- Finland announced proposals to let workers know how much their colleagues earn.
- Ministers hope the extra transparency will help reduce the country’s gender pay gap.
- Some studies suggest that pay openness can improve profitability,
Politicians in Finland have proposed a bill that will let workers see how much their colleagues earn.
Gender Equality Minister Thomas Blomqvist told Reuters that the proposed policy aims to reduce Finland’s gender pay gap. Men in Finland earned on average 17.2% more than women in 2020, according to the Organization for Economic Co-operation and Development.
Some Finnish employers’ groups have criticized the proposals, saying it would lead to conflict between workers – a view commonly expressed by opponents of wage transparency, which is still seen as taboo in many jobs in the UK and the US. Some workers are even gagged from telling their colleagues how much they get paid.
But being more transparent can help reduce pay gaps, Almudena Sevilla, professor of economics and public policy at University College London and chair of the Royal Economic Society Women’s Committee, told Insider.
According to her research on the impact of wage transparency within UK universities, the gender pay gap was reduced by 4.37% in the years following the publication of academics’ salaries in 2007. This decline was mainly driven by female academics negotiating higher wages or moving to universities where pay was more equal, according to research.
“When salary transparency is there, when you know your salary, then the individual responds and they ask for either higher salaries or they change company to get the higher salaries,” Sevilla told Insider.
The gender pay gap is the difference in gross annual pay between men and women. It is influenced by several factors, including the fact that there are more men in senior positions.
When it comes to the broader impact of wage transparency, surveys tend to be fragmented. Some suggest that employees are less motivated when they know their colleagues are getting paid more – other surveys disagree.
Another working paper found that wage transparency led to lower average wages in some organizations. Employers refused to negotiate with a single employee to avoid having to increase the wages of others, the newspaper found.
Seville said the impact of wage transparency depends on how fair a person perceives their organization to be and how individual companies communicate with their staff.
Finland’s policy represents “the next step” in wage legislation
Finland is not the first country to advocate transparency in pay gaps between men and women.
In Denmark, for example, companies with 35 or more employees must publish gender-specific salary information.
In the UK, companies with more than 250 employees have had to publish their gender pay gap since 2017. The gender pay gap has fallen over time, according to figures from the Office of National Statistics, although reporting was disrupted by the pandemic.
In the United States, certain states – including California, Connecticut, Nevada, Colorado and Rhode Island – have either enacted or are in the process of enacting legislation that requires employers to provide job applicants with more information on how much they pay their existing employees. Colorado goes the furthest by requiring employers to specify wage ranges in each job advertisement.
Finland’s proposal, which is still being drafted and which the government hopes to adopt by April 2023, could be “the next level” in wage transparency, Seville said, because it will provide people with more specific data with which to negotiate wage increases.