Salary history bans can impact wage gap
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Last week, Canal Winchester State Senator Tina Maharath introduced a bill to the Ohio State Senate to prohibit employers from asking about applicants’ salary histories.
Applicant salary history has become a flashpoint in conversations about what can be done to close the gender pay gap. The argument is that past salary history can be a distorted view of a job candidate’s potential value if she spent time, for instance, raising a child, a responsibility that we all know falls disproportionately on women in the United States.
Laws that prohibit employers from requesting salary history information from job applicants are common in the United States, with 19 states banning the practice statewide and 21 local governments doing the same, including Cincinnati and Toledo in Ohio.
Do these bans work? Some evidence seems to say that it does. A 2019 paper by a Yale University economist finds that bans in the United States have reduced the gender wage gap in states that have put them in place by over 4%. Other evidence suggests that these bans have a smaller impact: An NBER working paper last year found state-wide salary history bans only increased the gender earnings ratio by 1%.
While some of this change in the gap does come from lower pay for men, there also seems to be an effect that increases pay for women. A study out of Boston University last year suggested that employers increase pay for job changers by about 5% after a salary history ban is enacted, with increases for women getting up to 8% and increases for African-Americans getting to 13%.
Bans such as these hinge on compliance, though, since many of them still allow workers to voluntarily disclose past salary history. A survey last year found a quarter of applicants always disclose past salary to potential employers. It also found applicants who disclose were more likely to be men than women, which is important since that 2019 paper found that much of the job of salary history bans comes in reduce salaries for men as well as higher salaries for women.
Some experimental evidence even suggests that the signals provided by voluntary compliance can be enough to perpetuate wage gaps. The author does not go as far as to say they would render salary history bans ineffective or that they worsen the problem of wage inequality, only that they may not work as well as intended.
Aside from the gender wage gap, salary history bans could also have other impacts that could be useful toward the goal of leveling the playing field for workers. People who are formerly incarcerated may have their wages suppressed by salary history requests. A recent paper finds some evidence that salary history bans can help reduce wage gaps created by beginning a career during a recession.
Salary history bans are unlikely to lead to the end of the gender wage gap on their own, but this is not what they purport to do. These bans are one tool that seems to be effective according to the evidence we have at moving the ball forward on reducing the gender wage gap. It will be interesting to see if this bill has legs and if other Ohio municipalities follow suit with Cincinnati and Toledo in the near future.
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