Salary transparency. Yay or nay?

As of Nov 1, New York City has started enforcing salary transparency in job postings. This topic has been debated on for the longest time. While the intentions are good in nature, I've always been curious how an initiative like this would unfold. The skeptical me thinks that we are actually not ready for mandatory transparency and this might do more unintended harm than good.

There's no doubt that we are self-entitled. When it comes to swallowing the bitter pill of pay differences, are we more likely to point fingers at employers for being unfair, or do we have the maturity to self reflect and ask ourselves what's needed to bridge the gap.

Coincidentally, I penned down some thoughts on this topic just a couple of days before the news. Here's my 2 cents worth.

The need for information asymmetry

When it comes to negotiation, information is power. It's not surprising that employers have an advantage when it comes to salary negotiation as they possess information about salary range, budget limits, industry benchmarks and perhaps even your last-drawn salary.

To be fair to employers, just because they have the upper hand doesn't mean they will lowball your salary. A good employer will match a reasonable pay according to your qualifications, industry benchmarks and more importantly, gauge the employees' level of satisfaction correspondingly.

Here's where it gets contentious. Every individual's sense of self-worth, expectation and ambition is different, which leaves room for ambiguity as to what defines a justifiable compensation.

A purist will argue that two individuals of equal qualifications should receive equal compensation. An economist will argue otherwise that each individual should be paid the minimum viable amount to keep the employee satisfied.

As a business, employers are responsible to keep within budget and optimise for the maximum outcome with the given resource. With this in mind, it's a no-brainer why employers will prefer to maintain opacity of salary packages to maintain their ability to manage the purse strings.

But what does compensation transparency entails?

It's not uncommon to hear people fighting for more transparency but most of us are actually not ready for it. We argue for the sake of justice, fighting in the name of fairness and equality but have we considered the consequences.

Can you accept that a younger employee being paid higher than you, even after working for more than a decade? How about a data engineer getting paid 3-4x your salary without having to go into office? Or perhaps even a peer of similar background getting more?

The truth is compensation transparency has a huge potential to sow discord amongst peers as not everyone can comprehend what are the determining factors of a salary, even when it's done without prejudice (assuming achievable).

How can we strike a balance?

To build a sustainable system of transparency, it would take every employee to develop a growth mindset. When facing a salary difference, instead of holding an attitude of entitlement complaining about being underpaid, we should approach with humility, acknowledge our gaps in skillset and seek self improvement. In times of an industry cycle mismatch, where your work does not pay as well as another industry, have the maturity to dig deep within. Weigh the needs of your financial responsibilities against your interest. In order to achieve compensation transparency, we need to be ready to ask ourselves the tough questions, be ready to put ourselves in uncomfortable positions to up-skill and get out of our comfort zone.

Without the fortitude to handle the consequences, perhaps ignorance is bliss.