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A previous question asked whether or not discussion of salaries should be encouraged. I have a different question, which asks for meaningful research on the subject of whether or not salary discussions between coworkers actually cause problems.

From an answer on the linked question:

This can easily happen. I've worked at offices where one person who was a far better negotiator than the rest of us was earning almost double what the other folks who did the same job were earning. It caused a lot of grumbling and animosity because company policies didn't allow for the sort of raises that would be needed to get the lower paid folks up to what the star negotiator was making. In that case, quitting to go work elsewhere was the only way to get a raise that got me even close to what the expert negotiators were making. I've identified my poor negotiating skills to be one of the areas I need to work on.

Personally, I find it a bit of a paradox that salary discussions would cause problems between coworkers, since clearly some people within a company are aware of who is making what, and to my knowledge knowing this information does not cause problems for them.

Is there any data that salary discussions between coworkers cause problems, and if so, what does the data point to as an explanation?


UPDATE: In response to the request for clarification for what "problems" mean, there's two parts to understanding its definition in my opinion, who and what:

  • Who: Might be an individual, a group/peers, manager, company, competitors, and/or investors; I'm sure there's more, but those to me appear to be most likely to be affected. While I'm going to say the same for "what" - I'm most interested in who and what is most affected.
  • What: As I stated in "who", my concern is who and what is being affected most. Assuming that the topic is limited to for-profit companies, I'd assume that the who/what for the most meaningful "problem" would be related to pairing of investors and profits; meaning that salary discussions between coworkers result in less profits for investors in for-profit companies.
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Given the bias we have on our own abilities, every time two people compare salaries, one is very disappointed. –  MathAttack Jun 20 '12 at 8:40
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@Blunders - I think you age going to have a problem finding empirical(number) data about this. The problems that come from this behavior tend to have indirect consequences. How do you measure how much productivity is lost to office politics? And if you can how do you determine what was because sally got the super project and which was because sally said she got a 10k raise for it. –  Chad Jun 20 '12 at 12:46
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Related question –  Chad Jun 20 '12 at 12:50
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@HLGEM, well, that's not entirely true. You're not forced to answer the questions, but if you do, you really are expected to answer the question as asked. In fact, it's good if we have some tough questions. That's what makes this site valuable. –  NickC Jun 22 '12 at 19:27
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If you need to discuss salary with co-workers but don't want to say exactly what you make, use this system. Get 2 co-workers. Each take turns doing the following. (1) Add a random number to your salary (that hides it well) and write it on a piece of paper, hand to the next person to do. (2) First person then adds all three numbers together and subtracts the number they originally added to their salary. (3) They pass it to the next person who subtracts the value they added to their salary. (4) Once that is done divide the remaining value by 3. This will give you an average salary between you. –  Simon O'Doherty Feb 20 '13 at 9:24
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4 Answers

Coworker's salary is a sensitive topic. Discussing it may led to one feeling undermined and frustrated, as indicated by a case study at Working Rights: My Colleague Was Paid More Than Me.

The Realisation of a Difference in Salary

...“While we were all aware that we were not supposed to discuss our employment contracts with each other, when we went out for a drink after the course we got talking about the merger and whether or not we were going to put ourselves up for it. We had each been sent the job description for the new role and I saw that the salary was five thousand pounds more than my current salary. Over a glass of wine, my colleague mentioned that she wasn’t sure about applying as it was only three thousand pounds more than her current salary, for a lot more responsibility.”

Liz was fuming when she realised the difference in salary, even though she had responsibility for more employees and was based in central London. She spoke to her boss and explained her frustration, but was simply told that her colleague had ‘negotiated a better pay rise at her last review”.

Liz said, “I felt undermined and frustrated that my skills and hard work were not recognised in the same way, so I decided there and then to start looking for another job.”

Corporette refers to the case that led to open confrontation between employees: What To Do When You Make More Than Your Colleague (And He Knows It).

