January 22, 2009 at 2:11 pm
Of course it's disputable. The fact remains, however, that transparency does not ensure that one party comes to the table with the same honesty or mutuality of goals as the other. If I am dealing with a saint, that's one thing, but if I don't know what kind of person I am dealing with, why should I allow things to be transparent? If, after all, both parties are negotiating from a position of self-interest, why should both abandon their natural restraint with respect to full disclosure and bare all for the other to see?
The fact is that few potential employees come to the figurative bargaining table telling the whole truth. They don't say, for instance, that they intend to take the job for the sake of the experience until someone else comes along and waves more money in front of them. If an employer knew this, would he be willing to invest everything he could into the employee knowing that he was educating a potential competitor? Probably not. That is why it usually never surfaces during what some believe are open discussions.
Insofar as the free market, the appeal for transparency is somewhat of a smokescreen. When people say that allowing salaries to be disclosed would allow two equals to negotiate in good faith, they miss the obvious observation that the desire for transparency on the part of the employee is heavily motivated by the fact that he or she wants to STAY at the company with which negotiations take place. So, transparency is a convenience that allows the employee to remain where he or she is comfortable, where the work is a known quantity, where it is a short commute, where the perks are good, where the insurance is generous, and where the benefits are valuable. There's just this little thing called salary that could use some improvement.
If the salary were so important that everything else paled by comparison, then why bother with transparency at all? Just circulate your resume, solicit job offers, and take the best one that comes. It would just be a matter of money.
That, in fact, is not the way most people think. They make decisions within a system of constraints. Just as Herbert Simon observed in his work on bounded rationality, people make the best decisions they can within the limitations imposed. That is why not every business owner works himself to death trying to become the richest man on earth; perhaps being a mere millionaire is sufficient. That is why not every employee puts in a voucher for every tiny incidental expense; perhaps letting some things slide is okay for the sake of everything else he gets.
Salary concealment (and that is what it is) is fine with me. I have found in my career that working very hard, coming earlier to work and staying later at work, working for the best interests of the company, and speaking positively of the company's efforts and products does more to elevate one's income level than any form of corporate transparency. People are paid what they are worth. Rewards are given for obvious, conspicuous loyalty and conscientiously directed labor.
So, what is the free market? It is the freedom to work toward a common goal or to seek other employment.
January 22, 2009 at 3:24 pm
Robert DeFazio (1/22/2009)
Of course it's disputable. The fact remains, however, that transparency does not ensure that one party comes to the table with the same honesty or mutuality of goals as the other.
Salary transparency cannot be expected to fix every possible problematic issue that might arise in the employee employer relationship. That doesnt mean it is a not a good or fair thing.
... that they intend to take the job for the sake of the experience until someone else comes along and waves more money in front of them. If an employer knew this, would he be willing to invest everything he could into the employee knowing that he was educating a potential competitor?
Employers should assume that their employees will leave if they dont offer a competitive deal (and thats not just salary). Keeping salaries secret is a means by which employers prevent workers knowing they are not getting a good deal.
as the free market, the appeal for transparency is somewhat of a smokescreen. When people say that allowing salaries to be disclosed would allow two equals to negotiate in good faith
No one is arguing that disclosure of salaries enables negotiation in good faith. Good faith is about integrity and honesty, and is nothing to do with the amount of information about salaries each party has.
if salary were so important that everything else paled by comparison, then why bother with transparency at all? Just circulate your resume, solicit job offers, and take the best one that comes. It would just be a matter of money.
This isnt a discussion about the importance of salary versus the importance of other factors. Salary is quite high on the list of these factors (would you work for no salary?) even if it is not the only one
Just as Herbert Simon observed in his work on bounded rationality, people make the best decisions they can within the limitations imposed.
Exactly! Full disclosure of salaries allows people to make better decisions because they have more information.
[/quote] People are paid what they are worth. Rewards are given for obvious, conspicuous loyalty and conscientiously directed labor. [/quote]
That is a bit naive. People are paid the minimum that their employers can get away with.
