Does Transparency Lead to Pay Compression? (2016) [pdf]

> IMO salary secrecy is a weird fetish and probably counter productive.

Hidden salaries are why the job market is so extremely awful and costly. I have heard a million times that it is really hard to hire talent. But still, our approach to the job marketplace is akin to a bidding system, not a market. Imagine that each time that you go to the supermarket you need to negotiate the price of every item. It will be so hard to know where to buy your groceries.

And related to that also salary secrecy helps to hide discrimination from view. Again it makes it a hard problem even more difficult (https://hbr.org/2016/07/why-diversity-programs-fail).

I've read before that with "open companies" where they publish all salary data, it can, on occasion, be surprisingly counter productive. I haven't read extensively on the topic, but I believe there are examples of companies who started out making all employee salaries accessible to anyone in the company reverting this division. Famously Steve Jobs ended up doing largely this at Next. At any rate, I think that publishing salaries openly can have its own set of issues, even if on balance I agree it's probably a fairer approach. This is one of those problems that touches on cultural norms though, so what works for one person can offend another.

It's not difficult for me to imagine scenarios were certain employees may overvalue their worth, and take a great deal of offence to a perceived slight when viewing their colleague's remuneration. Humans often aren't good at looking at themselves purely as some kind of commodity to be priced by an open market, even if rationally that might make some sense in this context. People can get scared they will look over-paid, or embarrassed about being underpaid, even if neither of these things is true. There's the whole thorny issue of cost of living adjustments if your company operates in more than one location. The frequent debates I've seen on Gitlab's public salary calculator that tries to address cost of living illustrate how hard it is to get that right - you can get some pretty odd results from that thing just moving your zip code 5 miles in some regions. I imagine you're almost never going to convince everyone that the adjustment factor you choose is the right one.

I am paid less than one of my peers who has a masters from a prestigious university. I am cool with this: they have more debt and a larger skill set than me. However, I am thankful that other people in the organization do not see the difference in our salaries, because I would certainly be treated differently by people outside the team. Salary gets used as a proxy for competence: why do you think people stupidly expensive luxury cars as daily drivers?

This assumes that compensation should be directly tied to value created.

In practice, value created is merely the ceiling for compensation. The floor is the best alternative for the employee. People get paid somewhere in between. Neither the floor nor the ceiling can easily be generalized across multiple people.

Completely agree. It's not a perfect analogy but if you look at professional sports, the main driver behind higher salaries was publicizing them. Prior to that, owners could pay some star players much lower than their market value simply because they were bad at negotiating.

It's in our interest to have more publicity around salaries.

Part of the problem, I suppose, is that it's very hard to figure out what value an employee contributes with. Making salaries transparent is perhaps rational, but it only gets you that far. If the other half was a solved issue, I don't think there would be much in the way of making salaries open, but as it stands, doing so just makes it painfully clear how broken our ability to measure worth is.

there is a company already doing that and beyond.They call themselves "buffer"

https://buffer.com/transparency

Russians don't like to bargain mostly. I suspect (but please correct me if this sounds too wrong/offensive), that it's a vestige of the planned economy they had - all salaries and prices set by the state, no bargaining allowed. It's a simpler system and removes not only a layer of stress, but also a layer of conflict between you and the employer.

Though, if I were offered $2000k/mo, I wouldn't feel the need to bargain at all ;)

Not sure about the US, but here in socialist Europe, that's pretty much how the entire public sector works. You have very fixed salary-steps, based on education, job function and seniority and there is little to no room for negotiation.

Perhaps initially, but since there's a limit to how high total compensation can go for all employees put together... the effect will be to compress compensation differences. The same is true if it should initially lead to deflation (e.g., if total compensation is already at the limit, then some of the more highly compensated employees will have to see their compensation cut in order for less-generously compensated employees to see theirs improved).

Ignoring macroeconomic effects, this should just lead to compression of compensation deltas regardless of whether it also leads to inflation or deflation. Now, if every State did this suddenly, and if transparency were required of the private sector as well, then there might be macroeconomic effects as well, such as higher inflation (or faster deflation), and I won't hazard a guess as to which.

no need. they compare California (high competition from private sector) with other states without such competition.

they could manipulate it to proove any point. with the same data I could say that with sunnier days lead to more employee attrition. any point that California differs from the other state can be blamed, after the author ignored the private sector salaries, and he chose to pick a competing state without salary transparency to make their point.