Firms should make more information about salaries public

SWEDES discuss their incomes with a frankness that would horrify Britons or Americans. They have little reason to be coy; in Sweden you can learn a stranger’s salary simply by ringing the tax authorities and asking. Pay transparency can be a potent weapon against persistent inequities. When hackers published e-mails from executives at Sony Pictures, a film studio, the world learned that some of Hollywood’s most bankable female stars earned less than their male co-stars. The revelation has since helped women in the industry drive harder bargains. Yet outside Nordic countries transparency faces fierce resistance. Donald Trump recently cancelled a rule set by Barack Obama requiring large firms to provide more pay data to anti-discrimination regulators. Even those less temperamentally averse to sunlight than Mr Trump balk at what can seem an intrusion into a private matter. That is a shame. Despite the discomfort that transparency can cause, it would be better to publish more information.

There is a straightforward economic argument for making pay public. A salary is a price—that of an individual worker’s labour—and markets work best when prices are known. Public pay data should help people make better decisions about which skills to acquire and where to work. Yet experiments with transparency are motivated only rarely by a love of market efficiency, and more often by worry about inequality. In the early 1990s, it was outrage at soaring executive salaries which led American regulators to demand more disclosure of CEOs’ pay. Such transparency does not always work as intended. Compensation exploded in the 1990s, as firms worried that markets would interpret skimpy pay-packets as an indicator of the quality of executive hires.