So, what is the free market? It is the freedom to work toward a common goal or to seek other employment.
No, a free market is one in which all parties have access to all information about the goods and services, their prices, and which is unfettered by regulation of any sort. Free markets function by harnessing the self interest of individuals.
January 22, 2009 at 3:32 pm
dphillips (1/22/2009)
I believe in the free market system because there is no government or people perfect enough to manage a legislated "equal pay" system. My employability is my own incorporatable asset, and I have the right to take bids.
This is fine when employee and employer have equal power. But that is almost never the case. Employers almost always have more negotiating power than employees - they can last a lot longer without you than you can without them. When your bank is about to foreclose on your mortgage you wont be arguing very hard about salary with a prospective employer.
You also ignore the fact that markets are created by regulation and law. Markets just dont exist without laws and regulations. What is needed is a set of laws and regulations that allow the markets to function well, so that they are stable and produce fair outcomes. The current global recession is a good example of market failure because of poor regulation in the US financial markets.
January 22, 2009 at 4:55 pm
mtucker (1/22/2009)
dphillips (1/22/2009)
I believe in the free market system because there is no government or people perfect enough to manage a legislated "equal pay" system. My employability is my own incorporatable asset, and I have the right to take bids.This is fine when employee and employer have equal power. But that is almost never the case. Employers almost always have more negotiating power than employees - they can last a lot longer without you than you can without them. When your bank is about to foreclose on your mortgage you wont be arguing very hard about salary with a prospective employer.
You also ignore the fact that markets are created by regulation and law. Markets just dont exist without laws and regulations. What is needed is a set of laws and regulations that allow the markets to function well, so that they are stable and produce fair outcomes. The current global recession is a good example of market failure because of poor regulation in the US financial markets.
Who can last longer (business or employee) is a figure of debate. My current employer is tied to a market; I am not. There is more fear of change and fear of rejection than ever is a problem with employability. A resourceful and flexible person will find work in any market. No employer outright "owns" me; we don't live in the dark ages.
Ultimately, markets are created by the people. Since you cannot enforce perfection, no amount of laws will ever be able to permanently shore up any market. Blaming poor regulation is blatent opinion, and a hotly debated issue. Greed, and bad financial management on the part of many in both business and personal sectors are far easier to blame, and no amount of legislation will ever be fully enough to eliminate these problems.
A free market system does tend to right itself, when not propped up by borrowed money. Fortunately, we haven't hit bottom yet.
The compensation agreement is between myself and my employer, unless the company is publicly owned... then there may be room for disclosure to shareholders. I would still consider work with an "open disclosure" company though.
(edit: fixed typo)
January 22, 2009 at 5:27 pm
"My current employer is tied to a market; I am not."
Yes you are.
January 22, 2009 at 5:29 pm
dphillips (1/22/2009)
Who can last longer (business or employee) is a figure of debate. My current employer is tied to a market; I am not.
There is no doubt that in most cases employers are in a stronger position (have more negotiating power) than employees
A resourceful and flexible person will find work in any market.
Undoubtedly. But the question is whether or not they will be paid fairly. Full disclosure of salaries makes it easier for employees to decide if they are being paid reasonably, hiding salaries makes it easier for employers to avoid paying fairly.
Since you cannot enforce perfection, no amount of laws will ever be able to permanently shore up any market.
The fact that we cant achieve perfection does not mean we should abandon any attempt to get closer to it. If a free market functions better with regulations then regulations should be put in place. Im not sure I understand your position - you argue for a free market, does this mean you are for or against full disclosure of salaries? In a truly free market the price of labour would be freely available to all players.
Blaming poor regulation is blatent opinion, and a hotly debated issue. Greed, and bad financial management on the part of many in both business and personal sectors are far easier to blame, and no amount of legislation will ever be fully enough to eliminate these problems.
Greed and poor management need to be reigned in by better regulation. It is unlikely you will ever persuade people to be less greedy, so you need to enforce some constraints to stop it getting out of hand.
A free market system does tend to right itself, when not propped up by borrowed money.
