity this has uncovered, with Chris Evans as the highest earner with between £2,200,000-2,249,999 while the highest paid woman, Claudia Winkleman, was earning £450,000-£500,000. Resentment between colleagues and the general public has been well-documented in its wake, suggesting that Freebairn-Smith's attitude of 'measured transparency' would have been much more effective.

But Joanne Rencher, Chief Business and Talent Officer, Girl Scouts of the USA disagrees, believing that pay transparency can go a long way to solving the gender divide - but stresses that it's not an easy, uncomplicated task. Messy situations, like the one with the BBC, will be an inevitable part of the struggle. She states 'as for pay transparency and inequality, that takes a village. Literally. Companies must be willing to be honest and transparent about gaps and have the stomach and pocketbook to make the economic fixes to the disparity. I’m grateful for firms entering the leadership space who are focused on partnering with companies to close gender pay gaps. The firm, SameWorks [who's software allow companies to publish their pay gap data in straightforward statistics], is a great example of this.'

Sweden is a nation that has taken great strides towards increasing pay transparency. Each year, they publish everyone's tax returns, and you can find out anyone's salary with just a quick phone call to the tax authorities. It's not a perfect system - the gender pay gap has shrunk since it was introduced in 2014 but is still at 15% - however, this is largely down to the segregated nature of the labor market. A large proportion of women work in the public sector, where pay is generally low. But if you only measure men and women doing the same jobs, the pay gap is just 6%, according to the Financial Times.

Clearly pay transparency can do a lot of good at evening out the playing field for women in business. But that doesn't mean it isn't problematic, as Freebairn-Smith warns. Pay transparency seems to function most effectively when it is treated with sensitivity and understanding, when these measured conversations take place. This is demonstrable in a 2015 PayScale survey of more than 70,000 US employees, where they found that the more people knew about why they earn what they earn, especially in relation to their peers, the less likely they were to quit. Dave Smith Chief Product & Strategy Officer at PayScale said that 'open and honest discussion around pay was found to be more important than typical measures of employee engagement'. If these open discussions are taking place, with the person's adeptness at the role being considered as opposed to their gender, we can start to take important steps towards women achieving equality in the workplace.

Continue following the debate with our speakers at the Women in Strategy Summit in New York on February 27 & 28.

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