Pay transparency – the practice of being open about employees’ and prospective employees’ compensation, seen as a step toward greater pay equity – is gaining traction nationally. Since 2018, approximately half of U.S. states, including New York, have enacted or are considering pay transparency laws.
Previous research has suggested that increasingly visible pay disparities could adversely affect collaborations among co-workers, particularly with higher-paid partners.
Not true, said , assistant professor in the Charles H. Dyson School of Applied Economics and Management, in the Cornell SC Johnson College of Business. His new studies found that people tended to favor higher-paid collaborators – but only when they thought that person had superior skills and could teach them something. When it came to hiring, however, bosses preferred those with a lower pay history than themselves.
“There was some reason to expect that people might prefer to be higher-paid than their co-workers or teammates, but our research found the opposite to be true,” said Kniffin, who along with , assistant professor of management and organizations in the Samuel Curtis Johnson Graduate School of Management (SC Johnson College), are co-authors of “,” which published Sept. 23 in American Psychologist.
Kniffin said this line of research was inspired in part by the work of , the Henrietta Johnson Louis Professor of Management Emeritus (SC Johnson College), whose studies include analyzing the sensitivity to pay differences among co-workers. With the emerging trends of both pay transparency and self-selected collaboration (as opposed to a manager arranging the grouping), “this work is integrative of that mix of trends,” Kniffin said.
For their research, Kniffin and Hildreth conducted four studies that examined the relevance of salary as a factor in partner selection. The first study involved doctoral students in the field of economics, who were asked to bid for actual work and whether they preferred to work independently or with a co-worker. Study 2 involved professionals (median age 42) who were given a scenario in which they must choose one of two projects to work on, teaming with either Alex or Pat (non-gender-specific by design).
In both studies, participants were first asked whether they would prefer a higher- or lower-paid partner, then informed that the prospective partners had the same knowledge, skills, abilities and experience as they did. In both studies, the preference for a higher-paid teammate went down considerably after learning that their prospective partner was paid more but had the same skill set.
Similar results came from Study 3, in which participants were asked to name actual co-workers and their preference for working with partners who earned either more or less than they did.
“Why do people seem to have a preference to work with teammates who are higher-paid?” Kniffin said. “Our studies show that the predominant explanation is that people anticipate that they’re going to learn from that co-worker and eventually benefit themselves.”
“It’s like, ‘OK, I’m willing to join a group or a collaboration and sacrifice a bit of my self-esteem, maybe my status, in order to potentially gain something that I can use in the future.’ That’s the lens I’ve been looking at it through,” said Hildreth, whose recent research has focused on and .
Study 4 tested the theory in a different type of collaboration: hiring. Participants, all of whom had hiring experience, acted as prospective employers who could hire someone with either a higher salary history than theirs or a lower one. Most (71%) chose the candidate with the lower salary history, and that trend was even more pronounced (83%) when they learned the two candidates had the same skill sets.
Kniffin noticed that when he would discuss this research with people not involved in the study, asking them who they’d rather partner with, “almost everyone had a quick answer – with a range of different rationales – and few people would say that it didn’t matter to them.” And while some people may not want to know their co-workers’ salaries, and don’t want them to know theirs, the fact remains, Kniffin said, that pay transparency is happening.
“As teamwork and pay transparency are both continuing to trend upward across organizations,” he said, “our studies highlight some unexpected dynamics that people should be anticipating.”