...Once he learned that I made more, billed more and was treated as a more “senior” attorney this associate began making disparaging statements to me, where on several occasions the associate has mentioned that it is ridiculous that I am making more than him etc and the firm’s decision makes no sense. This associate also attempts to undermine my opinion and knowledge in every chance he gets. It has become very unpleasant and he reminds me of the super-competitive people in law school who just did not know how to have a normal conversation. Every time I try to work with him on a project, he uses it as a way to tell me that he is smarter and more knowledgeable than me.

Knowing coworkers salary may not always be negative (several years ago it even helped me to make quite a fortunate career decision), but in "salary-transparent" environment / situation my primary concern would be to make sure that team does not drift into counterproductive conflicts like above.

As a programmer, I have specific reasons to be concerned.

Taking into account 10X productivity difference (McConnell 1, 2) - no matter how the salary is distributed, there could be tension involved among developers at different ends of "productivity scale". If one of teammates is 10X more productive than another, they either get 10X salary difference or not - but one way or another, making them smoothly discuss each other salaries will not be an easy thing.

- Hey this superstar guy gets 10X more than me - this is so frustrating!
- Hey I know I am 10X better than that other guy, it's not fair that I am getting only 3X his salary!

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@Mark Booth: Correct, I'm as puzzled by the update as you. –  blunders Jun 20 '12 at 10:52
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@blunders - I'm not puzzled by it, I know exactly what gnat is trying to do. He is trying to improve his answer, which he has done. It may not meet your research level requirement, but it is a good good subjective answer. I have already decided that I can't meet your exacting requirements, which is why I haven't put any more effort into improving my answer. If anything I'm impressed with gnats persistence, hence the +1. –  Mark Booth Jun 20 '12 at 10:56
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@MarkBooth well when preparing update I re-checked FAQ -> How should I answer? and Back it Up! meta discussion. Not that I didn't read them before - just wanted to make sure nothing changed since the previous time I studied these –  gnat Jun 20 '12 at 12:13
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@gnat - I agree. I think some people are forgetting is that many of us believe that a flawed answer which recognises its flaws is better than no answer at all. It's interesting that your no citations message is now gone, so perhaps published anecdotes were sufficient after all. *8') –  Mark Booth Jun 20 '12 at 12:43
    
what happens when you know exactly how much every developer in your company makes and you are being paid the lowest? –  joepa Oct 12 '12 at 4:19
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up vote 10 down vote accepted

This research paper, "The use of multilevel models to evaluate the effects of pay secrecy", gathered data from eight organizations in Finland via 1706 employee surveys. It suggests that while the overall effects of pay secrecy on mastery climate is negative at individual and unit levels, pay secrecy can be beneficial in lowering the perceptions of potentially harmful competitive climate for individuals highly motivated by external rewards; note that within this study though that it appears that less than 50% of those surveyed replied to the survey, which might mean something too.

Another research paper from 2009 has a nice round up of research on the topic: Back to the Future? Performance-Related Pay, Empirical Research, and the Perils of Persistence

In general, in appears that it's agreed that it is a hard subject to study. For example, in this story in the Washington Post, "Should you know your coworker’s salary?", they point out a very interesting finding -- the wage gap in federal jobs between genders is half of the gap found in privately held companies; meaning it's theorized that the difference is based on the fact most federal job salaries are public information.

While not a prefect answer, I'm attempting to prove that there is research on the subject, and likely even better research that the research I've presented. If you're curious how I found the research, here's how: Google Scholar.

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Assuming that the pay gap between genders is a problem. Most studies on pay do not take into account that men generally are willing to take more risks and will sacrifice other things for pay that women are more reluctant to. –  Chad Jun 20 '12 at 18:25
    
@Chad: Are you saying that the difference is that federal jobs contain less risks and/or require less sacrifice than private sector jobs, or something else? –  blunders Jun 20 '12 at 19:34
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I am saying that the pay gap may not be a problem depending on how you define problem. –  Chad Jun 20 '12 at 20:23
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@Chad: Without additional objective research I would have to err on the side of saying it is an issue, since to my knowledge females entering the workforce from college for a few years now have been making more than their male counterparts on average; meaning the overall averages are a poor predictor of the future, and more a sign of the past; just my understanding of the topic, not claiming to be correct. On a side note, just wanted to say thank you for all the effort you've put into this question; in my opinion, you really have been a driving force in improving the question and answers. –  blunders Jun 20 '12 at 22:26
    
