One Argentinian company is finding out.
Who decides how much you get paid? You probably think the answer is ‘your boss’. But economists would say it’s a little more complicated than that. They say wages are influenced by something they call the ‘law of supply and demand’. Supply is how much there is of something, in this case workers. Demand is how much people want it. And as a rough rule of thumb, wages do tend to be higher if you have rare or impressive skills (pro footballers, say), or if there’s lot of companies looking for someone with your skills (coders, for example).
In theory, supply and demand should distribute power to both employers and employees. But in practice many people think employers largely have the upper hand. They can do things like outsource work (in theory expanding the supply pool to the whole world) and replace human workers with fancy tech (thus decreasing their demand for human labour). This power imbalance concerns many people, because the lower your wages are, the harder you’ll find it to pay for everything from the roof over your head to the food on your table.
The most common way societies attempt to rectify this is for governments to step in. Governments can put in regulations, such as minimum wages, that are intended to make every wage high enough to live on (although not everyone thinks they always succeed in this aim). Or they could top up people’s bank accounts with things like welfare benefits. But a software company in Argentina has come up with a different model. There, wages are set by all the staff. Employees who want pay raises have to make their case in front of a jury of their peers.
Will this lead to fairer outcomes? On one hand, knowing what everyone is earning should make it easy to spot and rectify if people are being paid different amounts for the same role. This could help combat the intentional and unintentional bias that can lead to some marginalised identity groups, including women and ethnic minorities, being underpaid. Peer-reviewed pay could perhaps even lead to less wage inequality in a company by focusing people’s attention on the pay gaps between different roles and making them consider whether magnitudes of difference are really fair.
But there’s also no guarantee that employees will be more generous with wages than their bosses. And the debate and judgement format may hinder people of some identities more than others. Women and ethnic minorities are also more likely to be seen as ‘pushy’ and ‘grasping’, for example.
Read our explainer on: horizontal workplaces