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How much do you get paid?

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Don't answer that out loud.

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But put a number in your head.

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Now: How much do you think the person
sitting next to you gets paid?

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Again, don't answer out loud.

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(Laughter)

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At work, how much do you think

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the person sitting in the cubicle
or the desk next to you gets paid?

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Do you know?

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Should you know?

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Notice, it's a little uncomfortable for me
to even ask you those questions.

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But admit it -- you kind of want to know.

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Most of us are uncomfortable with the idea
of broadcasting our salary.

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We're not supposed to tell our neighbors,

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and we're definitely not supposed
to tell our office neighbors.

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The assumed reason is that if everybody
knew what everybody got paid,

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then all hell would break loose.

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There'd be arguments, there'd be fights,

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there might even be a few people who quit.

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But what if secrecy is actually
the reason for all that strife?

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And what would happen
if we removed that secrecy?

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What if openness actually increased
the sense of fairness and collaboration

23
00:01:23,314 --> 00:01:24,536
inside a company?

24
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What would happen if we had
total pay transparency?

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For the past several years,

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I've been studying the corporate
and entrepreneurial leaders

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who question the conventional wisdom
about how to run a company.

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And the question of pay keeps coming up.

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And the answers keep surprising.

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It turns out that pay transparency --

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sharing salaries openly
across a company --

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makes for a better workplace
for both the employee

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and for the organization.

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When people don't know how their pay
compares to their peers',

35
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they're more likely to feel underpaid

36
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and maybe even discriminated against.

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Do you want to work at a place
that tolerates the idea

38
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that you feel underpaid
or discriminated against?

39
00:02:05,397 --> 00:02:07,907
But keeping salaries secret
does exactly that,

40
00:02:07,931 --> 00:02:10,814
and it's a practice
as old as it is common,

41
00:02:11,374 --> 00:02:13,466
despite the fact
that in the United States,

42
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the law protects an employee's right
to discuss their pay.

43
00:02:18,117 --> 00:02:20,675
In one famous example from decades ago,

44
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the management of Vanity Fair magazine

45
00:02:22,829 --> 00:02:24,949
actually circulated a memo entitled:

46
00:02:24,973 --> 00:02:28,178
"Forbidding Discussion Among
Employees of Salary Received."

47
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"Forbidding" discussion among
employees of salary received.

48
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Now that memo didn't sit well
with everybody.

49
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New York literary figures
Dorothy Parker,

50
00:02:36,423 --> 00:02:38,185
Robert Benchley and Robert Sherwood,

51
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all writers in the Algonquin Round Table,

52
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decided to stand up for transparency

53
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and showed up for work the next day

54
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with their salary written on signs
hanging from their neck.

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(Laughter)

56
00:02:49,416 --> 00:02:50,991
Imagine showing up for work

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with your salary just written
across your chest for all to see.

58
00:02:56,273 --> 00:02:59,543
But why would a company even want
to discourage salary discussions?

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00:02:59,567 --> 00:03:02,899
Why do some people go along with it,
while others revolt against it?

60
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It turns out that in addition
to the assumed reasons,

61
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pay secrecy is actually a way
to save a lot of money.

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You see, keeping salaries secret

63
00:03:12,936 --> 00:03:15,887
leads to what economists call
"information asymmetry."

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This is a situation where,
in a negotiation,

65
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one party has loads more
information than the other.

66
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And in hiring or promotion
or annual raise discussions,

67
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an employer can use that secrecy
to save a lot of money.

68
00:03:29,218 --> 00:03:31,842
Imagine how much better
you could negotiate for a raise

69
00:03:31,866 --> 00:03:33,673
if you knew everybody's salary.

70
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Economists warn that information asymmetry

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can cause markets to go awry.

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Someone leaves a pay stub on the copier,

73
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and suddenly everybody
is shouting at each other.

74
00:03:45,566 --> 00:03:47,272
In fact, they even warn

75
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that information asymmetry
can lead to a total market failure.

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And I think we're almost there.

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Here's why:

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00:03:56,823 --> 00:04:01,751
first, most employees have no idea
how their pay compares to their peers'.

79
00:04:02,334 --> 00:04:06,184
In a 2015 survey of 70,000 employees,

80
00:04:06,208 --> 00:04:09,589
two-thirds of everyone who is paid
at the market rate

81
00:04:09,613 --> 00:04:11,845
said that they felt they were underpaid.

82
00:04:12,536 --> 00:04:15,415
And of everybody who felt
that they were underpaid,

83
00:04:15,439 --> 00:04:18,392
60 percent said
that they intended to quit,

84
00:04:18,416 --> 00:04:21,303
regardless of where they were --
underpaid, overpaid

85
00:04:21,327 --> 00:04:22,907
or right at the market rate.

86
00:04:23,700 --> 00:04:26,160
If you were part of this survey,
what would you say?

87
00:04:26,184 --> 00:04:27,460
Are you underpaid?

88
00:04:27,484 --> 00:04:29,809
Well, wait -- how do you even know,

89
00:04:29,833 --> 00:04:31,966
because you're not allowed
to talk about it?

90
00:04:32,411 --> 00:04:36,010
Next, information asymmetry, pay secrecy,

91
00:04:36,034 --> 00:04:38,813
makes it easier to ignore
the discrimination

92
00:04:38,837 --> 00:04:41,304
that's already present
in the market today.

93
00:04:41,717 --> 00:04:45,414
In a 2011 report from the Institute
for Women's Policy Research,

94
00:04:45,438 --> 00:04:47,562
the gender wage gap
between men and women

95
00:04:47,586 --> 00:04:49,324
was 23 percent.

