- Finland announced proposals to let workers know how much their colleagues earn.
- Ministers hope that the extra transparency will help to reduce the country's gender pay gap.
- Some studies suggest that being open about pay can improve pay equality,
Politicians in Finland have proposed a bill that would let workers see how much their colleagues earn.
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 Organisation for Economic Cooperation and Development.
Some Finnish employer groups have criticized the proposals, saying it would lead to conflict between workers — a view commonly expressed by opponents of pay transparency, which is still seen as a taboo in many workplaces in the UK and US. Some workers are even gagged from telling their colleagues how much they're 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 into the impact of pay transparency within UK universities, the gender pay gap reduced by 4.37% in the years after the salaries of academics were made publicly available in 2007. This fall was driven largely by female academics negotiating higher wages or moving to universities where pay was more equal, per the research.
"When pay transparency is there, when you know your wage, then individual's react and they ask for either higher wages or they change companies to get those higher wages," Sevilla told Insider.
The gender pay gap is the difference in gross annual earnings between men and women. It's influenced by multiple factors, including that there are more men in senior positions.
When it comes to the wider impact of pay transparency, studies tend to be split. Some suggest employees are less motivated when they know their colleagues are paid more — other studies disagree.
Another working paper found pay transparency led to lower average wages within some organizations. Employers refused to negotiate with any one single employee in order to avoid having to increase the pay of others, the paper found.
Sevilla said the impact of pay 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 pay legislation
Finland isn't the first country to advocate for gender pay gap transparency.
In Denmark, for example, companies with 35 or more employees have to publish gender specific pay 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 decreased over time, according to figures from the Office of National Statistics, although reporting was disrupted by the pandemic.
In the US, certain states — including California, Connecticut, Nevada, Colorado, and Rhode Island — have either introduced or are in the process of introducing legislation that says employers must provide job applicants with more information about how much they pay their existing employees. Colorado is going the furthest by requiring employers to provide salary ranges in every job advertisement.
Finland's proposal, which is still being drafted and which the government hopes to pass before April 2023, could be "the next level" in pay transparency, Sevilla said, because it will give people more specific data with which to negotiate pay rises.