Have you seen a salary range on any job listings lately?
That could be because pay transparency laws are
becoming more common in the United States.
New York City employers are starting to comply with the
new salary transparency laws.
A new pay transparency law in California is giving us
an inside look at what some of the biggest companies in
the world are paying their employees.
The rising tide of pay transparency laws could give
job seekers more leverage in 2023.
It's okay to ask, and it's also okay to look for that
information before you decide whether or not that's
a job you really want to go after.
Pay secrecy can allow gender wage gaps, racial wage gaps,
various sorts of unfair pay to really flourish.
But some researchers think that these laws could have a
downside.
What we found is that people get smaller raises.
It's slowed wage growth by approximately one third.
It's still hard to make sure that people are compensated
equitably and fairly.
Why are so many people suddenly talking about how
much they make? And is there any catch to this
news? A growing
portion of the United States is requiring
companies to disclose how much they pay for a given
job.
Pay transparency is sometimes used to mean not
punishing people for talking to each other about
how much they make.
But more and more, we're seeing efforts to ensure
that employers affirmatively provide
information to job applicants or to employees
about pay ranges for particular positions.
New York State, California, Colorado and Washington
State are all requiring that in job announcements.
These states have the most aggressive forms of pay
transparency. Everyone, even the people who don't
apply to the job, knows what the pay will be.
Other jurisdictions only make companies disclose pay
upon request from an applicant.
So we're seeing that in states like Connecticut,
Maryland, Nevada and Rhode Island.
Of course, there has been some degree of wage
transparency in the states for many years.
For example, virtually all federal government jobs list
pay ranges.
The U.S.' Is largest employers, the government --
all government salaries public. When you look at
professional sports -- we know what LeBron James
makes. So I just kind of feel like it's something
that that does have a lot of impact.
Workers have technically had the right to discuss their
pay rates since 1935.
This modern movement is far more potent.
It traces back to the Lilly Ledbetter Fair Pay Act of
2009.
I went to work for Goodyear Tire and Rubber Company in
Gadsden, Alabama, as a manager in production.
That being in the factory for 19 years.
I go into work on my shift and I find in my mail a
note. It's a fourth of a sheet of paper torn with my
name and three men.
The note said Ledbetter made less than her peers.
Including folks that she had trained.
She was basically being radically underpaid.
In his first month in office, President Obama
signed this law, which made it easier to sue employers
who pay their workers unfairly.
This has been a very long journey.
People like Lilly Ledbetter paved the way to make sure
that there will be equal pay laws on the books and
make sure now that there's a movement toward pay
transparency across the country.
Other factors, like technology, are changing the
conversation, too.
The Internet has allowed that sort of information
sharing to be sort of more normalized.
It's easier. Sites like Glassdoor, where people
share their salaries more or less anonymously, have, I
think, started to shift the culture and the set of
expectations.
Gartner put out a research study that talked about
whether employees believe that their pay is fair and
only 32% believe that their pay was fair.
That said, these laws could come with a catch.
There are these hidden effects, and it looks like
pay transparency through this bargaining channel does
very much affect wages.
And the effect is...
It's typically not positive.
A growing group of economists believe public
wage transparency may erode the bargaining power of
individual workers.
There is a stronger force that's underlying this, or
at least in some ways stronger, which says the
firm can now say to you, if there's pay transparency,
you know, I'd love to pay you more money than you're
making because you're a great worker, but I can't
pay you anymore. And the reason I can't pay you more
is as soon as I pay you, you know, a little bit more
than what other people are making, they're all going to
see that and they're going to come breaking down my
door asking for a raise.
Bobby Pakzad-Hurson is an economist at Brown
University. He and his coauthor constructed a model
that found an unintended consequence that stems from
pay transparency.
What we found is that people get smaller raises.
A very back of the envelope calculation reveals that it
slowed wage growth by approximately one third.
So this means that pay transparency might have the
unfortunate side effect of suppressing wages among more
educated workers.
