Knowing what your colleagues earn
How much do your colleagues get paid? In a few countries, such as Norway, you can take a
good guess by looking 1)____________at____________ public records on individuals’ overall
tax payments and income. But in most places, finding out people’s salaries means asking them
what they earn. And that is about as socially acceptable as saying “What an ugly baby.”
Norms of privacy and secrecy around income help explain 2)___________why____________
legislators who fret about unfair pay differentials increasingly require greater transparency.
Few jurisdictions are as radical as the Scandinavians, but more and more of them are
mandating that firms disclose gender (and other) wage gaps, publish pay ranges on job adverts
or 3)__________refrain______________ from asking about applicants’ prior earnings. New
transparency laws 4)___________________take_____ effect in Illinois, Minnesota and
Vermont this year; an EU directive is due to 5)___________come_______________ into force
in 2026.
Greater transparency about what people in similar jobs are earning has helped close pay gaps
between men and women. This is not because lower-paid employees were given big pay
bumps, 6)_____________however_____________, but because average wages were
suppressed. Transparency appears to hand employers a powerful bargaining tool: firms can
argue that a pay rise for one individual would need to be replicated for
7)___________others_______________.
A Danish law from 2006, requiring that firms above a certain size disclose gender pay gaps
among comparable workers, provides an example. The gap between men and women
narrowed, primarily because male employees saw slower wage growth. A lower wage bill is
not necessarily good 8)_______________news___________ for firms, however. Productivity
at 9)__________ affected ________________ Danish firms also went down, perhaps because
lower earners were fed up to discover they were undervalued or because higher earners
resented the slower wage growth that followed.
Disclosure can lead to different outcomes. Requirements to include salary details on job
postings appear to push up pay, for example, in part because firms as well as employees have
better
information
about
market
rates.
It
is
surely
worth
10)___________paying_____________ a bit more to avoid wasting time on job applicants
whose salary expectations bear no resemblance to budgets.
Transparency can also stoke motivation. Pay transparency among American academics
increased the effort of those who were revealed to be overpaid. If you’re earning a lot more
than 11)________collegues/ others__________________, you’d better prove your worth.
12)__________As________________ for wage disparities between bosses and those below
them, you might imagine that gaps foster resentment. But they can also pique aspiration.
Employees not only consistently underestimate how much managers earn but also work harder
when they find out the 13)__________rewards/ benefits________________ that promotion
can bring.
Transparency makes 14)_____________it____________ more important to get performancebased pay right. When the previously secret salaries of ice-hockey players in North America
were published in the middle of the 1990 season, underpaid players shifted their efforts
towards scoring goals and providing assists, which were more highly rewarded than defensive
contributions, to the 15)____________detriment_______________ of their teams’
performances as a whole. Sunlight is lovely. It can still cause damage.