Salary Envy

In the public sector, and particularly at the federal level, it's easy to find out how much your coworkers are paid. (There are online databases devoted to the subject.) Five years ago, through a Fedblog post, I became aware of how common it is for federal employees to openly talk about what they make, since salary data is public.

Now comes a study of how the availability of pay data affects employees. Researchers at the University of California at Berkeley and Princeton analyzed the effects of a website detailing the salaries of state government workers in California. They found that those at the low end of the wage scale were significantly more likely to report low levels of satisfaction with their jobs and their pay if they had been sent an e-mail informing them that the website was available.

Here's how Slate's Ray Fisman characterized what the analysis showed about taking pay data out into the open:

Low earners resent their place at the bottom of the pay scale, and you don't buy any additional loyalty from those earning higher wages, as they probably figure they're worth it. Yet some HR gurus argue that we're making a mistake by assuming that shedding some light on the opaque world of employee compensation would bring nothing but headaches. Public salaries might bring a bit of healthy competition among employees--it might encourage workers to be more productive and hence command higher pay. Furthermore, after a string of resignations and complaints, those charged with setting compensation would realize that openness requires that they properly justify their pay decisions.

I'm interested in hearing how this plays out in federal agencies. Does making salary information public encourage "healthy competition" among employees for higher wages?