Academic Studies Diverge on Salary History Bans’ Effects on Worker Pay
States and cities are increasingly barring employers from asking about job applicants’ salary histories with the aim of closing pay gaps, but it remains to be seen whether those laws are having the intended effect, according to recent research.
An analysis of salary history bans published earlier this month by researchers at the Boston University School of Law found that employers posted wages more often and increased pay for job changers by about 5% more than comparable job changers. The analysis found pay increases were even larger for job-changing women and African Americans at 8% and 13%, respectively, the researchers said. Additionally, salary history bans do not affect either the rate at which workers changed jobs nor the characteristics of workers who did so.
Those findings follow the April publication of a study conducted by researchers at the University of Chicago, the London School of Economics and Burning Glass Technologies. The study found while online job posting increased and were more likely to include salary information, new hire pay declined.
At least 19 states (including Washington, D.C.) have issued bans that restrict in some way an employer’s ability to inquire or rely on pay history during the interview process.
The bans range from state-wide laws that affect all employers — as seen in California, New York and others — to bans that affect only the hiring processes of public-sector entities. And others, like Alabama, only hold that employers may not refuse to hire, interview, promote or employ a job applicant based on an individual’s decision not to provide pay history.
While salary history bans may help to modestly close the pay gap, they may also exacerbate information asymmetry among employers, the authors behind the April pay history study found. “Specifically, potential employers, facing greater information asymmetry, infer adverse selection in the applicant pool and offer lower pay,” the authors said. “Realized pay shows that the average earnings of new hires decline, with this decline being slightly attenuated for women.”
However, the large differences in compensation observed in the June analysis suggest that salary history bans may eliminate much of the wage gaps for job changers, the authors of the analysis said. “As a policy directed to reduce the gender wage gap, salary history bans appear to be effective for job changers and our limited evidence finds little reason to worry about negative effects on the quality of job matches or from adverse selection.” But the authors did note that the analysis “cannot fully assess the long run impact” of salary history bans on wage gaps faced by women and minorities.
Though estimates of the size of these gaps vary, sources have generally found that a pay gap between men and women persists despite narrowing in recent years. For example, in 2018, Pew Research Center found women earned 85% of what men earned. That same year, a Georgetown University report concluded that even after correcting for education and occupation, women earn 92% of what men earn.
Salary history ban advocates say that legislation can help eliminate these gaps, though the laws have also faced legal challenges in their respective states. Advocates received a legal victory earlier this year when the 3rd U.S. Circuit Court of Appeals upheld a ban enacted by Philadelphia in 2017. Local business groups challenged the law on the grounds that it violated employers’ freedom of speech, but the court ruled that the city’s law “was not more extensive than necessary.”
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