Friday, February 21, 2020

Job advert pay secrecy appears to be rising along with income inequality! Are the two connected?

If employer pay is difficult to access by the job seeking public, it becomes impossible for candidates to negotiate wages from an informed position. If applicants don’t know the employers salary range, they may settle for a lower amount during negotiation.

Income inequality data shows us that there are workers who are accepting unfair offers, but how do they know if their pay is unfair or unequal?

It makes sense for employers to strip wage information from the internet which increases the cost of job seeking and eventually creates the market perception that the public is in fact not entitled to know anything about employer pay.

This overt power move is called Monopsony.

Employers compete against each other for talent and sometimes claim pay secrecy is to prevent rivals from seeing their pay or because a new offer will be higher than current employees in equivalent roles.

Can job applicants be coerced into accepting an unfair offer because they think it’s fair?

Information Lock Down

When a recruiter and job applicant negotiate wages, the person with the most information about pay has the advantage. If one party involved in a negotiation has more information than the other, lawyers and economists refer to the difference as information asymmetry.

Under lock and key

Recruiters and employers abuse their positions of power when they persuade job applicants to divulge their pay history along with rival firm compensation information without being upfront about pay themselves.

Unequal access to information

The South African Constitution says  ‘everyone is entitled to fair labour practice‘.

Information asymmetry means information is not equal or fairly accessed by all parties to a negotiation.

When a hiring firm advertises a vacancy but is not transparent about pay in their advert or during discussions with applicants, they are adopting information asymmetry.

Unfair firms attempt to shift the balance of power and information in their favour.

The more information applicants have about pay, the more equal the power during negotiation.

So by claiming more access to pay information than a job applicant, employers and recruiters abuse their position in the economy to assume power they are not entitled to.

Research and Regulations Required

The less government knows about remuneration trends and wage negotiation behaviors, the less protections for job seekers and consequences for employers.

Government needs to fund research into pay secrecy in order to create better policies for transparency and the dismantling of inequality.

To push against inequality, Government can step in to prevent information asymmetry.

Regulations can ensure job applicants are exposed to fair, legally compliant recruitment practice.

Government can regulate against pay secrecy coupled with pay history questioning. If employers wish to be secretive about pay in job adverts, then they should not ask any questions about pay expectations nor are they entitled to pay slips and cost to company information.

If pay is not worth publishing, it’s not worth asking about either. Fair is fair.

Stop information asymmetry in favour of employers who end up knowing more about job applicant’s pay than what applicants know about employer remuneration.

How do we know if employers relying on information asymmetry are practicing fair wage negotiations?

The less job applicants know about a potential employer’s wage offer, the more likely they are to accept unfair pay. 

Pay Slip Ban SA champions the cause of fairness during recruitment processes and wage negotiation.

We can have a Really Fair labour market.

Help create the awareness and process for change to close the inequality gap in South Africa.

It takes less than 10 seconds, click HERE and add your name! 

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