Borrowed money is an integral part of a free market - money is a commodity too. It is true that free markets usually correct themselves, so long as they dont do too much damage in the process. But they also tend to swing violently up and down, it is better to have a self correcting system that doesnt have such radical swings up and down.
January 22, 2009 at 5:58 pm
Chris (1/22/2009)
"My current employer is tied to a market; I am not."
Yes you are.
That's it? Your statement can only be true if you define "market" as the world and all potential employment opportunities as a whole.
I am referring to both type of business (the market of what a business does) and to job description (the market of what type of thing I do for a company). A company is far more limited in this regard. As a consultant, I have worked for many companies in many markets, and in several different positions, in entirely different industries.
January 22, 2009 at 6:09 pm
mtucker (1/22/2009)
Exactly! Full disclosure of salaries allows people to make better decisions because they have more information.
How are my fellow employees going to make better decisions if they know what I make?
--Jeff Moden
Change is inevitable... Change for the better is not.
January 22, 2009 at 7:24 pm
There is no doubt that salary is a powerful component in the equation that leads to accepting the terms of employment or passing on them. What I am saying is that insistence on salary transparency is a one way dialog. What does the employer gain from disclosing everyone's salary other than to hand a bargaining chip to his opponent in negotiation, and believe me, negotiations are adversarial. There may be a lot of smiles and nice things said, but it is absolutely understood by the employer and the employee that money is at issue.
What employees fail to add to the tally are all the benefits, amenities, parties, and other activities and perks that come with the job. They don't include the cost of lights and heat, the defensive tactics that employers have to take against potential litigation, the costs of marketing (which includes paying sales people even when they don't make a sale), taxes, taxes, and more taxes, after-sale support personnel, etc. All these things are part of the baggage that come with the agreement to work in a company of more than a handful of people.
Speaking of sales, would you think that a salesperson who makes sale after sale without having to have someone come in afterward to clean up a messy deal should be paid according to the same deal that is given to a sales person who incurs lots of travel expenses, is not very persuasive, and leaves lots of strings untied at the end of the deal? Of course not. You may argue, "Well, that's different. Thats' commissioned sales, not IT."
I would reply that the two are very similar. Sales people produce sales. Software engineers produce code. Some leave an untidy mess that requires lots of clean up after the fact, and others dot the "i"s and cross the "t"s. There are measures of worth that go beyond being "fair."
True, sales people are not compensated the same as others. Often, sales people make more than the CEO of a company. Joe Girard, probably one of the auto industry's most famous sales people, worked just as long and just as hard as the CEO of his company, and his income reflected that. In 12 years he sold more than 13,000 vehicles at retail price with no fleet sales. That's more than four deals per day for every business day for 12 years. Think back to the last time you bought a car and how long it took the sales person to show you the car, let you drive it, do the paperwork, get the signatures, and deliver the keys into your hand. That's a lot of work, and considering his record of sales still stands unrivaled, it should come as no surprise that he had a special deal with respect to his compensation. Should every sales person in the Chevrolet sales organization have had the same deal? Absolutely not!
In a software company how would people feel if they saw the compensation of sales people as well? What would an $80K per year software engineer think if he saw that a bumbling sales person, who thinks that bytes are what preceed a swallow and whose only saving graces are that he can talk up a storm about something he understands poorly and that he can convert prospects into clients, made $500K? Would that cheer everyone up? I don't think so. In fact, the envy and discord it would sow would likely have a damaging effect on morale.
There are reasons that some are paid more than others. Part of the decision on the amount to be paid comes from the mind of the employer, part of it comes from the prospective employee, and part of it comes from cold hard reality. IT is becoming an overcrowded profession, not because there are too few jobs but because there are too many incompetents that ply the trade. I cannot tell you how many programmers I have had to sift through who can write code but who have no sense of what it is like to use the software they create and who do not understand the magnitude of the costs that deploying the software they write generates in the form of customer support calls. Bear in mind that these are the same people who darken my doorway looking for a raise so they can pay their bills, get a new apartment, etc.
