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More states enact salary transparency laws to fight gender, racial pay gaps

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More states enact salary transparency laws to fight gender, racial pay gaps

Jul 10, 2024 | 5:00 am ET
By Madyson Fitzgerald
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More states enact salary transparency laws to fight gender, racial pay gaps
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A KFC employee hangs a sign for job openings at a restaurant in Miami. Several states have passed pay transparency laws that require employers to be more open about the wages and benefits they offer. Joe Raedle/Getty Images

To combat gender and racial wage gaps, nearly a dozen states recently have enacted pay transparency laws that require employers to be more open about the wages and benefits they offer.

Most of the laws require employers to disclose wages in job postings and some bar them from asking a job candidate about their salary history.

“Even though it’s against the law, we definitely still see that women are being paid less than their male counterparts, even though they’re doing the same job,” said Jessica Ramey Stender, a lawyer and the policy director at Equal Rights Advocates, a San Francisco-based nonprofit that focuses on sexual harassment and pay discrimination, among other issues. “And that’s a problem.”

Under the federal Equal Pay Act of 1963, employers can’t pay different salaries “on the basis of sex” to employees who do “equal work.” States have similar protections. Nevertheless, women on average have been paid less than men as far back as federal data has been collected.

Women on average earn about 84 cents for every dollar that men earn, according to the U.S. Department of Labor. Federal data also shows a racial pay gap: Latino, Black and Native American workers on average earn from 73 cents to 77 cents for every dollar a white worker earns.

We definitely still see that women are being paid less than their male counterparts, even though they're doing the same job.

– Jessica Ramey Stender, a lawyer and the policy director at Equal Rights Advocates

Part of the pay gap comes from the fact that women and racial minorities are overrepresented in industries that pay lower wages, according to the U.S. Department of Labor. But there is still a gap, though a narrower one, when men and women are doing the exact same job.

Pay transparency laws can close the gap further by providing women and people of color with more opportunities to see whether they’re being compensated fairly, Stender said.

“The hope is that with this additional information in their toolbox, everyone — especially women experiencing the wage gap — will be able to better negotiate pay for themselves,” she said.

But some critics of pay transparency laws question whether they’ll have the desired effect.

Todd Zenger, a professor of strategic leadership at the University of Utah, said requiring complete transparency is an extreme way to address pay equity. There’s also mixed evidence over whether prohibiting employers from asking about salary history could help or hurt job candidates, he said.

“There’s one argument that there’s gender differences in one’s willingness to bargain,” Zenger said, noting research showing that women might not negotiate in the same way that men do. “You can say, ‘This is what I need to come and join you,’ and if they’re able to ask about your prior pay, that sets some sort of common ground.”

Pay transparency laws also could lead to “flattened” pay, he said. Some people are paid more because of good performance, for example, but transparency laws could make it difficult to change pay on those less objective criteria, he argued.

Salary transparency and history bans

The number of states with pay transparency laws has grown significantly within the past few years, said Glenn Jacoby, a policy associate in employment matters at the National Conference of State Legislatures. Labor force participation still hasn’t reached pre-pandemic levels, but more people are looking to join the workforce and lawmakers want the job-seeking process to be smoother, she said.

So far, California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Minnesota, Nevada, New York, Rhode Island, Washington state and the District of Columbia have approved pay transparency laws.

The laws take varying approaches to ensuring transparency. They may require employers to disclose salary ranges for open positions, prohibit retaliation against employees who discuss their pay with colleagues, or require employers to report pay data to government agencies, according to GovDocs, a Minnesota-based company that tracks employment laws for large companies.

Some laws also mandate that employers provide salary information upon request, or prohibit them from asking job candidates about their salary history, according to Jana Bjorklund, the senior counsel and director of employment law and compliance at GovDocs.

“And this is all driven by pay inequity,” Bjorklund said.

A handful of cities, including New York City, Jersey City, New Jersey, and Columbus, Ohio, have enacted their own transparency laws.

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

Most states with pay transparency laws require employers of a certain size to post salaries for all open job positions. In California, companies with at least 15 workers must do so. But some states, such as Colorado, where lawmakers enacted new rules this year, require the transparency from all companies, even those with a single worker.

When states first began considering pay transparency laws, they tended to focus on requiring employers to provide salary information upon request, Jacoby said. In some cases, the requirement would apply only for applicants selected for an interview. Now, several states are expanding these laws to require compensation-related information in the initial job posting, she said.

In January, a law took effect in Hawaii requiring certain job listings to include an hourly rate or salary range. It also prohibits an employer from discriminating by paying one employee in a protected category less than another for substantially similar work.

The bill’s original language was inspired by conversations among recent college graduates struggling to find jobs, said Hawaii state Sen. Chris Lee, a Democrat. These laws make sure everyone is on the same page through the entire hiring process, he said.

“It’s both fair to the companies as well as the employees or prospective employees and helps ultimately saves a ton of frustration and time and effort by a lot of other folks who would be applying for these positions,” Lee said.

Still, Lee recalled that lawmakers heard complaints from small businesses concerned about being able to compete with larger companies.

In the District of Columbia, new rules went into effect last week requiring employers to include salary ranges in job postings and to disclose health care benefits before the first interview. A Maryland law with similar rules will go into effect in October.

“As a Black woman and as someone who works professionally, this is personal to me,” said Maryland state Del. Jennifer White Holland, a Democrat who helped pass the new law. “When we look at families in Maryland, it’s women’s earnings … that matter now more than ever.”

She cited the state’s Equal Pay Day report for 2024, which found that more than 40% of Maryland mothers are the lead or only wage earner in their household.

On average, women in Maryland are paid 86 cents for every dollar their male counterparts make, according to the report. Hispanic women in Maryland have the largest gender and racial wage gap, making just 50 cents for every dollar earned by white men.

Do the laws work?

While some states’ pay transparency laws are just going into effect, some preliminary research shows how such laws could be helping raise salaries for all workers.

A recent study in Colorado, the first state to mandate salary transparency, in 2021, found that not only did more companies share salaries within job postings, but the posted salaries increased by 3.6%. One possible explanation for the boost is that some companies adjusted their salaries to match their competitors and reach market equilibrium, according to the paper, which was written by a pair of economists in the University of California system.

According to a survey from the Society for Human Resource Management, a nonprofit for human resources professionals, 70% of organizations that list pay ranges in their job postings said they received more applications, and 65% said that listing pay ranges made the candidate pool more competitive.

Isabela Salas-Betsch, a research associate at The Center for American Progress, a left-leaning think tank, said the results are good news for businesses.

“When employees have more information, they feel more valued and motivated, which translates to greater performance and retention,” she said.

States Struggle to Close Their Own Gender Pay Gaps

But some small employers fear that pay transparency laws will make it more difficult for them to compete with larger companies for talent. Close to half of the almost 400 companies that responded to a 2022 pay clarity survey by global advisory company WTW cited possible employee reactions as a reason for holding back on communicating about pay. Still, many companies said they plan to increase transparency in their postings, even without local mandates.

Some experts warn that the laws could have unintended consequences.

In a 2016 article for the Harvard Business Review arguing against pay transparency, Zenger, the University of Utah professor, cited an experiment in which University of California faculty who discovered they were being paid less than their peers became much less satisfied with their jobs and more likely to say they might leave.

“There’s always a trade-off associated with these kinds of things,” Zenger told Stateline.