Pay transparency laws may be game changer
California, N.Y. could require salaries to be posted on job listings.
WASHINGTON — Anyone who has ever been on a job hunt knows that it is often difficult to find out what a new position might pay.
That could be about to change. The governors of California and New York, both Democrats, have bills on their desks that would require companies to post pay ranges on job advertisements. Those two states — and their outsized economies and populations — could spur most larger companies to adopt the policy nationwide, advocates and experts say.
All workers could be affected, but evidence suggests that more transparent pay practices are particularly helpful for women and people of color, who are more likely to get lowballed in salary negotiations.
“It’s a tidal wave, really, to have the two coasts embrace salary transparency in this way,” said Beverly Neufeld, president and founder of PowHer New York, which helped push an ordinance in New York City, set to take effect in November, and one modeled after it at the state level that is now on Gov. Kathy Hochul’s desk.
If California Gov. Gavin Newsom and Hochul sign their respective bills, their states will join Colorado, Washington state and several cities, including New York, that either require or plan to require such disclosure.
About 1 in 6 workers nationwide would be covered under the new and existing laws, according to Christine Hendrickson, vice president of strategic initiatives for Syndio, which sells software that helps companies promote pay equity. Other states, including Nevada and Connecticut, require employers to disclose salary ranges proactively during the hiring process.
Women working full time typically earned about 83% of what men made in 2021, according to the Bureau of Labor Statistics. The disparity in pay is sharper for Black women and Latinas.
For decades, lower-paid workers have been kept in the dark about how much their colleagues were earning. Lilly Ledbetter, whose suit against Goodyear Tire led Congress to pass the 2009 Fair Pay Act in her name, said the veil around salaries was a major factor in keeping her earnings lower than male managers’ when she worked for the company from 1979 through 1998.
“It was kind of a secret thing and if you did [discuss it] you’d lose your job and lose your status,” Ledbetter said in a phone interview from her home in Jacksonville, Ala.
Union employees had a set pay scale and knew what they would be paid for promotions or experience. “There was no system” for handing out or explaining pay raises for salaried employees, she said.
In recent years, several states, including California, have moved to end some of the secrecy, requiring companies to provide pay information during the interview process, though, in some cases, only on request. Some have also moved to bar companies from asking prospective employees their salary histories, which tends to lock people into lower pay from their previous jobs.
But without a critical mass of states requiring disclosure, companies have tried to skirt some of the requirements.
When Colorado became the first state to enforce a rule requiring salary ranges in job postings last year, some companies advertising for remote workers began posting in their notices that Colorado workers need not apply.
But as the state began cracking down and other states and cities moved to adopt the Colorado rule, anywhere-but-Colorado postings have all but disappeared. Scott Moss, director of the Colorado division of labor standards, said the number of such postings dropped from more than 900 to a few dozen after his office sent letters. Only three companies have been fined under the law, and only after multiple warnings.
“There continue to be some really bad actor companies that work really, really hard to continue to underpay women,” said Colorado state Sen. Jessie Danielson, a Democrat who sponsored the law there.
But “it becomes far more difficult to single out Colorado” as more states join the fight, she said. “You can’t opt out for New York and California.”
Experts and employment specialists say larger companies are likely to respond to the newest laws by posting salary ranges for all jobs, regardless of where they are, to simplify their hiring process. Microsoft, for example, plans to do so nationally as it meets the requirements in Washington state, set to take effect Jan. 1.
Research shows that pay-disclosure laws can help combat discrimination, but that non-unionized workers could actually see their pay decline.
Zoe Cullen, an assistant professor of economics at Harvard Business School, analyzed data from the U.S. and studied four other countries that adopted pay transparency rules and found that the measures tended to close the gender pay gap but overall pay declined by 2% to 3% for non-unionized employees. Workers who bargained collectively did not see a decline in wages. Her data did not relate directly to job posting requirements but instead looked at other transparency measures.
Employers are more likely to say no to raise requests if they know the salary will eventually become public because they can argue more credibly that they will then face pressure to offer the same raise to other employees, Cullen said.
“They have another incentive to bargain aggressively because it helps keep everyone’s wages low,” she said.
Advocates and employment specialists say they would like to see more conclusive evidence that publicizing salaries actually depresses wages. But they do argue that it helps employers in other ways, by matching applicants’ salary expectations with the job market and helping to cull the field.
“You would never look for a house and not know what the house costs,” said Neufeld, of PowHer New York.
Hendrickson, of Syndio, said posting pay ranges also helps employers think harder about which employees are really worthy of salaries that exceed the pay range because of skill, training or experience.
“These types of laws put emphasis on being able to identify who really is a unicorn and who isn’t a unicorn,” she said.
Business groups have opposed many of the laws, but their level of opposition depends on the specifics.
The California Chamber of Commerce, for example, removed the state bill from its “job killer list” last month after lawmakers eliminated a provision that would have made some data on wage discrepancies public. The group still opposes the current bill. Business groups also won concessions in New York City, eliminating penalties for first-time offenders when the law takes effect Nov. 1.
“It is helpful for employees to understand the pay scale. It’s helpful for employees to understand in the context of negotiations for initial pay,” said Camille A. Olson, an employment lawyer in Chicago and California who has testified before Congress on workplace issues for the U.S. Chamber of Commerce. “I just get concerned to the extent the information can impinge on other employees’ confidentiality and the company’s trade secrets.”