Wednesday, April 25, 2018

Gender Pay Gap, Transparency, and Privacy

The Economist recently had an interesting article on the gender pay gap.  April 4th was the deadline for employers in Britain to start reporting the difference between the average pay of men and women (for disclosure, The Economist reported a median gap of 29.5%).

As The Economist pointed out, there are some caveats to these values because they compare total salaries, without regard to similarity in roles.  So, for example, the gap will be really high for Premier League football (soccer) clubs because they would be skewed by the players' salaries on the men's side.

However, in general, they think the data could lead to a dialog about the causes of the pay gap, which they think would make it worthwhile.

One of the causes that The Economist mentions (besides the need for better parental leave) is the asymmetry between employers (who know all salaries) and workers, which give employers an advantage in negotiations.

They feel that more salary transparency is needed for good-faith negotiations.

The trade-off then becomes transparency vs. privacy.  For example, in Finland, Norway, and Sweden, anyone can look up anyone else's salary.  This is pretty radical and would probably meet with resistance elsewhere, such as in the U.S.

However, from the article, I thought that Germany has found an elegant compromise.  Rather than showing individual salary data, companies with at least 200 employees have to provide employees who ask with the average salary in their peer group.