Pay transparency laws increase women’s salaries (and slightly reduce men’s)

The 2016 bestselling book ‘Hidden Figures’, later adapted into a popular movie, told the story of black female mathematicians who played a vital role in the US space program in the 1950s and 1960s, but who faced racial discrimination and were paid less than their male counterparts.

The gender pay gap existed before the era portrayed in the book and film, and it persists today, though it has narrowed in recent years. In 2019, the national median salary for full-time working women was $43,394, compared to $53,544 for men, according to the US Census Bureau’s American Community Survey.

The sponsor of a West Virginia bill aimed at closing that gap named it after two of the mathematicians featured in the book and film, Katherine Johnson and Dorothy Vaughan, both born in the state . The bill, which was introduced for several sessions but did not pass, would require employers to publish wages when posting job vacancies and prohibit companies from retaliating against workers who discuss their salary with colleagues.

Studies show that pay transparency, coupled with laws prohibiting companies from asking a candidate for their current or previous salary, can reduce the gender pay gap. If companies must advertise salaries for vacant positions and current employees can freely discuss salaries, applicants are less likely to receive or accept low offers. Studies show that women and minority candidates are most likely to receive such offers.

But research also shows that pay transparency tends to lower men’s salaries even as it raises women’s – and could lower wages overall. Multistate companies have found ways to circumvent laws by refusing to accept applications from job seekers who live in states that require transparency. And critics say pay transparency laws could persuade companies to hire fewer employees and could foment workplace conflict.

State Representative Barbara Evans Fleischauer, the Democratic sponsor of the West Virginia bill, said it foundered against opposition from Republicans and business interests. “One member said, ‘I don’t want my secretary talking to other people about what they’re doing,'” she recalls.

But 17 states already have similar pay transparency laws. In March, Democratic Washington Governor Jay Inslee signed legislation requiring employers with 15 or more workers to post pay scales beginning in 2023. A similar Rhode Island law is expected to take effect next year.

There are no studies readily available on whether state transparency laws have helped close the pay gap, since the first of the laws took effect just a few years ago, in 2018.

But a 2019 study of Canadian universities, which have similar requirements, found that the laws “reduced the gender pay gap by around 20-40%”.

“It’s very hard to underestimate a potential new hire if the potential new hire is able to contemplate a range of salaries,” said Thomas Jungbauer, assistant professor of economics at Cornell. “This can have a positive effect on wage differences due to gender or color. Employers may offer lower salaries to certain types of applicants. This makes things more difficult.

According to the US Census Bureau, the median earnings of women during the period 2016-2020, the most recent period for which samples were taken, showed that women earned 81% of what men earned as median salary. That’s better than the 59 cents on every dollar earned by women in the “hidden numbers” era, but still far from equal.

Data from the 2019 census also shows that the gender pay gap varies widely by state. The District of Columbia, Utah and Wyoming all had gaps above $15,000, while the gap was below $10,000 in states like Arizona, California, Florida, New York and La North Carolina.

New York debate

New York City’s Pay Transparency Act was supposed to go into effect this month, but the City Council in April voted to delay implementation until November due to business concerns about a lack of flexibility and fears the law was passed too quickly, according to Beverly Neufeld, president and founder of PowHer NY, a network of racial and gender justice organizations.

The new law will require employers to be given a warning and 30 days to fix their first offense before facing fines. It also eliminated the right to sue an employer for not posting pay scales unless you were employed there.

The Staten Island Chamber of Commerce was one organization that opposed the law, saying it would disadvantage New York businesses. Forcing them to publish salaries for vacant jobs, the chamber argued, would cause potential employees to look elsewhere for higher pay.

” The city [minority- and women-owned business] companies 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 offer,” the chamber said in a statement.

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New York State is considering a similar bill. State Rep. Latoya Joyner, a Democrat and lead sponsor of the bill, said in an email to Stateline that while the state has taken an important step towards closing the pay gap by prohibiting companies from asking respondents about their salary history, it will go even further with this legislation.

Overall, the gender pay gap in New York State in 2019 was $8,821, with women earning 85.5% of what men earn, but this 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 difficult 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 wages,” Joyner said. .

The bill awaits action in the Senate and Assembly, and Joyner said she hopes it will pass in June.

Limited efficiency?

Colorado’s Transparency Act went into effect last year, but a Denver-based 9News investigation found that at least 10 companies in May 2021, including Nike, Johnson & Johnson and Lincoln Financial, have stated in their advertisements that no Coloradans need apply for their openings. A later ruling from the Colorado Department of Labor outlined the regulations and said no company is exempt, even if the jobs are for remote work.

Meanwhile, a 2021 study by Harvard Business School Assistant Professor Zoe Cullen showed that making pay scales public reduces “individual workers’ bargaining power, leading to lower average wages.” The study found that wages fell by 2%, mainly by lowering men’s wages. The study used salary data from the American Community Survey and compared overall salaries in states where pay transparency exists to those where it does not. He modeled future effects based on these statistics.

“Empirical work and this model have shown that when employers get wind of the fact that there is greater transparency and have time to adjust wage-setting practices, they do so by negotiating more aggressively,” she said in a telephone interview. “They know that by increasing your salary, it weakens their negotiations. The result is that average wages are lower overall.

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