Why It’s a Bad Idea To Discuss Salaries With Co-workers

Sometimes within a company there are large salary differences between individuals of similar job descriptions and seniority. Some commenters who have noticed this phenomenon take the most cynical possible view of it: Here is evidence that employers are screwing over their workers! If they’re willing to pay $100k a year for the more tenured engineer, how can they justify paying the similarly-qualified younger engineer only $50k?

Their solution to this perceived inequity is a pretty terrible one: Workers should supposedly be discussing salaries with each other and making comparisons with each other. The ones who think they are underpaid should demand raises.

I think this is a bad idea for lots of reasons. First off, how do you know that two employees are actually similar? People tend to be oblivious to their own flaws. Often times an incredibly smart and talented worker is completely unorganized. Often a lack of social skills makes an employee less valuable. We’re not all independent skilled craftsmen building widgets and selling them on the open market. Most of our jobs require some kind of coordination with other human beings. The inability to interact pleasantly with other people, to pick up on unspoken cues, to navigate bureaucracy, to be aware of power differentials, can really hurt you. I suspect there are a lot of extremely skilled programmers out there who are under-employed (even unemployed) because they can’t interact delicately with their customers (“customers” often being users of their software within the same company). As I like to say, “Computers do exactly what you tell them to do, with no appreciation of your actual intention. Some human beings have learned to adopt this nasty habit. We call them ‘computer programmers.’” The point is that some people are perfectly happy to take a specification from a customer, program it, and dust off their hands as if they were done.

Customer: “This isn’t working the way I expected. This software is useless.”
Programmer: “I did exactly what you told me. See the specs, bitch!”

Many of these kinds of disconnects can be fixed just by having people talk to each other, with the customer trying to understand what is technically feasible and the programmer trying to understand what the customer is actually trying to accomplish. I tried to explain my intention to one clueless programmer and he literally responded with, “Yeah, I don’t care what you’re trying to do.” To be fair, this guy was trying to be deliberately abrasive. He succeeded. I think some people literally take this attitude toward their work. To be perfectly clear, I am not just picking on computer programmers here. “I did exactly what you told me, so that should be a safe harbor.” versus “I took the time to understand your intention, and got you what you actually wanted.” This can be the difference between a low-value employee and a high-value employee, and it can differentiate two individuals who look the same on paper.

So that’s the first lesson. There are differences between employees that the employees themselves may not appreciate. There's another good reason to have a "don't talk about salary" norm or even an enforced rule.

Suppose two employees really are equally qualified, but one makes much more than the other. Should they be discussing this and demanding higher pay for the “underpaid” one? I still say “No.” If the junior engineer was willing to jump at his first job for $50k/yr, but that company needs to pay $100k/yr to keep its senior engineers from retiring or leaving, that’s none of your business. If you can find $100k/yr elsewhere, more power to you! Go for it! Find an offer and leverage it to get a pay raise, or pursue that other opportunity. That’s the real proof that you’re worth more as an employee: someone is actually willing to pay you more. Steven Landsburg makes this point especially well in this post. If someone is paid their fair market wage, they will either sit happily or calmly take another job elsewhere. However, if someone is currently working for their best possible employer, they will stay at their job and yell, kick, scream, and bite for higher pay and better perks. That company with a huge salary differential between similarly productive workers is probably paying appropriately. It would probably go out of business if it paid its young engineers $100k/yr, as it would if it tried to pay its older engineers $50k/year thus driving a mass exodus of firm-specific capital. Operating within a narrow set of constraints probably led this firm to a pay structure that looks inequitable to outside observers. This is similar to price discrimination, but in this case the buyer is paying different prices for indistinguishable goods. The important “keep your eyes on the prize” point here is that the company might not exist at all if it tried to pay everyone the same (even the same for employees with similar productivity).

Companies have damn good reasons for discouraging employees from discussing salaries with each other. It breeds resentment. One employee with an unrealistic sense of their ability starts comparing himself to someone who is actually a more productive worker. The unqualified worker resents the other person’s higher pay and status. The more qualified worker resents the comparison. Perhaps someone has to explain to the low qualified employee why his pay is as low as it is, and it sounds like a personal attack. How could it not? “Here is what’s wrong with you… And we use these items as reasons to pay you less.” The less qualified employee resents having their problems stated out loud. If lack of emotional maturity is one of their flaws, the whole thing escalates. Everyone is probably happier not making explicit salary comparisons. Otherwise you get these obnoxious relative-status conflicts all the time. That would make for a pretty hostile work environment, one that almost nobody wants to work in.

I have read that if you introduce a bunch of chickens into a new pen, their stress levels are very high until the “pecking order” is established. When the relative status of every chicken is implicitly understood, stress levels then fall. “Everyone talk about salaries and ask for a raise” is like the community of chickens suddenly all saying, “Wait a minute, I’m getting a raw deal. Let’s re-evaluate. Constantly!” The analogy fails, of course, because employees aren’t confined to a pen. They are free to pursue a different pen if the existing pecking order is giving them a bad deal. 

So don't just ask for a raise. Ask for more responsibility. Ask to be trained for a better-paid position, or seek that training on your own. Ask if you are in the running for a management position, and how you can be slated for such a position if one opens up. Do constant continuing education, constantly be learning new skills, and stay up-to-date on trends in the industry you work in. Try to do things that will make you deserve better pay. Asking for more money for the same work is very risky. Remember that one of the possible answers to the request is "No" and think about the awkwardness of getting that response. This awkward truth, that you and your boss have different estimates of your value, must suddenly be stated out loud. You'd better be damn confident it will pay off before you try it.

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Obviously this argument won't apply to all workers. Government employees, for instance, aren't necessarily being hired on an open market. See the Landsburg post linked to above. If you're in far-and-away the best possible job for you and have nowhere else to go, it doesn't make sense to seek a better deal somewhere else. Someone in this position might be able to coax a higher pay out of the same employer for the same work, but like I said it's risky.

In my case, it would be almost incoherent for me to barge into my bosses office, balls blazing, and demand a raise. I'm an actuary. The salary structure is laid out very clearly for actuaries, based on a combination of exams passed and years of experience. During the annual performance review, when raises for the next year are determined, the bosses themselves compare the salaries of similarly situated workers and try to close the gaps whenever necessary. I'm not saying everyone is in this kind of job, but many employers are diligently eliminating pay differentials between similar employees. The mistake is to think that a pay differential is completely arbitrary or always exists for cynical reasons.

Some people may try to shoe-horn this post into a discussion about the gender pay-gap (the one that shrinks to a few percentage points when you actually start controlling for pay-relevant factors). Please don't. That's not what I'm talking about here.