April 21, 2022
The persistent gender- and race-based pay gaps have many contributors. A recurring culprit is employers’ reliance on candidates’ prior inequitable pay, a phenomenon known as “start low, stay low.” Another is applicants’ lack of information about what the job should pay.
While some have placed the onus on underpaid employees to cure inequities through increased negotiation — which is itself a questionable proposition, given the evidence that women often experience penalties for such self-advocacy — negotiations are unlikely to have their desired leveling effect if candidates only know their past compensation, and not that of their potential colleagues.
To get closer to pay parity, the law should — and in some cases does — require employers to increase their provision of information while limiting their requests for financial figures from applicants.
Other jurisdictions should follow the lead of Colorado, New York City and Washington, which have recently required employers to advertise salary ranges with job postings.
Eliminate Reliance on Past Pay
Crafting employees’ salaries based on their prior pay essentially creates different starting lines for negotiation, disadvantaging women and people of color who are systemically underpaid
To avoid exacerbating past discrimination, 21 states and several localities have curbed employers’ ability to ask candidates about salary histories.
Some states, like California, go even further and prohibit considering prior pay even when applicants volunteer it.
Courts, as well as a state statute in Massachusetts, have trended toward the conclusion that reliance on previous compensation cannot insulate employers from claims of pay discrimination.
Despite this tremendous progress, two states — Wisconsin and Michigan — have taken the unfortunate step of prohibiting localities from enacting salary history bans.
Even worse, Mississippi is currently considering cementing this discriminatory practice, as the state’s equal pay law, which has been approved by the Legislature, has an explicit loophole permitting employers to justify differences in pay based on differences in prior pay.
Moreover, currently permissible questioning about applicants’ salary expectations may be serving as an end-run around bars on prior pay inquiries.
Predictably, there exists an expectation gap for women and people of color that strongly correlates with the wage gap.
Not only may certain candidates have depressed expectations because of a dearth of information, but, as Robin Bleiweis from the Center for American Progress has written, the “economic and other societal biases that devalue” certain individuals’ work — resulting in lower pay in their current positions — “likely inform [their] expectations and may effectively present the same structural barrier to equal pay as questions about prior salary.”
For these reasons, some courts have already recognized that applicants’ salary demands do not necessarily reflect nondiscriminatory reasons that could justify pay discrepancies.
To ensure that past discrimination does not sneak into negotiations, laws should prohibit reliance on past pay, whether the result of direct inquiries or indirect probing on salary expectations.
Increase Transparency Around Plausible Compensation
Studies have consistently shown that pay secrecy policies, which ban employees from discussing their compensation, worsen inequalities in compensation.Yet employers persist in explicitly prohibiting or strongly discouraging workers from sharing with each other information about what they are paid.
Without access to information about what others earn, employees are in the dark about how their pay compares to that of their peers.
As a result, more than a dozen states have explicitly protected workers’ ability to discuss their compensation with each other. Nonsupervisors also have some cover under federal law to discuss their wages.
Recently, some jurisdictions have taken a further step to level the playing field by passing pay transparency laws.
Under laws passed in Colorado, New York City and, recently, Washington state, employers must affirmatively post the anticipated salary range for a given position.
Other places, like California, Connecticut, Maryland, Nevada and Rhode Island, require employers to make this information available upon request or at certain stages in the interview process.
Such proactive measures are of crucial importance to new hires, who have yet to meet their future co-workers, and to individuals who are less plugged into networks, often for reasons stemming from a problematic lack of inclusivity.
And in this era of increased remote work, without the proverbial watercooler, side conversations that create a whisper network of information exchange are far less likely to occur.
These legislative developments make great strides in putting the ball in employers’ court to do the heavier lifting toward closing discriminatory pay gaps.
To ensure that the policies have their desired sea change, a few things must occur.
First, pay transparency cannot be limited to base salary, but must also include all forms of compensation, including bonus amounts and form, e.g., cash versus equity.
Second, when workplaces post huge ranges in job ads, they should also use and advertise objective factors that are considered in placing a candidate on the pay spectrum.
And finally, employers must foster a culture where openness around compensation — from the top down — is not only tolerated but encouraged.
After all, hiring managers should welcome pay transparency measures that allow them to invest time interviewing only those applicants for whom the possible paycheck is not deal breaker.
Conclusion
Legislators should continue shifting the burden of closing gender-based and other pay gaps to employers by providing employees with more information, while protecting employee salary history from discovery by the employer.
Such a one-way flow of information starts to balance the scales of employer-employee bargaining power, which are currently uneven due to employers’ outmatched information access about their internal operations, and likely also that of their competitors.
By keeping past pay out of consideration and telling applicants what they can expect to earn upfront, such compensation policies go a long way in giving women and people of color more balanced positions in negotiations, and hopefully helping to address the scourge of unequal pay.
Read To Close Pay Gaps, Laws Must Shift Burden to Employers.