Though the government does make public the salary schedule, and in many case publishes lats everybody know what grade or pay band an employee is in, they still resent the differences. They say I was her longer, I should have gotten the promotion. Also keep in mind that the grade/bands are very wide and they over lap. The highest paid GS-12 make more than the lowest paid GS-13. –  mhoran_psprep Jun 22 '12 at 23:42
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The "Fair Wage Effort Hypothesis" is a well-known idea in the world of economics. Nobel prize winner George Akerlof and Janet Yellen wrote several papers discussing the effects of open knowledge of salaries across an enterprise. For the lazy, I will summarize: people that know your salary compare it to their own. If they feel that they are not being appropriately compensated in comparison to a colleague, they will adjust their efforts in the workplace to match their compensation level. For the record, I am not so sure that that effort alone is adjusted; I think that people generally prefer to leave, but this hints at another cost for the business. Sure, you might make a stream of income by not paying somebody what they are worth, but it must be compared against the costs of bringing somebody new on board, the cost of lost time on projects, etc. On the other hand, people almost always overestimate what their own worth is to the company.

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Exactly describes my first ever job out of college. All was great, I received all the accolades, worked exceptionally hard, brought in lots of innovation and I had a lot of work satisfaction. However, because of an errant email, I found out that I was being paid about 15% less than a much less "respected" (by the team) and capable colleague with similar years of experience. It wasn't intentional, but my attitude soon took a tremendous dip. It wasn't long before I was out looking for a new job and got a really nice raise for making the switch. Good attitude returned thereafter. –  Dunk Feb 18 '13 at 16:01
    
@Dunk - The issue in these cases is usually management problems and having a weak review process –  bigdaveyl Feb 21 at 21:43
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Yes, salary discussions between co-workers certainly can cause problems.

Unless you have a completely transparent pay structure, be careful about getting into a situation where your workers care about what their colleagues are being paid. If they are being paid enough and enjoy their work, if they have sufficient intrinsic motivation, they probably won't even think to discuss it with their colleagues.

Let them feel under appreciated or get disillusioned and you will have a problem whether or not they talk about their salary with their colleagues or not.

From my own experience

In my first job after university, the company I worked for suffered a problem with churn. Each year they would take on a bunch of new graduates, for substantially less than market rate. These new recruits would get disillusioned and leave within a year.

The year after I started, they tried a new approach, give new recruits a more generous package to try and encourage them to stay longer. What they did wrong was to not improve the package of the previous recruits, so as soon as one of them left and people started talking about their salaries, there were an awful lot of angry people.

To stave off a mass walk out, we were all given an instant 35% pay increase, to put us on par with the new recruits.

Even so, the situation left a bad taste in our mouths and many of us left soon after, and were able to walk into higher paying jobs based on our higher final salaries.

In my career since then, I have seen a strong correlation between environments where people were content where discussion of salary almost never came up, and environments with problems where it would be often remarked upon.

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This answer belongs on the question linked to in the body of my question, that being: "Should I encourage my coworkers to share their salaries with each other?" -- as is, your answer is off-topic here. –  blunders Jun 19 '12 at 13:21
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My original question was more clear that I wanted research. The question was edited by a mod, and I left it as is. I've highly the keywords in the question related to research/data in an attempt to make it more clear. –  blunders Jun 19 '12 at 13:35
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@Mark This may not be skeptics, but the question itself is asking for research, and your answer, which doesn't cite any research, does not answer the question. Probable explanation for additional downvotes: other people notice this and downvote for the same reason as blunders (which would explain blunders' comments being upvoted). –  JGWeissman Jun 19 '12 at 19:25
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You are not answering the question asked. You told us a story about that time at my first job when the poster asked for hard data. It is not that your answer is low quality for content it is low quality because you ignored what was being asked for. –  Chad Jun 19 '12 at 19:27
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@Chad - At the time I answered, the research requirement had been significantly downplayed. If you can answer with the research asked for I will happily vote your answer up, I wouldn't vote it down if your references failed to live up to impossibly high standards however. –  Mark Booth Jun 19 '12 at 20:12
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