> If everyone knows what everyone makes, it becomes much harder to give an excellent employee more money. Everyone thinks they deserve a raise, so now a manager has to confront the rest of the team when he gives one person a raise. Envy is a very powerful force.

I think economic modeling moves towards the opposite direction. First, people assume that other people make and still have that envy, and in that assumption they make mistakes. But there are severely underpaid people that would immediately get a better deal.

There are other interesting externality is that knowing what people make would allow people to jump jobs a lot clearer. One of my crusades in public opinion in argentina is that the salaries of college graduates is absolutely unknown, making it impossible to gauge how valuable each college degree is worth. Hence, lots of people commit to dead-end careers. If it were known how much the graduates made, less people would go there, and more people would go to the paying ones.

Same with jobs: knowing other company pays substantially more will move you, increasing the salary of the low paying companies and lowering the salary of the high paying companies.

In a very naive way, the lack of information prevents market efficiency, because if the information where there, people would do more and different trades. And this is algo good for companies in the long run, because they would more effectively attract the appropriate talent.

Think of it as any other market: housing for example. Is housing clearer or worse by having house sale prices open?