Like a lot of policies intended to help women and minorities, barring employers from asking job applicants about their salary histories sounds like a good idea.
But it would probably do nothing to help these groups. And it might even make things worse.
This proposal has proved popular among liberals, and legislation is set to be introduced in the House by three Democrats next week. A similar law passed last month in Massachusetts, and the idea is under consideration in New York City, New York state, California and Colorado.
The motivation behind such legislation is understandable. Women earn less than men, even after controlling for factors such as occupation, sector and experience. Ditto for blacks and Hispanics, relative to whites.
This wage gap opens at the start of workers’ careers, which means that using past salaries as a baseline for offers at new jobs can perpetuate inequities. Hence the solution: Let workers start afresh, with no salary baggage to weigh them down.
“Women and minorities often face discrimination in the job application process and in salary negotiations,” said Del. Eleanor Holmes Norton (D-D.C.), one of the bill’s sponsors. “Many carry lower salaries for their entire careers simply because of wages at previous jobs that were set unfairly.”
When you think it through, though, this logic starts to unravel.
First, it assumes that whatever mysterious factor causes the wage gap at the start of workers’ careers (reluctance to negotiate, outright discrimination, something else?) disappears in later job-hopping — and that inertia is what’s keeping these inequities around.
Which, of course, doesn’t explain why the gap persists for brand-new workers today.
Additionally, previous attempts to prohibit employers from gathering information they seem hell-bent on using have just led them to use proxies that end up doing more harm to historically marginalized groups.
Take, for example, “ban the box.” Such laws, passed in states and cities around the country, forbid firms from asking applicants if they have criminal records early in the hiring process. The goal is to help the previously incarcerated get a fair chance at an interview.
I’ve been sympathetic to this policy. But two new studies suggest that banning the box doesn’t actually help ex-offenders get jobs, and instead reduces employment for black and Hispanic men without criminal records.
Why? Firms that want to avoid hiring ex-offenders practice “statistical discrimination”: If they can’t glean information about criminality directly, they make pernicious assumptions based on an applicant’s race. And so many stop interviewing black and Hispanic candidates altogether.
Such discrimination is not fair, or legal, but is difficult to police.
Other studies have found similar results for policies stopping employers from using credit scores and drug testing to screen applicants. These laws were often enacted with the goal of helping black workers but also had the unintended consequence of reducing black employment.
Of course, barring employers from asking about past salaries is different from asking about a stigmatizing record or behavior. But one could imagine a similar result: In the absence of more tailored information about how much money to offer potential hires, firms might end up lowballing all applicants from demographics that usually earn less (such as blacks, Hispanics and women).
And because there’s nothing to prevent applicants from volunteering information, highly paid candidates might cheerfully provide their salary histories — hoping to get a better offer — while poorly paid candidates stay mum. This could in turn lead employers to infer that anyone who discloses nothing can safely be offered very little.
So we’re basically back to the status quo.
Finally, a salary gag would add even more frictions to the hiring process.
Already, firms are taking longer than ever previously recorded to fill job vacancies. If policymakers make it harder to figure out upfront whether a candidate fits into a company’s budget, the hiring process could get even more protracted. Employers may also find themselves spending more on headhunters whose sole job is to divine who’s poachable, so firms don’t waste time pursuing candidates they can’t afford.
If policymakers really want to close the wage gap, they should focus on making salary information more transparent, not less. Passing the Paycheck Fairness Act, for example, would tighten prohibitions on pay secrecy so that workers wouldn’t have to worry about retaliation if they asked co-workers how much they earn.
Coaching workers (especially women) to be better self-advocates, and more effective negotiators, would go a long way, too.
But artificially limiting the terms of the negotiation process seems ineffective at best, and destructive at worst.