With no bit of irony, on the same day that the minimum wage rose to $10.25 per hour, the Ontario government published its annual list of public sector employees earning over $100,000 per year in 2009. This disclosure of salaries over 100K has been going on since the mid 1990s, and every year there is a media uproar and expressed public indignation over the numbers for a day or so, and then everyone forgets about it.
What I find interesting about salary disclosure is that it is not required on a larger scale. I have noted this point before. In Ontario, for example, we require public disclosure of all public sector employees who earn more than $100,000, and the income of executives of publicly traded companies is often required to be disclosed. The law also requires that the incomes and all terms and conditions of employment of all unionized employees be publicly disclosed (look here (s. 90) if you don’t believe me. The Minister then makes all collective agreements public). But the incomes of non-union workers outsides of the public sector need not be disclosed.
Why is that? The classical economic model “assumes” (see yesterday’s post on economists’ assumptions) that workers have information about alternative employment opportunities and that they can and will quit one job to go to a ‘better job’. This possibility is key to the ‘invisible hand’ of the market idea–there will be pressures on employers to be competitive in wage rates in order to attract the best workers. Professors salaries are listed, so I can look at what my colleagues are being paid at other universities, and if York falls behind what I think I am ‘worth’, I can start looking for a job elsewhere. I think that is how an economist thinks the ‘free’ market should work.
So why doesn’t the law simply require all employers to disclose what they pay their workers? Wouldn’t that create a more efficient labour market, according to classical economic theory? It wouldn’t cost employers much to do this. Can anyone explain to me why politicians who believe in classical economics and free market theories don’t insist on greater transparency of labour practice information?
Cynthia Estlund of NYU was pondering similar questions in her recent article called “Just the Facts: The Case for Workplace Transparency”. It’s an interesting read.
