Question

Debate why firms have the right to keep salaries private?

Factors to consider:

• Productivity and Pay

• Discrimination

Answer 1

Productivity and Pay:- Productivity is simply the total amount of output (or income) generated in an average hour of work. As such, growth in an economy’s productivity provides the potential for rising living standards over time. However, it is clear by now that this potential is unrealized for many Americans: Wages and compensation for the typical worker have lagged far behind the nation’s productivity growth in recent decades, and this reflects a break in a key transmission mechanism by which productivity growth raises living standards for the vast majority of workers. There are three important “wedges,” or factors, between net productivity growth and the paychecks of typical American workers, paychecks that provide the foundation for their standards of living. As shown in Figure B, average hourly compensation—which includes the pay of CEOs and day laborers alike—grew just 42.5 percent from 1973 to 2014, lagging far behind the net productivity growth of 72.2 percent. In short, workers, on average, have not seen their pay keep up with productivity. This partly reflects the first wedge: an overall shift in how much of the income in the economy is received by workers in wages and benefits, and how much is received by owners of capital. The share going to workers decreased, especially after 2000. We sometimes refer to this as the “loss in labor’s share of income” wedge.

Discrimination:- Discrimination takes many forms and has multiple outcomes. One of the most evident outcomes is to reduce the rewards for effort and skill paid in the form of wages to those groups who are discriminated in the labor market. This form of discrimination has been found to affect women in all countries, although to varying extents. Reduction of the gender pay gap has been identified as a major objective of anti-discrimination and pro equal opportunities campaigns. It is an essential element of the ILO’s programme to reduce discrimination, in line with the Declaration on Fundamental Principles and Rights at Work – namely freedom to organize and negotiate conditions of work, freedom from forced or compulsory labour, freedom to protect children from requirements to work and freedom from discrimination in employment and occupation. This paper aims to contribute to our understanding of the forms of labor market organisation which may be compatible with the promotion of non-discrimination and decent work by identifying the role that minimum wages can play in reducing gender pay discrimination in particular and discrimination in the labor market more generally. Two hypotheses underlie this study: z minimum wages can be an efficient and effective tool for reducing gender pay inequality, provided that the minimum wage is set at a sufficiently high level to improve the pay received by women and other disadvantaged groups; z this tool can have beneficial effects in reducing wage discrimination in the labor market more generally, for example, discrimination encountered by racial or ethnic minorities, immigrants, etc. In the first part, we discuss the underlying causes of pay discrimination, taking gender discrimination as the starting point. The argument is made that pay discrimination is embedded within the organisation of the labor market and the structures of pay and reward. Similar factors are associated with the discrimination against other labor market groups – for example, associated with ethnicity, race, class or social origin – and as such minimum wage policy may constitute a common policy tool, capable of being applied to reduce discrimination, broadly defined. In the second part, we discuss the need to focus on pay equity as part of a general strategy of promoting equity and decent work. The third section examines in more detail the case for using minimum wage policies in comparison to more targeted equal pay policies to reduce gender pay equity. Section four explores attitudes towards minimum wages among the major actors in order to identify potential obstacles to or support for such policies. The fifth section considers the potential and actual role of minimum wages in reducing gender pay equity and discrimination, drawing on actual experiences of the use of minimum wages in specific countries. We conclude by identifying continuing gaps in knowledge and the need for both new approaches to research and policy monitoring.