I am not a grinch, but from my perspective of having worked relentlessly and tirelessly taking myself from being a jobless soul to board member of a billion dollar company and having personal business interests both here and abroad, I expect others who want me to part with some cash to exhibit some of the same work ethic that I had to display to get where I am.
This isn't snobbery; it's just a simple fact that one has to wrestle to gain an advantage in a free market. Free markets aren't necessarily fair. They are just free. They don't necessarily correct themselves quickly, either. Sometimes they can take generations to correct, and there is no assurance that they will stay corrected. The financial markets have existed for centuries, but even with all that time they are still not "fair" and not steady.
In a real world where people try to get the most they can out of other poeple, it is naive at best to think that they won't try to do the same to you.
January 22, 2009 at 7:36 pm
Jeff Moden (1/22/2009)
How are my fellow employees going to make better decisions if they know what I make?
better decisions with regard to their salary and conditions...should i ask for more? should i work harder to avoid being laid off? should i look for another job?
January 22, 2009 at 7:45 pm
if you are in the job market looking for work then you are tied to the market consisting of the jobs that you can do
if you are in the job market as an employer looking for employees you are tied to the market consisting of the people who are putting themselves forward for that type of work
To put it another way. If you lose your job you lose 100% of your income, but if an employer loses you they probably only lose a tiny fraction of their income. Employees have power in that they can look for work eslewhere, but there are usually large costs associated with this. Of course, in an ideal free market there would be no cost to switch from one job to another, or to find new employees, but this is not reality.
January 22, 2009 at 8:01 pm
mtucker (1/22/2009)
Jeff Moden (1/22/2009)
How are my fellow employees going to make better decisions if they know what I make?better decisions with regard to their salary and conditions...should i ask for more? should i work harder to avoid being laid off? should i look for another job?
Heh... They don't give a rat's patooti how much overtime I may have to put in nor do they care about how much time I spend studying for my job on my own time as a prerequisite to make those decisions... knowing my exact salary isn't going to help them, either. And if they think it's going to help them, then they do need to look for another job... slinging burgers where everyone knows everything about everyone's pay.
I don't mind if someone knows the salary range for my position, but they have no right to know exactly what I make. Period. Heck, the guy that signs my timecard doesn't know what I make! Only the folks in HR know.
And, I don't want to know how much someone else makes... If I found out that some slacker dill-weed was making anything near what I make, there'd be some serious pork chop slinging with my boss, his boss, his boss, and HR. If my boss found out that I'm probably making more than he is, then he'd be on the way to HR!
Each person should negotiate their own worth on their own merits... if they can't do that, then they should join a union so someone can tell them what they're worth. 😉
--Jeff Moden
Change is inevitable... Change for the better is not.
January 22, 2009 at 8:01 pm
Robert DeFazio (1/22/2009)
There is no doubt that salary is a powerful component in the equation that leads to accepting the terms of employment or passing on them. What I am saying is that insistence on salary transparency is a one way dialog. What does the employer gain from disclosing everyone's salary other than to hand a bargaining chip to his opponent in negotiation, and believe me, negotiations are adversarial. There may be a lot of smiles and nice things said, but it is absolutely understood by the employer and the employee that money is at issue.
Absolutely, employers dont want to make salaries visible because that would allow employees to negotiate higher pay. Employers dont want a free market except where it suits their interests, and they will distort it to suit themselves as far as they can within the limits of their conscience.
What employees fail to add to the tally are all the benefits, amenities, parties, and other activities and perks that come with the job.
Oh yes they do!!!
In a software company how would people feel if they saw the compensation of sales people as well?
They might decide to go and work as salesmen instead!!! That might not be great for the company, but it is a benefit to the market as a whole. People are not under the illusion that everyone earns the same amount, and you cannot create that illusion by hiding salary levels. High pay creates competition for the job, and that competition creates downward pressure on pay and upward pressure on productivity.
