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.