96
00:04:49,951 --> 00:04:52,570
This is where that 77 cents
on the dollar comes from.

97
00:04:53,141 --> 00:04:54,604
But in the Federal Government,

98
00:04:54,628 --> 00:04:56,691
where salaries are pinned
to certain levels

99
00:04:56,715 --> 00:04:58,755
and everybody knows
what those levels are,

100
00:04:58,779 --> 00:05:00,864
the gender wage gap
shrinks to 11 percent --

101
00:05:00,888 --> 00:05:03,464
and this is before controlling
for any of the factors

102
00:05:03,488 --> 00:05:06,381
that economists argue over
whether or not to control for.

103
00:05:06,764 --> 00:05:09,436
If we really want to close
the gender wage gap,

104
00:05:09,460 --> 00:05:11,948
maybe we should start
by opening up the payroll.

105
00:05:12,364 --> 00:05:15,586
If this is what total
market failure looks like,

106
00:05:15,610 --> 00:05:18,878
then openness remains
the only way to ensure fairness.

107
00:05:19,774 --> 00:05:22,275
Now, I realize that letting people
know what you make

108
00:05:22,299 --> 00:05:23,945
might feel uncomfortable,

109
00:05:23,969 --> 00:05:25,484
but isn't it less uncomfortable

110
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than always wondering
if you're being discriminated against,

111
00:05:28,412 --> 00:05:32,174
or if you wife or your daughter
or your sister is being paid unfairly?

112
00:05:32,853 --> 00:05:36,793
Openness remains the best way
to ensure fairness,

113
00:05:36,817 --> 00:05:38,730
and pay transparency does that.

114
00:05:39,491 --> 00:05:42,171
That's why entrepreneurial leaders
and corporate leaders

115
00:05:42,195 --> 00:05:44,988
have been experimenting
with sharing salaries for years.

116
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Like Dane Atkinson.

117
00:05:46,449 --> 00:05:50,328
Dane is a serial entrepreneur
who started many companies

118
00:05:50,352 --> 00:05:51,934
in a pay secrecy condition

119
00:05:51,958 --> 00:05:55,311
and even used that condition
to pay two equally qualified people

120
00:05:55,335 --> 00:05:57,031
dramatically different salaries,

121
00:05:57,055 --> 00:05:59,224
depending on how well
they could negotiate.

122
00:05:59,591 --> 00:06:02,922
And Dane saw the strife
that happened as a result of this.

123
00:06:03,388 --> 00:06:05,615
So when he started
his newest company, SumAll,

124
00:06:05,639 --> 00:06:08,749
he committed to salary transparency
from the beginning.

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And the results have been amazing.

126
00:06:11,924 --> 00:06:13,546
And in study after study,

127
00:06:13,570 --> 00:06:15,446
when people know
how they're being paid

128
00:06:15,470 --> 00:06:17,499
and how that pay compares to their peers',

129
00:06:17,523 --> 00:06:20,456
they're more likely to work hard
to improve their performance,

130
00:06:20,480 --> 00:06:23,329
more likely to be engaged,
and they're less likely to quit.

131
00:06:23,353 --> 00:06:24,755
That's why Dane's not alone.

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00:06:24,779 --> 00:06:26,950
From technology start-ups like Buffer,

133
00:06:27,415 --> 00:06:30,761
to the tens of thousands
of employees at Whole Foods,

134
00:06:30,785 --> 00:06:33,952
where not only is your salary
available for everyone to see,

135
00:06:33,976 --> 00:06:36,976
but the performance data
for the store and for your department

136
00:06:37,000 --> 00:06:38,919
is available on the company intranet

137
00:06:38,943 --> 00:06:40,165
for all to see.

138
00:06:41,485 --> 00:06:43,947
Now, pay transparency
takes a lot of forms.

139
00:06:43,971 --> 00:06:45,569
It's not one size fits all.

140
00:06:45,593 --> 00:06:48,089
Some post their salaries for all to see.

141
00:06:48,113 --> 00:06:50,414
Some only keep it inside the company.

142
00:06:50,438 --> 00:06:53,023
Some post the formula for calculating pay,

143
00:06:53,047 --> 00:06:54,821
and others post the pay levels

144
00:06:54,845 --> 00:06:56,623
and affix everybody to that level.

145
00:06:56,647 --> 00:06:58,696
So you don't have to make signs

146
00:06:58,720 --> 00:07:01,244
for all of your employees
to wear around the office.

147
00:07:01,268 --> 00:07:04,182
And you don't have to be
the only one wearing a sign

148
00:07:04,206 --> 00:07:05,428
that you made at home.

149
00:07:06,294 --> 00:07:09,498
But we can all take greater steps
towards pay transparency.

150
00:07:10,033 --> 00:07:12,061
For those of you that have the authority

151
00:07:12,085 --> 00:07:13,879
to move forward towards transparency:

152
00:07:13,903 --> 00:07:15,378
it's time to move forward.

153
00:07:15,743 --> 00:07:18,211
And for those of you
that don't have that authority:

154
00:07:18,235 --> 00:07:20,214
it's time to stand up for your right to.

155
00:07:21,063 --> 00:07:22,788
So how much do you get paid?

156
00:07:23,986 --> 00:07:26,613
And how does that compare
to the people you work with?

157
00:07:26,990 --> 00:07:28,296
You should know.

158
00:07:29,112 --> 00:07:30,387
And so should they.

159
00:07:31,736 --> 00:07:32,904
Thank you.

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00:07:32,928 --> 00:07:36,106
(Applause)