Transparent pay and inequality


I was on Radio Five yesterday morning, discussing whether we should all have to reveal how much we earn. A survey by Hudson, a recruitment consultancy, had found 60 percent of people would be happy to reveal what they got paid. The trades unions leapt on this, saying that all salaries should be disclosed in order to tackle pay discrimination in the workplace. I was on the other side of the debate.

My first argument was that this was a fundamental issue of privacy. How much someone gets paid should be between them and their employer. If people want to tell their co-workers their salary, fine. And if a company wants to adopt a fully transparent pay policy, then that's entirely up to them. But we ought to be vary wary of government legislation forcing their hand – frankly, it's none of the state's business.

My second point was pragmatic. In most businesses, the ability to negotiate pay and conditions privately with individual members of staff is vital. Imagine you are running a business, and you have a team of four or five people doing the same job. You know, however, that one of them is more valuable to you than the others and that he or she is likely to be poached by another firm. You will want to reward that person more, but without upsetting the others. That becomes much harder to do if pay deals have to be disclosed to the whole staff.

I didn't get the chance to make my third point, which was that 'pay discrimination' is itself a misunderstood concept. Men are paid an average 15-18 percent more than women doing the same job, but the evidence does not support the view that it's the result of discrimination. On the contrary, it seems to be the result of life choices that women freely and rationally make – i.e. to have children and take time off to look after them, to work part-time or flexible hours. Europe-wide research last year found that unmarried, childless women actually earn three percent more than the average man doing the same job.