In Fair Pay (Harper Business, June), which PW’s starred review called a “winning debut,” David Buckmaster, global compensation director at Nike, discusses the ethics and practicalities of compensating employees for their work. He proposes that the problem isn’t just that some people make more than others, or that some people don’t make enough to live on; it’s that the entire wage system—based on the notion of a self-propelling free market—is broken.
What does fair pay mean to you?
The World Economic Forum defines fair pay as providing enough money for essentials, and also some discretionary income. This concept shows up often in minimum wage debates, which can miss the point. Pay is how we prioritize which jobs are worth what. Setting fair pay has to be a continuous mindset, and there has to be a shared perception between employers and employees that these calculations have been fair.
How would you explain the concept of “pay sincerity”?
When you work with big companies you hear a lot of corporate blather: “We believe in all people”; “Our process is competitive and fair.” Businesses leaders need to ask: Are we serious about that? What really goes into that calculation? If our workers are considered essential, are we sure their essential needs are being met? How is this resonating with the lowest-paid people in the organization? Pay is a function of proximity to power. The further away you get from the source of power, the more the needs of employees fall off the radar, and those voices need to be captured. Companies aren’t actually out to get anyone; their assumptions just don’t get questioned enough.
You refer to corporate pay designers as “the world’s least-interesting Illuminati”—what’s the real-world impact of their work?
Companies who do the best job [at setting wages] know to ignore the numbers that come up in industry salary surveys. If you just rely on the market, you over-rely on the idea that there’s an active free market for low-paid work; it’s at best free-ish. Too many structures get in the way, such as lack of transparency. The world would be a better place if this work were more obvious and not so much of a black box.
How would you respond to those who say the $15 minimum wage would kill small businesses?
These opponents are working from a mindset that the laws don’t already exist somewhere, which they do. Many cities already have the $15 minimum wage, and many states have done away with tipped wages, and their economies are stronger than ever. A new wage floor will reset to a better working environment and put the burden on big businesses to change the market. Outside the U.S., we’ve seen that wages can grow up to 50%–60% of median wage for the country without hurting the economy; we’re in the 30s somewhere. We need to make a catch-up investment in employees.
What can businesses do to improve pay equity?
We should ask leaders, do you know what the lowest-paid person in your company makes, and why that’s the case? Too often, they don’t. They assume the free market’s going to take care of it; my core argument is that there’s not enough of a free market for wages to grow the way they need to. Unequal pay just isn’t on their radar. It needs to be a standing bullet on their agenda, for CEOs and chief HR executives. They need a signal from top leadership that it’s okay to invest in people.