Led by the rationale proffered by legislatures in support of pay transparency laws, I have been thinking about them from the wrong perspective. Promoted as a means of closing the gender wage gap, I have been vocal in my criticisms that the laws will be of little or no effect for two key reasons. First, because they do not get to the root problems that produce most of the pay gap, as I discussed in this blog article. Second, because even where they provide useful information for negotiations, they do not overcome the tendency of certain groups to “undersell” themselves.
Reflection on their efficacy is important, because the laws are proliferating and the existing versions are already being tweaked. Less than three months after it took effect, New York City is considering amending its pay transparency law, partly to align with the New York State version of the law, and partly to capture forms of compensation beyond base salary. The city’s proposed amendments to the law will not do anything to address its deficiencies in resolving the gender pay gap.
Connecticut, on the other hand, currently has an earlier version of pay transparency, which requires employers to disclose salary ranges to job applicants during the hiring process. The state is considering amending the law to align with the approach in New York, California, and Colorado, and require that salary ranges appear in job postings. That is a distinction with a difference. Not so much for the gender pay gap problem, but relative to the new way in which I am considering the benefits of pay transparency.
Reconsider Pay Transparency as Serving a Different Beneficial Purpose
How are pay transparency laws helpful to U.S. workers? Sometimes you need to consider things from a different perspective. The aha moment for me was in the epilogue of Barbara Ehrenreich’s book, Nickel and Dimed, which I recently had the opportunity to read. Reflecting on her own experience as a journalist undercover, temporarily occupying the space of a low-wage worker, Ehrenreich observed that her coworkers in those positions had little opportunity to comparison shop for higher-paying positions.
Time is money, transportation is money, and when you have little or no money saved, you cannot afford to hop between multiple employers and interview processes. You only go to as many places as it takes to land a job, even if it is not the best job.
We Don’t Talk Much About Money
Friends and family may provide few insights into other work opportunities because, at all levels of society, most people tend not to say how much they are paid. This was illustrated last month, when The New York Times ran a Sunday feature on people’s compensation, “27 People on the Streets of New York Talk About How Much They Make.” They reported that most of the people they stopped on the streets (nearly 400 were asked) declined to speak with them on the record about how much they earned.
Similarly, from the employer’s perspective, I suspect my own approach is similar to that of most small business owners. Even this past year when I knew pay transparency laws were on the horizon I did not list pay in my job postings. In my interviews with candidates, pay is usually one of the last points covered, and only if I am asked. But why is that? I have done benchmarking and believe I am paying on the higher end for the roles I am filling. And yet I have historically hidden that fact. I could say I wanted people to work for me because they were interested in the work and not the money. While true, I am not sure that was my motive. Rather, I think I am just reticent to talk about pay, worried that my benchmarking is wrong, or that I am planning to offer too much and should pay less. I hedge as long as I can before committing to compensation to reassure myself that I am not overpaying the person or, if I am, that it is because they are a great candidate and worth the investment.
Comparison Shopping Is a Valuable Benefit
Overcoming that reticence and secrecy to allow for “comparison shopping” is how pay transparency laws can make a difference for workers. Imagine if every help wanted ad in the paper or online included a wage range. Employers would be disinclined to inflate that number, lest too many of their current employees start to question their pay, and they would not want to lowball it too much, lest they lose out on attracting the best candidates.
How valuable would it be for people who are barely getting by financially to have salary information for dozens of open jobs at their fingertips? They could quickly pinpoint the highest paying opportunities and prioritize applying for those. Would that equalize pay between men and women, or between individuals of different races? I am not sure that it would for the various reasons I have covered in prior articles. But it sure might help those at the bottom rungs of the pay scale do just a little bit better. Over time those incremental differences can mean the difference between paying for food, shelter, clothing and transportation, versus having to forego one or more basic necessities.
For low wage workers, then, there is a benefit to pay transparency laws. And for any worker the laws force disclosure of data that allows for some degree of benchmarking and comparative analysis, which can help inform wage negotiations. But at more skilled, higher-level positions, the compensation range for posted positions tends to get wider, so the comparative data is less helpful.
New York City’s Newest Contemplated Changes Will Not Help
Currently, New York City only requires employers to disclose base salary, not incentive compensation or commissions. The City Council is considering amendments to the law that would require inclusion of the job description, which would make the law consistent with New York State’s pay transparency law that takes effect in September 2023. The amendments would also require employers to describe the non-salary or non-wage compensation for the position, including bonuses, benefits, stocks, bonds, options and equity or ownership. All that additional data will make for a mighty long (and pricey) job posting for employers, and in my experience those non-wage factors can encompass so many variables that the information employers include in their postings in response to such a mandate will be of little value to applicants.
Rather than bog down employers with further mandates and clutter their job postings to such a degree that the most useful information gets lost in the fine print, local and state governments would be better served in recognizing the value of mandating pay transparency in job postings simply as to base salary. For those who lack the time and resources to interview widely or otherwise collect comparative pay data, it could be invaluable. As for solving the gender pay gap, move past the quick fix window-dressing of pay transparency. Instead, consider the societal changes needed to really make a difference.
By Tracey I. Levy