There are reasons that some are paid more than others. Part of the decision on the amount to be paid comes from the mind of the employer, part of it comes from the prospective employee, and part of it comes from cold hard reality.
No one disagrees with this. It is not an argument in favour of hiding salaries.
I expect others who want me to part with some cash to exhibit some of the same work ethic that I had to display to get where I am.
no one disagrees with you here either, but it is not at all relevant to whether or not salaries should be visible.
Free markets aren't necessarily fair. They are just free. They don't necessarily correct themselves quickly, either. Sometimes they can take generations to correct, and there is no assurance that they will stay corrected. The financial markets have existed for centuries, but even with all that time they are still not "fair" and not steady.
You are not describing a free market. In a free market all the players have all the information about the price of labour. What you would like is a market which is distorted to favour employers. Understandable? yes, a good thing? probably not - distorted markets are not as productive as they could be.
In a real world where people try to get the most they can out of other poeple, it is naive at best to think that they won't try to do the same to you.
Fortunately not everyone is as self interested as that.
January 22, 2009 at 8:10 pm
Jeff Moden (1/22/2009)
Heh... They don't give a rat's patooti how much overtime I may have to put in nor do they care about how much time I spend studying for my job on my own time as a prerequisite to make those decisions... knowing my exact salary isn't going to help them, either. And if they think it's going to help them, then they do need to look for another job... slinging burgers where everyone knows everything about everyone's pay.
If someone sees that you are doing a lot more work than them for the same salary they have a very good incentive to work harder. They would not have this incentive otherwise.
I don't mind if someone knows the salary range for my position, but they have no right to know exactly what I make.
There are no actual rights with regard to knowledge of salaries, only your desire that people dont know.
And, I don't want to know how much someone else makes... If I found out that some slacker dill-weed was making anything near what I make, there'd be some serious pork chop slinging with my boss, his boss, his boss, and HR. If my boss found out that I'm probably making more than he is, then he'd be on the way to HR!
it sounds like it would be a very good idea if you did know - your 'pork chop slinging' could save the company a lot of money.
Each person should negotiate their own worth on their own merits... if they can't do that, then they should join a union so someone can tell them what they're worth. 😉
You cant negotiate on even terms unless you know what a fair price is, you cant know what a fair price is unless you have visibility of salaries. Employers hide salaries to enable them to pay you less than you are worth.
January 22, 2009 at 8:44 pm
mtucker (1/22/2009)
If someone sees that you are doing a lot more work than them for the same salary they have a very good incentive to work harder. They would not have this incentive otherwise.
Nah... all they'd do is laugh at me for working so hard. Been there and done that before.
There are no actual rights with regard to knowledge of salaries, only your desire that people dont know.
I'm pretty sure that the Privacy Act of '76 covers that for everyone who's not so fortunate as I.
it sounds like it would be a very good idea if you did know - your 'pork chop slinging' could save the company a lot of money.
True enough... but I don't need to know someone's salary to actually do that. A slacker is a slacker even if they make only peanuts.
You cant negotiate on even terms unless you know what a fair price is, you cant know what a fair price is unless you have visibility of salaries. Employers hide salaries to enable them to pay you less than you are worth.
You know going into a job what the salary range is. So does everyone else. You don't need to know another's exact salary to figure out if you should be on the high side of that range or not. And you don't need to know another person's salary to ask for more if you think you're worth it. And, if you really don't know, check out the salary ranges for your job in your area on the Internet.
Yes... I agree that companies don't want you talking about salaries because they do want to try to get people for as little as they can. Regardless, it's still no one's business but my own and the guy or gal that cuts me my check.
Just from personal experience, I've seen some companies where everyone knows everyones salary (except mine, of course). I can't and won't say it happens at every company that does that, but the ones I've seen have one of two things happen... either everyone turns into a sluggish drone because they're all being paid the same no matter what they do (for the most part, managers are too cowardly to stiff a slacker or fire him) or people are insanely jealous and spend more time gossiping about why someone is being paid more than they are instead of working harder to get paid more.
--Jeff Moden
Change is inevitable... Change for the better is not.
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