Pay Transparency Is Coming, and Employers Are Terrified

Hacker News - Wed Sep 15 05:59

Last fall, I did something I had never done before: I started looking in earnest for a new job. For the decade prior, I worked at Bloomberg News, and because I was happy there, I never got far enough in the few job interviews I took to gauge what I could earn elsewhere. After quitting in January 2020 to take some time off, I started sending out applications. 

I hated everything about the process. I hated writing the self-aggrandizing cover letters I knew no one would read. I hated "casually" reaching out to people I hadn't spoken to for years to see if they knew anyone who was hiring. I hated getting rejection emails — or worse, no response at all. But the thing I struggled with the most was figuring out my market value. I knew what Bloomberg had paid me, and I had a vague sense that it was probably more than what most other companies would. But how to know for sure? I scoured salary sites like Glassdoor, but they provided few specifics. When it came time to negotiate my pay with Insider, I was more or less flying blind. Eight months into the job, I still wonder if I left money on the table. 

When it comes to salaries, this is what it's always been like for job applicants. You make your best guess of how much to ask for, based on the few tidbits about pay ranges that you've been able to glean from friends and co-workers and job apps, and then you negotiate in the dark. It's a system of secrecy that benefits employers: By treating everyone's salaries as "confidential," companies are able to keep workers guessing about how much they're willing and able to pay.

That's all about to change. A growing number of states are enacting measures known as "pay transparency," which force companies to disclose their compensation levels. New laws set to take effect in Connecticut and Nevada next month, and in Rhode Island in 2023, require employers to provide applicants the salary range they pay for each position at some point in the hiring process. Four other states and two cities have enacted similar mandates, some of which also require employers to disclose their pay scales to existing employees. The most far-reaching law, which Colorado implemented in January, compels businesses to include their salary ranges in every job posting — effectively making their payroll public.

The measures represent nothing short of a revolution in the way salaries are negotiated, especially in white-collar jobs. Study after study shows that greater transparency narrows pay inequities based on race and gender. That on its own is an outcome worth celebrating. But I think these new laws could end up doing even more. If enough states enact pay transparency, it could forge a new national norm — one in which companies are as upfront about salaries as they are about prices. Think about it: Every business, from tiny boutiques to online giants like Amazon, tell you exactly how much each of their items costs. Why shouldn't it be the same when we're shopping for a job? 

"It's a great move," Felice Klein, a management professor at Boise State University who studies workplace compensation and inequality, told me. "It levels the playing field. Ultimately, applicants are going to appreciate that and be more attracted to these companies as well." 

The long march to transparency

Employers have long fought to keep employees in the dark about compensation. Some companies even instituted "pay secrecy" policies to prohibit employees from discussing their own wages with others. Such gag orders are illegal under federal law, and in recent years a growing number of states have cracked down on them further. But it hasn't made much difference, for a simple reason: In a culture in which discussing money is considered taboo, employees themselves are often reluctant to discuss their salaries.

There are five people in the world with whom I feel comfortable talking about my own pay: my wife, my sister, her husband, and my parents. Over the years, I've pushed myself to share my salary when colleagues ask. But to this day, these conversations make me nervous. Will they think I'm overpaid and hate me for it? Will they think I'm an underpaid pushover? Will I get in trouble if word gets around? In American society, we've all internalized the culture of silence around salaries, creating a kind of workplace omerta.

Recognizing an opportunity amid the secrecy, job sites like Glassdoor have shed some light on the closeted world of salaries. Crowdsourced sites and searchable databases are far from comprehensive or up-to-date, but they at least give you a general idea of what employers pay for any given position. Far better are the huge, survey-based datasets that HR departments buy to ensure that their salaries are competitive — but that isn't the kind of information they share with their employees.

The first state to compel employers to disclose salary information to job candidates was, predictably, California. As of 2018, employers in the state have been required to disclose a job's pay scale to applicants after their initial interview. But there's a twist: The applicant has to request the information. People can only take advantage of the law if they know about it — which, anecdotally, no one does. I've lived in California for most of the last decade and write about workplace issues for a living, yet I hadn't heard about the law until three weeks ago. Neither had my wife, who's an attorney in California, or my sister, who's in HR and just landed a new job, or any of my friends in the state. The law puts the onus on job applicants to demand their right to salary information, without requiring employers to let them know the right even exists.

Jerry Brown of California (standing, right) was the first to sign a law forcing employers to disclose salary ranges to job applicants.
Kristopher Skinner/Bay Area News Group/Tribune News Service/Getty Images

Similar "right to know" laws have been enacted in Maryland, Washington, Toledo, and Cincinnati. But this summer, three newly signed bills went even further. Employers in Connecticut, Nevada, and Rhode Island will soon have to disclose their pay scales to every jobseeker — even those who don't request the information. And employers in Colorado must now include their minimum and maximum pay levels in every job posting, for all to see. 

