As I blogged about here and here, California and San Francisco recently enacted new laws prohibiting employers from asking applicants about their prior “salary history.” California currently joins Delaware and New York City as the only other jurisdictions that currently prohibit all employers from asking about salary history during the employment process. (Note: Several other jurisdictions have passed similar new laws, including Massachusetts, Oregon and Philadelphia, but those laws have not yet gone into effect).
Although every law is different, at their core each law prohibits employers from asking about or relying upon an applicant’s prior salary history when making hiring decisions, including the decision of how much to offer an applicant. Supporters of these laws point to research that shows wages paid to women and people of color are lower than wages paid to white men for equal work. Thus, by prohibiting employers from inquiring about that historically unequal information, employers will be prohibited from perpetuating this salary disparity. The result, they claim, will be that employers will end up paying all employees more fairly and evenly — based on current market conditions and not based on historical bias or prejudice that gets “baked in” with each new job.
But will these new laws actually achieve the intended goals? Possibly not, according to author Noam Scheiber. In an article that recently appeared in the New York Times, Mr. Scheiber questioned whether these new laws will force employers to guess when setting starting salaries. Research indicates that guessing is often laden with implicit bias and stereotypes. Employers who are deprived of salary information and who are therefore forced to guess may thus be worsening pay gaps and disparities, not reducing or eliminating them as intended by these new laws.
In addition, because most of these new laws allow an applicant to “voluntarily” disclose their salary history, employers who are forced to guess may “lowball” candidates because the employer assumes that the applicant will speak up if the number is too low. Thus, those employees who don’t speak up will make less than those who do. But research indicates that women in general are less likely to bargain than their male counterparts. If this plays out, the gender pay gap could get even worse and not better.
Mr. Scheiber raises some interesting points. In the past couple of months since California enacted their salary history ban law, I’ve advised several employer-clients who were making job offers to candidates. I’ve witnessed these employers — who now lack any salary history information to guide them — having to make tough educated guesses about what to offer their chosen candidates.
But I don’t see those educated guesses as being infected with salary-lowering bias. To the contrary, I see my employer-clients working hard to come up with an opening salary offer that usually ends up on the higher side of the market. Why? Because my employer-clients realize that the Bay Area is at or near full employment and that good employees are hard to find. Good candidates now usually have a job, so they have to be seduced and wooed and offered a more competitive overall package than what they currently have. So my employer clients are “aiming high” now in the absence of salary history data.
It could be that the new law is working as it was intended here in the Bay Area, given our robust local economy. It is allowing market conditions to dictate the terms of new employment, at least for fair-minded employers who operate as rational economic actors. But I wonder whether there might be more perverse outcomes once the market changes. Time will tell.
In the meantime, California employers need to update their hiring processes to ensure that they are not asking about or relying on an applicant’s salary history during the pre-employment process, unless that history was “voluntarily” disclosed by the applicant.
