My name is Mark Goodfield and I am a tax partner and the managing partner of Cunningham LLP in Toronto. This blog is about income tax, business, the psychology of money and investing topics and is meant for taxpayers no matter their income bracket, but in particular for high net worth individuals and entrepreneurs who own private corporations. I also blog about whatever else crosses my mind; I have to entertain myself. This is my personal blog and the views and opinions expressed in this blog do not reflect the position of Cunningham LLP. I am blunt and opinionated (at least for a Chartered Professional Accountant). You've been warned.

The blogs posted on The Blunt Bean Counter provide information of a general nature and should not be considered specific advice, as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Monday, May 13, 2013

Should You Discuss Your Salary with Friends, Co-Workers or Family?

I have written several blogs on various money taboos; from discussing your will with your family to planning for inheritances. I enjoy writing or discussing these sacred topics because I like to challenge some of our financial conventional wisdom's. Frankly, I find some people just so uptight on these topics that I enjoy watching their reactions and/or reading their comments on my blog.

A major taboo is discussing your salary with friends, co-workers and family. Although I am personally fairly open to discussing many sacred money topics, I think discussing your salary is generally not a prudent action. However, are there any situations in which a discreet discussion of salary may be advantageous to one or both parties?
  

Friends


Personally, I see few if any circumstances that would ever merit discussing your salary with your friends. The one possible exception may be where your friend is in the same or similar profession. I will discuss that exception in detail below. Otherwise, I see only risk in discussing this topic with friends. Some may lack discretion and inform others of your salary, while others may be jealous or harbor resentment. 

Co-Workers


In the case of co-workers and friends in similar professions, I can see at least 2 reasons why someone would divulge their salary. The first reason being to ensure equality of salary. Many people want to know they are being paid equally, especially in industries where there may not be gender equality. The issue becomes what you do with that information? Do you run to your employer and tell them Don down the hall told you he is making $2,000 more? You put Don at risk with your employer (which is why Don may be hesitant to discuss the issue in the first place), and if you confront your employer you risk your own job, whether your employer is legally entitled to dismiss you or not.

On the other hand, if an employee is discreet, they can use their knowledge of wage inequality in salary discussions to know how far they could try and push for a salary increase, assuming they feel
confident they are a valued employee. Both the above situations involve risk to the employee and their co-worker which is why I would suggest many co-workers do not discuss their salaries (Although, I may have employer bias; as I would not be pleased if someone told me during a salary review that they deserve to be paid as much as Mary or Sam).

Another reason for discussing your salary amongst friends and co-workers in the same profession would be if you or they are job shopping. If you know Jane makes $70,000 working for an engineering firm and your engineering firm only pays you $60,000, you may wish to consider applying for a job at Jane’s firm if all other employment variables are equal. Alternatively, this information may be helpful in pushing for a raise at your current firm, as knowing what other firms are paying and what your firm really needs to pay to compete would be valuable knowledge.

Family


I would think that most people share their salary with their spouse. However, I know there are spouses who try and keep that information private or provide partial disclosure. In some cases they think the information is private, in others they feel their spouse will spend more money if they know what they earn, and finally, many spouses are not forthright so their spouse will be in the dark should there ever be a marital breakdown.

I see no reason to provide such information to siblings, unless it would be useful information for their own careers. Even the most well intentioned sibling could say something by accident and we all know about sibling rivalry and jealousy.

How about younger children? I found a couple of articles on this topic, specifically this New York Times Article titled “Daddy Are We Rich? and Other Tough Questions”. The author, Ron Lieber, discusses ways to handle the question without providing specific income in various situations. The article puts forth an elegant solution by Gary Shor, a financial planner, where he suggests parents turn the question upside down by detailing the expenses they incur to live their current lifestyle. This provides their children with a sense of how much salary would be needed to afford those expenses and what kind of professions could provide such income for their children in the future.

For full disclosure, the reason I wrote this blog is that I recall as a university student considering following in my father’s footsteps. He was a baseball player (a left handed pitcher who was asked to try out for a Cleveland Indian farm team when younger) and I asked him how much do major league pitchers make? 

Just joking about asking him how much pitchers make, but he was asked to try out for a minor league team and believe it or not, in the late 50’s accountants made more than baseball players. Then there was my grandmother who forbade him from trying out for the Indians, so in the end my father decided against baseball and he became an accountant. I have digressed as I often do, however, I do remember having a frank discussion with him about what he made as an accountant that I found very enlightening in making my career choice. In retrospect, I would have preferred it if he had framed our discussion based on what accountants make per hour they work (given the hours I have worked over my career), instead of on a gross annual basis.

Anyways, as I stated at the outset, I would generally dissuade anyone from disclosing their salary, other than where that information provides them or someone they trust, with knowledge to leverage a greater future salary. And in those rare cases when you do disclose your salary, always understand you are taking a huge risk with that information being leaked – intentionally or unintentionally.