Colorado's law has terrified employers, and a trade group sued the state in an unsuccessful bid to block it. Their concerns boil down to two issues. First, job postings are visible to everyone. That makes it easier for competitors to poach their employees. It also reveals any pay disparities to their employees, who could use the information to demand the same salaries being offered to new hires. That, of course, is the primary point of the law in the first place: to promote equal pay for equal work.

Second, thanks to the boom in working from home, big national companies that have at least one employee in Colorado now find themselves required to post pay levels for any remote role that could potentially be performed in the state. Some employers tried to get around the new rule by barring Colorado residents from applying for their remote positions. State regulators quickly clarified that such exclusions are illegal, and moved to crack down on them. "We've hired extra staff to literally scour the internet for these remote job postings and send them enforcement letters," Scott Moss, who heads the division that enforces pay disclosure, told me. 

Most employers who received an enforcement letter have agreed to stop excluding Colorado applicants in their job postings. Those who don't respond will be subject to a formal investigation — which could result in fines as high as $10,000 per violation. "I'm already seeing Coloradans act surprised when a job doesn't post the pay," Moss told me. "It's becoming the norm in Colorado really quickly, because the law and compliance have gone very well." 

But given the boom in remote work, the state still has a ways to go to get to full compliance. I told Moss about Insider's own job postings that I scrolled through before our call, many of which were remote-optional. Not a single one included any salary information, even though the company has at least one editor based in Colorado. Is my employer out of compliance with Colorado's law, I asked Moss. "Yes," he said. (An Insider spokesperson told me that the company is currently reviewing its postings to ensure that they comply with Colorado law.)

A new normal 

Thanks to Colorado's new law, no region has seen a bigger boom in pay transparency than the Rocky Mountains. There, job postings that include salary information have quadrupled since 2019, according to Emsi Burning Glass, which tracks labor-market data. But the trend is taking place everywhere: In March through June of this year, 12% of job postings nationwide included salary information, up from 8% in 2019.   

It's not just the new laws that are driving the increase in transparency. In the wake of #metoo and Black Lives Matter, employers are under tremendous pressure from employees and shareholders to demonstrate a commitment to pay equity. A new wave of union drives, from digital media outlets to Amazon warehouses, are championing the kind of pay transparency that is a standard component of most collective bargaining agreements. And many companies are starting to realize that it's easier to post the same information everywhere, rather than trying to target disclosures geographically. 

"When Colorado passed, it seemed like a bit of an anomaly," said Christine Hendrickson, who co-chairs a pay equity group for the law firm Seyfarth Shaw. "But now we're seeing this ramp-up with new laws that are proactive. It's requiring employers to think really deeply about how they can comply with all these different laws." 

More information is good. Once people get information in a market, you never look back. Scott Moss, Colorado official who regulates pay disclosure

When it comes to compensation, I think we're getting close to the tipping point of a new normal. Soon, even beyond the handful of states that have implemented pay disclosure laws, job applicants will expect to know what they'll earn — and employees will expect to know that they're making the going rate for the jobs they're performing. This will be a gamechanger, especially in professional jobs, where pay levels are more variable than in low-wage work. "More information is good," Moss, the Colorado official, told me. "Once people get information in a market, you never look back. It becomes strange to think there was ever a time where we didn't have this information."

Plenty of companies are sure to resist this more transparent future. But once they stop clinging to secrecy, they may find that a better informed labor market works better for them as well. After all, job interviews are just as time-consuming for businesses as they are for candidates, and it'll save both parties a lot of time if their salary expectations are in line from the start.

Disclosing salary ranges could also offer managers a chance to improve relationships with their existing staff. "When pay's secret, people believe they're underpaid," Elena Belogolovsky, a leading researcher on pay secrecy, told me. And that leads to a lot of unnecessary resentment. One of Belogolovsky's studies suggests that, with transparency, people perform better on the job. It makes sense: When we know we're getting paid fairly, we can all stop worrying about whether we're getting screwed over and get on with the work we were hired to do. "Based on the research that we have," Belogolovsky said, "I truly believe that pay transparency will lead to better outcomes — for organizations, for individuals, and for society as a whole." 

If a world of open salaries sounds far-fetched, consider the fact that government jobs have offered full transparency for years. Civil servants seem to deal with the information just fine. My wife, who's a government attorney, knew what her salary would be before she completed a single line of her job application. With a simple Google search, she could even look up exactly what her peers and bosses make. Preparing for her recent performance evaluation, she spent plenty of time worrying about whether her supervisor thought she was doing well. But she didn't spend a single second strategizing for a raise, the way I almost certainly will when it comes time for my annual review. I think both she and her employer are better off for it.

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