When Cynthia MacFarlane, who leads Mercer Canada’s pay equity practice, lived in Norway for several years, she saw up close just how extraordinarily frank people there were about their salaries. “It was nothing to be sitting at the lunchroom and say, ‘So, how much do you make, anyway? What was your bonus this year?’”
It’s not just that Norwegians lack our psycho-cultural hang-ups about money. Rather, Norway has also had radical pay transparency laws since 2001, with every citizen’s salary published on government websites. Obviously, there’s not much point being coy about how much you earn when anyone can pull out their smartphone and find those figures in an instant.
A not-unrelated fun fact about Norway: As of last year, it ranked among the five countries with the narrowest gender compensation gaps in the world. Meanwhile in Canada, which is embarrassingly No. 27 on that list, personal income remains our most cherished taboo subject, and the gender pay gap hasn’t really budged for a decade—it’s currently stuck at 88% (based on women’s median hourly wages compared to those of men).
Federal and provincial pay equity laws established in the 1980s were supposed to close that gap, but they haven’t achieved much. The federal Liberals are making yet another attempt later this spring, with new pay equity legislation that applies to about 18,000 federally regulated firms and their 910,000 employees. Under the new act, MacFarlane explains, firms have to establish tripartite committees, including employee and union representatives; gather pay data on every job class; assess compensation levels in categories dominated by one gender; and then develop a plan to correct the imbalance. Whether this complex approach will make a difference in the broader labour force is difficult to predict.
But instead of (or in addition to) pay equity legislation, could a Norwegian-style shift in pay transparency—both in terms of policy and attitudes—help close the gender compensation gap in Canada? (In Ontario in 2018, Kathleen Wynne’s Liberals passed similar pay transparency legislation, but Doug Ford’s Progressive Conservative government never enacted it.)
Proponents argue that making salary information public will curtail the pushback women face when they try to negotiate for higher pay, a point Facebook executive Sheryl Sandberg called out in 2107. “If you are negotiating for a raise and you are a man, you can walk in and say, ‘I deserve this.’ That will not backfire on you,” she said at a Stanford University public policy forum on women’s economic opportunity. “The data says it will backfire on a woman.”
That data includes a 2005 U.S. study by Harvard and Carnegie Mellon University researchers that found women were penalized more than men for initiating negotiations, because they were perceived to be “demanding” and not “nice.” As a result, many women—especially women of colour—simply don’t negotiate for more than what’s offered, as economist Linda Babcock argued in her 2003 bestseller, Women Don’t Ask.
“When you put transparency into the mix, it can sort out some of these problems,” says Erin Reid, an associate professor of human resources and management at McMaster University’s DeGroote School of Business. “Suddenly, people know how much others are making. Within the organization, there’s a little more accountability around what you’re paying people and why.”
Yet, the track record on the effectiveness of pay transparency is mixed. Early results from the U.K., where pay transparency laws went into effect in 2017 and apply to all firms with more than 250 employees, aren’t especially dramatic. (Companies must compile stats annually showing median gaps in pay and bonuses, as well as the proportion of men and women in each of the four salary quartiles. The information must be posted on both government and company websites.) Although the U.K. pay gap has narrowed gradually over a long period of time, there was no noticeable acceleration following the introduction of the new laws. On the contrary, as one study published in a U.K. compensation journal noted, the gap actually widened slightly in the second year after the law took effect.
Furthermore, an ongoing evaluation of pay transparency rules commissioned by the European Union—where the gender gap is just as stubborn as it is in Canada—cautions that such policies are not only costly to implement, but may also breed disputes and resentment among employees.
There is growing evidence, however, that pay transparency can be an effective tool for closing the gender compensation gap. Take the publication of so-called sunshine lists for high-earning civil servants, for example. A 2021 study done for Statistics Canada on the impact of sunshine laws on university faculty found that the gender gap had narrowed by 30% to 40% (although, as the authors note, the role of progressive-minded faculty unions can’t be discounted).
Voluntary private-sector pay transparency programs have also produced encouraging results. Six years ago, CRM powerhouse Salesforce began auditing compensation data on its 57,000 employees, disclosing the results publicly and adjusting pay levels accordingly. According to president Brent Hyder, the firm’s 2021 equal pay analysis “found that 3.5% of our global employees required adjustments. Of those, 81% were based on gender, and 19% were based on race or ethnicity. As a result, we spent $3.8 million to address any unexplained differences in pay, a total of more than $16 million to date.”
Other private-sector programs have begun to spring up, mostly initiated by large corporations, including tech and logistics giants such as Amazon, FedEx and UPS. These tend to be focused on disclosing salary ranges in job postings. (In fact, last month, New York City made this kind of disclosure mandatory for local companies, with the law also applying to announcements or postings for transfers and promotions.)
Quite apart from these individual examples, there’s now a whole online industry dedicated to publishing salaries, plus reviews and other employer information, for job-seekers. Thanks to firms like Salary.com and Glassdoor, it’s now easier to find salary data for both firms and professions, including open-access Google spreadsheets. Of course, such data is aggregated and anonymous, which doesn’t really help women in negotiations the same way as being able to simply say, “Just pay me what you pay Bob down the hall, who has the same skills and experience as I do.”
When companies make their pay scales visible to current and prospective employees, it gives women additional agency in choosing between firms and thus creates more efficient labour markets, argues sociologist Neil Guppy, a professor emeritus at the University of British Columbia. “A little more transparency in the market, where things aren’t a secret, ought to be a way to help both men and women get proper value for the work they do as individuals.”
Which, paradoxically, may be the very reason more businesses will finally embrace pay transparency, whether mandated or not. As the pandemic’s dramatic upheaval to the labour market continues—with people changing careers, shifting to permanent remote work or just quitting—competition for skilled employees has intensified substantially. As Reid says, “Organizations that underpay women are putting themselves at risk to lose talent.”
The Globe and Mail
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