Does empirical research indicate that salary discussions between coworkers cause problems?

Question

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?

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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.

Answer 1

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.

<sup>- 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!</sup>

Answer 2

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.

Answer 3

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.