Does transparency promote equity? More to the point, does pay transparency promote pay equity?
That’s the goal in California, where a state senator introduced a bill last week that would require employers to disclose salary ranges for jobs they’re trying to fill and to report employee and contractor pay data to the general public.
Pay transparency laws are being seen by equal pay advocates as the next key policy in closing gender and racial pay gaps.
They’re saying it means the next time you’re looking for a job, you might know how much it actually pays—before you’re hired.
Emily Peck reports that a similar law went into effect in Colorado last year, while another is about to start in New York City in May.
Peck says California already requires employers to disclose salary ranges, but only if asked by a prospective candidate.
Jessica Stender, policy director for Equal Rights Advocates, says, "I think the tide is turning in terms of support for stronger pay equity laws."
She noted that employers in the UK have had to disclose pay disparity data for some time now—helping to narrow certain gaps.
By Dave Allen for Discount Gold & Silver
Does transparency promote equity? More to the point, does pay transparency promote pay equity?
That’s the goal in California, where a state senator introduced a bill last week that would require employers to disclose salary ranges for jobs they’re trying to fill and to report employee and contractor pay data to the general public.
Pay transparency laws are being seen by equal pay advocates as the next key policy in closing gender and racial pay gaps.
They’re saying it means the next time you’re looking for a job, you might know how much it actually pays—before you’re hired.
Emily Peck reports that a similar law went into effect in Colorado last year, while another is about to start in New York City in May.
Peck says California already requires employers to disclose salary ranges, but only if asked by a prospective candidate.
Jessica Stender, policy director for Equal Rights Advocates, says, "I think the tide is turning in terms of support for stronger pay equity laws."
She noted that employers in the UK have had to disclose pay disparity data for some time now—helping to narrow certain gaps.
As Goes CO, NYC and Cali, So Goes a Nation
The rise of remote work during the pandemic means that local laws, particularly in places like NYC and California, can have national implications.
Peck said after Colorado's transparency law went into effect, companies who advertised remote jobs said that state residents couldn’t apply.
But bigger employers—like ones based in NY and Cali—likely won't be able to do that because of the millions of in-demand workers there.
Although these laws are still new, there is evidence that pay transparency does narrow wage gaps from the public sector.
The gender pay gap for federal workers, who can tap publicly available salary information, was 93%, according to a 2017 GAO study. For all U.S. workers, it's 82%.
Meaning, for example, that all female workers in the U.S. get paid 18% less than their male counterparts doing the same job (100-82=18; see chart).
Not surprisingly, Black, Hispanic and Native American women face wider gaps.
Laws that ban employers from asking job candidates for their salary history have already improved the hiring process for many women, but in complicated ways, according to Peck.
On the other side of the gold coin, companies have argued that posting pay ranges is burdensome and complicated.
Peck believes it’s likely that business groups will oppose the California bill, as they opposed previous pay equity laws in the state.
Remote Work Throwing Wrench into New York’s Law
Companies in New York are already scrambling to get up and running before the city's new law takes effect.
New York's aim is to give workers, especially women and people of color, more power in job negotiations. But Jennifer Kingson says the rise in remote work is throwing a wrench into the effort.
Under the Big Apple’s new law, an employer trying to fill a job based in New York City will have to advertise the minimum and maximum salary.
New York's role as the nation's financial capital and business bellwether puts the pay transparency movement front and center.
Tauseef Rahman, a partner at Mercer who specializes in pay equity and transparency, says “it’s a game changer."
While pay discrimination is illegal everywhere, and more states are banning the practice of asking candidates' salary histories, employers still have a big upper hand in compensation negotiations for new employees.
It should also come as no surprise that it's very hard for job candidates to find out salary information up front, even if a range is advertised with the job notice.
The major goal of pay equity laws is to ensure that women and people of color don't get offered substantially lower salaries, as has happened in the past.
Kingson says for employers, the rule can help keep pay discrimination claims at bay. For workers, she adds, “there's comfort in knowing that your income is in line with what the boss is offering others.”
Labor attorney Danielle Moss says, "As a practical matter, pay transparency laws provide prospective employees with more clarity around how lucrative a potential position is before they get too deep into the recruitment process."
At least eight states and several cities have laws on pay transparency, but Kingson says most are considered weaker than New York City's.
A few private employers have taken matters into their own hands. Whole Foods, for example, lets its employees look up how much their co-workers make.
And some tech companies—like Buffer, GitLab and Whereby—post formulas about how their employees’ salaries are calculated.
Remote Work Could Circumvent Local Laws
Remote work can give employers an easy way to avoid localized pay-transparency laws, at least for some positions.
Colorado's law, which is known as the strictest in the U.S., forces employers of all sizes to post pay information for all jobs advertised, even if they're for remote positions that could be performed in Colorado.
But experts say that's actually had a chilling effect, prompting companies to pull their listings from the state.
Kingson points to other problems as well. For one thing, employee compensation isn't always an exact science and doesn’t—shouldn’t— always apply to all workers in a company.
There can be reasons why a company may want to pay bigger salaries to legit star performers or applicants with unique backgrounds.
Plus, Moss says, "If an employer is posting a first of its kind or a unique position, it may not lend itself to a pay band or salary range that can be disclosed."
Not to mention, pay transparency laws can create confusion or headaches for employers with workers in multiple cities and states.
So, with states like Massachusetts and South Carolina now considering pay transparency laws of their own, the trend is likely to continue.
But at least we're a long way from Norway, where everyone’s salary is public information.