A new wave of transparency is sweeping across America’s workplaces — and there’s no turning back. Earlier this year, California, Washington and New York joined Colorado in demanding pay transparency for most open jobs. Several other states and localities, including Illinois and Massachusetts, are now considering their own laws to require employers to disclose what they are willing to pay for open positions.
These laws were motivated, in part, by the stubborn persistence of gender and racial pay gaps, but also by the pragmatic recognition that wage and salary information was only accessible to businesses through pay services. benchmarking, and lucky people with well-placed friends.
The hope was that transparency would reduce – or better yet, eliminate – these well-documented market inefficiencies that impact workers’ lifetime earnings.
Obviously, the hope was justified. Early research on the effects of pay transparency laws, as well as research on similar rules in other countries, suggests that they often lead to significant reductions in gender pay gaps and to level the playing field. game for job applicants.
Despite the occasional social media screenshot of a comic broadstrip or the anecdote of a company deciding not to consider applicants in a state with pay transparency rules, these stories grab attention precisely because that they are the exception. THE overwhelming majority of companies posting jobs in pay transparency states follow the rules.
Since its inception nearly 15 years ago, Glassdoor has been at the forefront of making salary information more widely available to those who don’t have the right connections. We’ve seen first-hand the magic of pay transparency, but we’re also aware that it’s not a panacea for all labor market ills. There are many reasons to be optimistic about the new wave of pay transparency laws and important reasons to be vigilant about their unintended consequences.
To understand the new risks and emerging challenges, it is helpful to understand the recent enthusiasm for pay transparency in the context of a longer line of open information laws dating back nearly a century: public enterprises in the 1930s, food ingredients and nutrition in the 1960s. (expanded in the 1990s), federal campaign donations and mortgage lending practices in the 1970s, and public school performance in the 2000s, among others.
While in the beginning many of these new disclosure steps had their share of criticism, it is hard to imagine a functioning stock market today where investors could not access critical company information or where consumers are forced to wonder what ingredients (and potential allergens) may be hiding in their food.
Professionals tasked with implementing and fighting new pay transparency laws on the front lines seem cautiously optimistic about their potential. More than half (55%) of senior leaders employed in some of Glassdoor’s Best Places to Work in 2023 ‘disagree’ or ‘strongly disagree’ with the suggestion that greater pay transparency will make it harder to retain talent, and only a third (34%) ‘agree’ or ‘strongly disagree’ ‘agree’ that vacancies with salary information or salary ranges attract a pool of higher quality candidates. In general, they consider pay transparency a best practice, whether it is legally required or not.
In the past, pay transparency worked in part because it signaled a broader set of investments in a good employee experience: Companies that shared pay scales likely signaled to job seekers that ‘they cared more broadly about fairness and transparency with their employees.
This will not necessarily be the case in the future. Job seekers will have to look for new signals that an employer is genuinely invested in the compensation and fair treatment of their teams. For employers looking to stand out in the ever-competitive talent market, they will need to find new ways to communicate this virtue.
While sunlight can be the best disinfectant, funk inevitably flourishes in shifting shadows. The transparency requirement may displace rather than eliminate the market dysfunction it seeks to correct. Inequalities could appear on more difficult to measure dimensions such as use of benefits, career advancement and employee experience. Glass door research found that, beyond compensation, men and women report significantly different day-to-day experiences at almost a fifth of companies. We also identified significant experience gaps between racial/ethnic groups in nearly a third of companies. We are only beginning to discern the contours of workplace equity challenges in these emerging areas that have long been in the shadow of compensation.
When access to information depends on network, connections, or the ability to pay to play, access to information disproportionately benefits insiders and perpetuates long-standing inequalities. The new wave of pay transparency laws aim to address these age-old problems – and a growing body of evidence suggests they are doing just that. We can be both optimistic and open about where this will take us.
Aaron Terrazas is chief economist at Glassdoor.
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