To Close Wage Gaps, Ban Asking about Salary History?
Employers can't legally ask applicants their salary history in 14 states. New research indicates banning the question can make salaries more fair.
Banning employers from asking about salary history can help close the wage gap between white employees and those of color and between men and women, research finds.
The paper, which is not yet peer-reviewed, looks at the effects of salary history bans in the 14 states that have passed laws prohibiting employers from asking prospective hires about their past pay.
Across the United States, men outearn women in comparable jobs by 15%, and white employees outearn their Black peers by 11%, even after accounting for such differences as education, experience, occupation, industry, region, hours worked, and union coverage, says study leader Jim Bessen, executive director of the Technology & Policy Research Initiative (TPRI) at Boston University’s School of Law.
Women also take an extra pay hit related to the additional burden of childrearing and household duties that they typically do more of than men, Bessen says. “What our study is showing is that a very large part of the residual [wage] gap is for things that aren’t related to productivity,” he says. “It’s related to the [salary] bargaining process—possibly [tied to] discrimination or other inequities.”
In a paper reporting their new findings, Bessen and his team write, “Salary history reveals information about the applicant’s reservation wage”—the wage they are willing to accept—”that might give the employer a bargaining advantage. Job applicants currently suffering from discrimination or other inequities might well be willing to accept a lower wage offer than other workers with comparable capabilities.”
But discrimination can’t be blamed fully for wage differences, the study authors say: “For instance, they might reflect group differences in negotiating propensity. But salary histories enable a form of institutional discrimination. Even if employers do not individually discriminate, the use of salary histories appears to perpetuate the effects of past discrimination or other group inequities.”
That makes salary histories “a target for policy change,” the researchers conclude.
The study was inspired by insights from research the team previously conducted into technology measuring the success of help wanted ads, says Bessen. He and TPRI coresearchers Chen Meng, a postdoctoral associate, and Erich Denk, a research data analyst, noticed in 2018 a tripling of ads listing jobs’ salaries, the result of bans on salary history inquiries. The TPRI and the Ewing Marion Kauffman Foundation supported the new study.
Bessen shares more about the findings below:
What have the results been in states that instituted salary history bans?
We wanted to compare workers and employers with comparable workers and employers that are not covered by the ban. We looked at counties covered by a ban and those that are not. For instance, there’s a labor market that covers Fall River and New Bedford, Massachusetts, and Providence, Rhode Island; we compared the Massachusetts county that’s covered by a ban with counties in Rhode Island that are not.
We find a significant increase in the share of ads that employers list salary information on [in counties under a ban]. Number two, workers who change jobs [and] are covered by the ban are getting 5% more in pay than [those] who live in areas not covered by the ban [and] who are comparable in education, experience, all the observable ways. Normally, when people change jobs, they’re getting about a 4% increase, so the 5% is in addition to that.
Women earn 8% more when they change jobs, and Blacks earn 13% more when they change jobs. It’s very substantial.
Might employers say that salary histories reveal potential hires the employer shouldn’t overpay or shouldn’t hire at all?
If that’s true, we would expect to see more turnover—I’d hire somebody, find out pretty quickly that they don’t cut it, and they’re gone. We don’t find evidence of greater turnover.
The gender gap, you write in your paper, was dropping before salary history bans. Why was that happening?
The racial wage gap has also narrowed, and the biggest reason for both of them narrowing is greater equality in education. You’re getting more women who are going to college than men, and many more Black people attending college than before. But [the narrowings] had stalled out over the last decade or so.
Some, particularly in academia, have argued capitalism is unavoidably racist. What light does this study shed on that assertion?
There are many different flavors of capitalism. If we’re talking capitalism in Asia, it’s not clear the same racial dynamic applies; they may be dealing in a monocultural world. What our study shows is that different policies can change the character of capitalism. Clearly, when slavery was abolished, it changed the nature of capitalism. [Salary history bans] is a smaller change, but there’s quite a lot of room for capitalism to improve. A more pessimistic view might say civilization may inherently introduce tribal antagonisms that lead to racism.
Source: Boston University