Here’s One Reason Why Salary Transparency Doesn’t Work

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Salary transparency seems like the most obvious and appealing way to solve the gender and race pay gap. In theory, if everyone knows what everyone else makes and there is a clear-cut structure that illuminates how these numbers are decided, then no woman or member of a minority group could be shortchanged based on gender or race alone. But it turns out transparency isn’t enough.

Fast Company reported on four companies that instituted a salary-transparency policy to see how it worked out, focusing especially on a social-media start-up called Buffer:

The social media startup has always been dedicated to “radical transparency,” not only internally, but externally as well. So it published everyone’s salary (from the CEO on down) as well as the formula used to calculate those wages. According to the founders, the move was aimed at facilitating trust, a key ingredient for an agile organization. They said disclosure could help other founders figure out their own compensation structure, not to mention that transparency led to feedback and increased productivity.

After a year, the founders of the company discovered that the system had eliminated negotiating — a positive effect, since it helped those less inclined to be aggressive about their salaries. But after analyzing the salary numbers last month, Buffer’s PR crafter Hailley Griffis found that there was still a $10,000 pay disparity between men and women. How could that be?

Griffis explains that when you look for experience you build in implicit bias: 

When the analysis was done, Buffer had 80 employees, 30% of whom are women, 70% men. “More women (58.3% of all women) are set at the lower experience level of intermediate, whereas more men (61.4% of all men) are set at a higher experience level, advanced,” says Griffis. Additionally, Buffer has more men in development roles, which are higher paying positions. More men have been at the company longer.

People often assume that there are fewer female business leaders because women tend to leave the workforce at a higher rate than men, but new research has found that’s not the case. Women opt out of the workforce at roughly the same rate as men. But when they do leave, it’s because they’re less likely to be paid well and promoted into leadership roles, a separate study found. This leads to the “experience gap” that companies like Buffer are seeing. Fewer women and minorities are able to rise up the ranks, which means fewer high-paid women, despite salary transparency. Even if you can point to a pay structure and say, “Here’s how we pay all senior staff, regardless of gender or race,” that kind of openness won’t help if you’re not allowing women or minorities to reach that senior level.

So what’s to be done? Griffis told Fast Company that Buffer is “actively trying to hire more women for higher paying roles, like development, and making sure that women are moving up in their experience levels.” But when all else fails, companies could always try the simplest system of all: Hire women, pay them what they deserve to be paid, and promote them. Repeat.

One Reason Salary Transparency Doesn’t Work