In Western society, one's salary is often a taboo topic and people tend to not tell other people what they earn.

In China by contrast, I have been told that asking one's salary is fairly normal social discourse.

It seems that employees being aware of each other's salaries would be an advantage, as they have more information about what the organization is willing and able to pay.

Is there an economic reason why people don't reveal their salaries, or is this entirely a cultural taboo?

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    $\begingroup$ You are overgeneralising in your first sentence. In countries like Sweden and Norway, how much income tax everybody pays is public information. In Norway, newspapers even print rankings of who pays most income tax. Although not exactly the same as salary, it can be pretty much guessed. Where is it a taboo? USA? $\endgroup$ – gerrit Aug 18 '15 at 23:56
  • $\begingroup$ I know (through personal experience/anecdotes) that it is a taboo in the USA and Japan, but not so in Chinese societies and South Asia. And as @gerrit says, apparently it is not taboo in Sweden and Norway either. So you cannot really generalize this as being a Western vs Eastern thing. $\endgroup$ – Kenny LJ Aug 19 '15 at 6:21
  • $\begingroup$ It is sad that some cultures make people work against each other so strongly. It is good to hear about places where it isn't so cutthroat. $\endgroup$ – chicks Aug 21 '15 at 0:48

Two remarks:

Firstly, there is some research on subjective wellbeing, where a common theme is that people's happiness seems to depend more on a relative comparison of their material wellbeing to that of those around them than it does on their absolute level of material wellbeing. If two people share salary information then it will generally be true that one of the two will be subjected to the disappointment of learning that his/her salary is below that of the other. Since, in many societies, making others feel uncomfortable is in itself embarrassing, neither party is likely to be happy with this exchange of information.

A more strategic reason: I would like my employer to think that I have a reputation for keeping my salary secret. Why? Suppose my employer expects that I will tell people about my significant pay increases. If my colleagues learn that I get a pay rise they can rationally infer that the company is able to pay its employees more. They might respond to this new knowledge by also demanding a pay increases. If the firm anticipates that giving me a pay rise means that it has to give everyone else a pay rise too then it will be more reluctant to increase my pay. Thus, I would prefer not to tell anyone about my pay rise.

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To answer your question briefly: no, because it is rather a social or psychological matter than it is an economic matter.

There is already asked a good question about this subject in The Workplace community: https://workplace.stackexchange.com/questions/15397/why-is-discussing-pay-such-a-taboo-how-can-i-get-people-to-talk-about-concrete/15431#15431

Feel free to read the (also good) answers. The answer section also contains some handy tips and tricks that you and your co-workers could try.

I hope this will be useful for you.

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  • $\begingroup$ This should be a comment rather than an answer. $\endgroup$ – Kenny LJ Aug 19 '15 at 6:19
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    $\begingroup$ @KennyLJ I disagree. It answers the question: “no” is the answer. $\endgroup$ – gerrit Aug 19 '15 at 9:24

No there shouldn't be an economic reason. As the previous answer says, it regards mainly sociological/cultural aspects. Anyway, if you want to be a bit "abstracted", if you'd live in a World where everyone knows very perfectly your salary, at parity of jobs, he would demand more if he earns less, and who earns more would earn less. Information asymmetries contributes to let companies discriminate better salaries because they have a lot information more than the single worker and because they live in a more "colluded" framework. It could be a NON DEMONSTRATED explanation that in China, with a sort of modern Communist thinking, people tend to be more "standardized" (only in an economical view, without any other meaning) while in capitalism discrimination is more frequent and convenient.

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  • $\begingroup$ I dont get it. First you say there is none, then you say that having private information about their own salaries is an advantage for high-earners and their firms. Which is it? $\endgroup$ – FooBar Aug 19 '15 at 14:20
  • $\begingroup$ @FooBar I said just that there is no demonstrated/official theory (if there is). I have just said that if you want to find an economic explanation (like maybe a couple of thousands possibilities) this could be one, treating the problem with asymmetries. STOP. I never said that it is an advantage for high-earners and their firms, I have just said that in THAT kind of world a system like this tends to be more convenient for capitalist economies (by discrimination). I do not get your point. $\endgroup$ – Leonardo Urbano Aug 19 '15 at 14:25

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