Eliminating one of the darker sides of capitalism

There’s no reason companies should keep salaries a secret.

If salaries are determined rationally, according to principles that everyone in the company would agree to, then there’s nothing to hide.

When salaries are hidden, employees can be paid much less than they’re worth. The underpaid employees won’t know they’re underpaid. So they won’t ask for a raise, and they won’t go looking for another job.

If salaries are public, employees will know their true market worth. More importantly, they’ll know their potential future market worth which lets them make informed life choices.

Your salary can have a huge impact on your life trajectory. It’s most people’s only source of income. It determines where you can live, what house you can buy, how often you can travel, when you can retire and how much time you get to spend on hobbies, personal projects or with family and friends. If you have kids, it determines how much you can spend on them too.

But salary information is still so opaque that people can’t effectively plan their financial future.

When I was a fresh computer science grad, I had no idea what salary to expect when applying for software engineering jobs. I got a couple of offers and accepted one from a London tech startup.

But after a year at the startup, I wanted to see what else was out there. I applied to Facebook and got an offer that was double my current compensation. I was blown away and counted myself lucky to stumble onto this information early in my career.

An old colleague also had no idea what he could be making if he switched jobs. He recently joined Facebook too and tripled his salary. It’s significantly changed his life trajectory. But here’s the crazy thing — if I hadn’t told him what he could be making at Facebook, he still might not have known. He still might be making 3x less than he is now.

It’s sad to think that many will be in this situation for years. They’ll spend a significant part of their life working for a company that is underpaying them. And this is mainly due to keeping salaries secret.

In most other parts of our life, we know what’s out there and how it compares to what we have. When we buy a car, we can compare the options objectively and make an informed decision. When we buy a house, we can do the same thing. The market is mostly fair and efficient because information is readily available.

But the choice that impacts people the most — the job that determines their financial future and what they spend most of their prime waking hours on — is not given the same treatment.

Companies have intentionally hidden salaries to make the labour market unfair and inefficient. They exploit this inefficiency by underpaying their employees so they can make more money. This is a darker side of capitalism which should be eliminated. Consider that we already send people to jail when they exploit nonpublic information in the stock market.

Sharing your own salary makes the labour market fairer and more efficient. It opens people’s eyes to their true market worth, but more importantly, their potential future market worth.

For a student, having the right information can alter their life trajectory. Knowing the market value of different skills can inform what they choose to study and specialize in. The same is true for working professionals.

Compensation at Facebook is mostly formulaic and everyone is pretty open internally about how much they’re paid. But not much is shared externally. If you want to explore tech salaries for yourself, levels.fyi is a great resource.

In the next post I’ll break down my own software engineering salary at Facebook.

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