Millions of job seekers may soon have access to closely guarded information about pay.
Six states recently approved wage transparency laws that require most employers to include pay ranges in job ads. Colorado debuted the policy in 2021 as a strategy to help shrink the persistent gender wage gap. California and Washington enacted similar laws earlier this year, and in September, New York will do the same.
The simple idea of disclosing compensation to job seekers went mainstream in 2023.
The governors of Hawaii and Illinois are expected to sign wage transparency bills lawmakers approved in the spring. In Maine, state senators will soon vote on a similar bill that passed the House in June. Council members in the District of Columbia are debating their own policy change. Most bills exempt small businesses.
Clarity around compensation is particularly crucial for women of color, who are more likely to be underpaid, said Da Hae Kim, state policy senior counsel for the National Women’s Law Center.
“We know that discrimination thrives in the shadows,” said Kim, who has testified in favor of the policy in multiple states. “[Wage transparency] shines a light on it and holds employers accountable for setting fair pay.”
Kim describes the new laws as an obvious solution to a major problem: the gender wage gap is costing women thousands of dollars a year.
Women who work full time earn, on average, 83 cents for every dollar a man earns — a number that has hardly budged since 2004, according to the Bureau of Labor Statistics. The disparity is even larger between women of color and white men.
Equal pay advocates say that forcing companies to be clear about how much they are willing to pay for a position gives women crucial information to negotiate a higher salary than they would get otherwise.
District of Columbia Councilmember Christina Henderson said such a change would help “level the playing field for black and brown residents” in the nation’s capital.
“The district cannot tolerate wage discrimination and it is imperative that this government adjust the mechanisms that hinder women from earning equal pay for equal work,” Henderson said at a recent hearing on the Pay Range Act.
What the research says
Emerging research shows how much the new laws could advance pay equity.
An economist at the University of Zurich found a 3% increase in pay for newly hired workers after Slovakia enacted a pay transparency law in 2018.
A study published this year by Zoe Cullen at Harvard Business School found evidence that wage transparency encourages workers to negotiate higher salaries and increases wage competition among companies.
Economists at the University of California, San Diego, and the University of Southern California studied data from Colorado after it became the first U.S. state to enact a pay transparency law in 2021. They found that employers who voluntarily posted salary ranges on job ads before the law went into effect increased salaries, on average, by 3.6% immediately after the policy change.
A study from researchers at the University of Toronto found an even bigger impact on women in academia. They analyzed pay disclosure laws required for government jobs and found “robust” evidence that they helped reduce the gender pay gap between male and female university faculty by about 30%.
Few business groups push back
States considering pay transparency laws have faced little public opposition from businesses.
Oregon Business & Industry, representing 1,600 companies in the state, is one of few that has voiced concerns. The group said in March that it opposed a pay transparency bill because it didn’t exempt small businesses and allowed job seekers to sue for damages if an employer breaks the law.
“Foremost, OBI worries a private right of action would open employers to extremely costly lawsuits for simple mistakes,” Derek Sangston, the group’s policy director and counsel, wrote in a statement to lawmakers.
The legislature has not held a vote on the bill yet.
In the District of Columbia, council members held a hearing earlier this month that drew no opposition.
Abel Amene, a former restaurant worker, asked lawmakers to expand it. He said most restaurant employees in the District won’t benefit from their proposed bill because it exempts businesses with fewer than 25 employees from complying.
He described how lack of pay information created financial hardship for him.
“You would go through an entire process of an interview, securing transportation with the little money you have to go to the place to interview, go through the stress of interviewing, only to find out afterward that the pay is very measly and not going to cover your expenses,” Amene said.
Council members seemed open to making changes to the bill.
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