That said, wages don't change as much for people
with less individual bargaining power, like union
members and those with less education.
Nevertheless, knowing the salary range may put many
disadvantaged workers on much better footing.
The issue that some have researchers have found that
perhaps overall wages decline by a couple of
percentage points.
Once there is a pay transparency law in place,
that pales in comparison to the double digit percentage
differences in pay.
When you're looking at perhaps women and men,
Blacks and whites, Latinos and whites, there were some
groups that were getting paid so much more than
others for reasons that had nothing to do with their
qualifications or very little to do with the
experience they had going into that job.
This is not only about earnings for my income and
my family back when I was working, but this is my
retirement. It was my 401K.
It was my Social Security, everything depends on what I
got paid. And because I never got that money and I
got shortchanged my retirement.
Is extremely low, and I'm better off in some of the
other women across the nation, and minorities.
But it is so critical that this get changed.
Also, in recent years, some companies have avoided
posting jobs in places that have pay transparency laws.
Colorado was the first state to require salary ranges in
job postings. And when Colorado required that, in
the immediate aftermath, there were some companies
that tried to get a little cute and in their postings
said, "You can do this anywhere in the country
except Colorado." You can't really do that when you have
industry leaders like New York and California
requiring this.
So I think it could actually backfire on some companies
if they list a certain state or a certain area that
has pay transparency laws as an area where they're not
necessarily looking for candidates. To me, that's a
red flag.
Salary transparency does give workers some
information to negotiate.
This could cause problems for hiring managers around
the country.
A lot of these companies just are not ready.
They're not ready because of fear of the
fallout of their current employees -- compression.
31% of employers don't feel like they're prepared to
comply. Employers are very, very nervous of their
existing employees being upset of the of the salary
rules.
Finding out the pay of other people affects, at least in
the short run, people's morale.
But there are some nuances.
So a recent study finds that if if you find that
your boss is paid more, that that might actually
increase your morale because you can say, well,
great. Five years from now, I might be in that position.
And so let me work harder to get there.
These new laws are coming about in a tight labor
market.
When we're looking at an unemployment rate as low as
it is right now, this is a great opportunity for many
workers to seek another position
In 2023.
Transparency is giving job seekers more power.
Experts believe that anyone looking to make a switch
should move fast.
Quits are falling from pandemic highs as the
Federal Reserve tightens the economy.
Our model predicts that we should see more muted
effects whenever there is a tighter labor market.
That said, there could be another unintended
consequence. Transparency requirements may push
companies to seek out talent without advertising
publicly. All the same, many people believe pay
transparency is a win win for businesses and employees
alike.
It helps get a better match between applicant and
employer -- it saves everybody.
Time to know that at the front end.
Also, keep in mind that this is about career growth too.
Pay transparency laws present an opportunity for
you to ask for more than just pay.
Things like mentorship, travel to conferences,
getting professional development. I also think
it's important to to start the conversation once you
know what the pay is or even if you don't.
How do you determine that pay?
What are the qualifications? What are the
skills that are required?
This puts a lot of control in the hands of the job
seeker.
If you've got all this knowledge at your
fingertips, just research it.
You really need to talk to people and find out how is
the job? How are these people as an employer, and
how will we be treated?
We do see that pay transparency policies across
a number of labor markets have indeed decreased
inequality and forms of the gender wage gap.
I view that as a good thing. We also see across a
number of studies that pay transparency lowers wages.
I view that as a bad thing, as the juice worth the
squeeze? In some sense, I think we have to weigh these
tradeoffs, and I think that's for policymakers and
voters to decide.
It's just a mindset shift and the change that
leadership and people need to get used to.
Come up with a structured process for you to give
raises based on productivity, based on
measurable KPIs, and kind of embrace this change.
Take the take the time now to fix some of those
compression issues and set yourself up for future
success.
Information is power.
I think that we'll continue to see this push across the
country.