One of the problems is that virtually everybody in corporate America — from senior management all the way down to entry-level employees — has internalized the primacy of capital over labor. There’s an unspoken assumption that any given person should be paid the minimum amount necessary to prevent that person from leaving. The simplest way to calculate that amount is to simply see what the employee could earn elsewhere, and pay ever so slightly more than that. If a company pays a lot more than the employee could earn elsewhere, then the excess is considered to be wasted, on the grounds that you could get the same employee, performing the same work, for less money.
How is it that most Americans still believe in this way of looking at pay, even as we reach the 100th anniversary of Henry Ford’s efficiency wages? Ford was the first — but by no means the last — businessman to notice that if you pay well above market rates, you get loyal, hard-working employees who rarely leave. Many contemporary companies have followed suit, from Goldman Sachs to Google to Bloomberg: a well-paid workforce is a happy workforce, which can build a truly world-beating company.
If you work for a company where everybody knows what everybody else is earning, then it’s going to be very easy to see what’s going on. You’ll see who the stars are, you’ll see what kind of skills and talent the company rewards, and you’ll see whether this is the kind of place where you fit in. You’ll also see whether men get paid more than women, whether managers are generally overpaid, and whether behavior like threatening to quit is rewarded with big raises. What’s more, because management knows that everybody else will see such things, they’ll be much less likely to do the kind of secret deals which are all too common in most companies today.
So let’s bring pay rates out into the open, where they belong. Doing so will create better companies, staffed with better-paid and more productive employees. Which is surely exactly what America needs, in a world where it can never compete by racing to the bottom.
Felix Salmon, Why salaries shouldn’t be secret
The entire piece is great. Go read it.