Pay Transparency Laws Raise Women’s Salaries (And Slightly Lower Men’s)

Multistate companies are finding ways to circumvent the laws.

 The gender pay gap is no secret between men and women and has existed for many decades. A popular film “Hidden Figures”, which was also a book, told the story of black female mathematicians in the U.S. space program who were discriminated against and also paid less than their male counterparts. While this took place in the 1950s and1960s, we know it began many years before that. According to the U.S. Census American Community Survey, that pay gap is decreasing. In 2019, the national median salary for women was $43,394, while men were at $53,544.

There is a bill, from a sponsor of West Virginia, where two of the mathematicians are from, aiming to close that gap. The bill has been introduced for several sessions but has failed to pass. It would “require employers to publish salaries when advertising jobs and would prohibit companies from retaliating against workers who discuss their pay with colleagues” (Povich 22).

In recent studies it is shown that laws that prohibit companies from asking an applicant about their current salary or previous salary mixed with salary transparency can narrow the gender pay gap. If companies are forced to advertise the salary for open positions, it can prevent employees from accepting lowball offers. Studies have proven that women and minority candidates are the ones most likely to receive such offers. Studies have also shown that salary transparency has the potential to lower salaries across the board, as it lowers men’s salaries. Companies have found ways around this, like not accepting applications from states that require transparency. It can also lead to companies hiring fewer employees and putting more work on their current employees.

“State Rep. Barbara Evans Fleischauer, the Democratic sponsor of the West Virginia bill, said it has foundered against opposition from Republicans and business interests. “One member said: ‘I don’t want my secretary talking to others about what they make,’” she recalled. But 17 states already have similar pay transparency laws. In March, Washington Democratic Gov. Jay Inslee signed legislation requiring employers with 15 or more workers to post salary ranges beginning in 2023. A similar Rhode Island law is scheduled to take effect next year” (Povich 22).

Because so many of these laws have just taken effect, the earliest being in 2018, there are no studies yet to prove that salary transparency has closed the pay gap. But in Canada, a 2019 study showed that similar requirements found that the gender pay gap was closed by 20 to 40 percent. “It’s very hard to lowball some new potential employee if the new potential employee is capable of looking at a range of salaries,” said Cornell economics assistant professor Thomas Jungbauer. “This can have a positive effect on wage gaps because of gender or color. Employers might offer lower wages to certain types of applicants. This makes it harder.”

The U.S. Census taken in 2019 shows that the gender pay gap varies largely from state to state. For example, in Utah and Wyoming there are gaps of $15,000 or more, but in states like New York, California, and Florida it was less than $10,000. Still from the time period of 2016-2020, women only made 81% of what men earn as a median salary.

New York City’s pay transparency law was supposed to go into effect in June but has since been pushed back to November because of business concerns about a lack of flexibility and worries about the law being approved too quickly. “The new law will require that employers get a warning and 30 days to fix their first violation before facing fines. It also eliminated the right to sue an employer for not posting salary ranges unless you are employed there. The Staten Island Chamber of Commerce was one organization that argued against the law, saying that it would disadvantage New York companies. Forcing them to publicize salaries for open jobs, the chamber argued, would push prospective employees to look elsewhere for higher compensation. “The city’s [minority- and women-owned business] firms are generally at a disadvantage in competing for scarce talent and are likely to be outbid if a majority competitor has access to their salary offering,” the chamber said in a statement(Povich 22).

New York state is attempting to put into law a similar bill. State representative Latoya Joyner, a democrat, and the primary sponsor of the bill, said that the state has taken a step toward closing the gender pay gap by forbidding companies from asking potential employees about their current or past salaries, but this bill will take it even further. Overall, the pay gap between men and women in New Yorkstatein 2019 was $8,821, with women making 85.5% of what men make, but that gap differed by race and ethnicity. For White workers the gap was $12,000 (83%), while it was $3,500 for Hispanic workers (92%) and $2,900 for Black workers (94%). There was no gender pay gap for Asian workers. “Workers—especially women—still face a very daunting work environment when it comes to compensation, and we need to do more to create a level playing field in the workplace when it comes to salaries,” Joyner said. The bill is awaiting action in both the Senate and the Assembly, and Joyner said she was hopeful it would pass in June (Povich 22).

Last year Colorado’s transparency laws went into effect,-and it was found that at least 10 large companies, like Nike, made it clear that no Coloradans should apply for their openings. A Colorado department of labor made it clear that no company is exempt, even if the jobs are for remote work.

“Meanwhile, a study in 2021 by Harvard Business School assistant professor Zoe Cullen showed that making pay scales public reduces “the individual bargaining power of workers, leading to lower average wages.” The study found the wages went down by 2%, mostly by lowering men’s pay. The study used salary data from the American Community Survey and compared overall salaries in states where pay transparency exists to those where it doesn’t. It modeled future effects based on those statistics. “Both the empirical work and that model showed that when employers catch wind of the fact that there’s greater transparency and have time to adjust pay setting practices, they do so by bargaining more aggressively,” she said in a phone interview. “They know that by raising your wage, it weakens their negotiations. The upshot is that average wages are overall lower” (Povich 22).

By: Beth Gray