The Pay Taboo: Better Off Not Knowing
I was just rereading an interview that the Gallup Management Journal conducted with behavioural economist Alan Krueger, Bendheim Professor of Economics and Public Affairs at Princeton University. Krueger was talking about how the pay structure has to be perceived as fair if an organization wants to get maximum performance out of employees.
GMJ: How fair does it have to be if it’s secret?
Krueger: That’s a good question, and I’ve done a little bit of research on how much employees know about what their fellow workers are paid. I once did a survey with employees at a non-union service company. We asked employees to identify another worker and then tell us how much they thought that other worker was paid. Most of the time, they couldn’t or wouldn’t guess. It’s a taboo subject, and not delving into it may be one way in which employees cope with the sensitivity of the issue. By the way, this was a fairly enlightened, progressive company. I think one way in which workers find it easier to work with each other is not to even speculate on those subjects.
GMJ: So do issues of pay hold the same power in companies where people do know how much everyone else is making, such as union shops?
Krueger: I suspect that morale suffers. I think there are probably reasons why the social norms developed that discourage employees from discussing pay and employers from bringing it up. But I think employees do want their pay structure to be perceived as fair in case information leaks out. It is also interesting to note that unionized workers report being less satisfied with their jobs despite their higher pay, on average.