Why Banning Questions About Salary History May Not Improve Pay Equity

Lydia Frank

Last year,Massachusettspassed the first law in theU.S., banning employers from asking job candidates about their salary history. Since then, several other cities and states have followed suit or are considering similar legislation. The topic has sparked some heated debates and even resulted in a lawsuit in one city, brought by the Greater Philadelphia Chamber of Commerce.

The intent of this type of legislation is to address the gender pay gap by ensuring that low pay doesn’t follow women from job to job and compound over time. PayScale, the compensation data and software company where I work, regularly examines trends and questions regarding employee pay, so we conducted a survey to better understand the relationship between the salary history question and the gender pay gap. What we found surprised us and almost everyone we’ve shared the data with to date – from career counselors to gender equity advocates to employers and employees who thought they were doing things right.

Between April and June of this year, we asked 15,413 job seekers who visited PayScale.com to evaluate an active job offer whether they disclosed their pay at previous jobs at any point during the interview process. The possible responses were:

(A) No, and the employer did not ask.

(B) No, but the employer asked.

(C) Yes, the employer asked about my salary history.

(D) Yes, I volunteered information about my salary history.

(E) I do not recall.

The respondents were also asked a number of detailed questions as part of PayScale’s ongoing employee compensation survey about themselves and the employer they were considering – job title, location, years of experience, industry, age, gender, etc. When examining findings around potential gender pay gaps, we controlled for all of these factors with the exception of gender to ensure we were comparing similar individuals seeking similar jobs at similar companies.

The widely held assumption is that revealing your salary history, especially if the number is below market value, could negatively influence the offer made by the employer with whom you’re interviewing. However, this study revealed that a woman who was asked about her salary history and refused to disclose was actually offered 1.8% less than a woman who was asked and did disclose. Meanwhile, if a man refused to disclose when asked about salary history, he received an offer that was 1.2% higher than a man who did.

As with any data analysis, individual circumstances may vary, so it’s entirely possible that sometimes revealing your salary does negatively influence your offer. However – at a macro level – that’s not typically what’s happening. These findings seem to undercut the whole premise of banning the salary history question in order to level the playing field for women when it comes to compensation.

But, why would not talking about salary history impact a compensation offer negatively for women and positively for men? Our analysis didn’t reveal the answer, but based on some well-known studies that exist around unconscious bias, I have two hypotheses.

· People react negatively when women negotiate for higher pay. We know from numerous studies that women face a “social cost” that men do not when they initiate salary negotiations, regardless of the gender of the person with which they’re negotiating. By not disclosing their salary, the women in our study may have signaled to a potential employer that they were intent on negotiating – and were punished for it. Women, it seems, may be penalized for sending this signal, while men are not.

· Employers may assume women who refuse to disclose pay earn less. Whether it’s conscious or not, employers may be jumping to conclusions about a woman’s salary when she declines to reveal it. The fact that a pay gap still exists for women is well documented; most hiring managers are likely aware of this issue. Does the gender of the candidate refusing to disclose pay, then, affect an employer’s perception of what that candidate is likely paid (i.e. that a woman likely has a low salary)? In the absence of information, what information is being assumed?

In our study, both male and female refusers tended to earn more in their current jobs than the candidates who revealed their salary history, regardless of whether they were asked or volunteered the information. What an employer didn’t know, in this case, potentially hurt some of our respondents, as offers made to these women were less than those made to women who disclosed salary.

There is a lot more research to be done on this topic area at PayScale, but in the meantime, it’s clear that asking salary history is having a negative impact on female job candidates, just in a different way than was previously believed. In addition, it’s worth remembering that there’s likely a double standard taking place with any salary history request: When employers ask about past pay, they’re asking for a level of transparency from the candidate that they’re often unwilling to meet themselves. Try asking a group of recruiters or hiring managers whether they’d consider including salary ranges in their job postings. I expect you’d be met with an awkward silence.

The bottom line is there’s a better way to approach this situation. The most typical reason employers offer for asking about salary history is to ensure they’re not putting candidates through the interview process who are already earning more than the budget available for the position. However, there are some misguided motives at play as well. Some employers are trying to determine what to pay for a position by asking a handful of candidates. Other employers are hoping to save on budget by lowering an expected offer based on a candidate’s current pay. These are not good reasons for asking salary history and generally don’t result in the right outcome for either the candidate or the employer.

What can employers do instead?

· Stop asking the question. The relationship with a potential new employee should get off to a good start, so don’t put them in the awkward position of having to decide what to reveal about their previous pay. Avoiding the question gives a better impression about the way pay is set at the organization.

· Price the job, not the person. A candidate’s current salary should have no bearing on what an employer is willing to pay for a particular position. Compensation should be a data-driven decision based on the current value of a given position in the talent market. Certainly, a candidate’s unique skills may place them lower or higher in the pre-determined range, but their current salary shouldn’t be the basis for determining their pay.

· Tweak the process for setting pay expectations. If the reason for asking salary history is to establish whether a candidate is above the available budget for a position, there are other ways to get to that same answer. Employers could ask about a candidate’s salary expectations. Or they could consider a bold step and try sharing the range for a position. They can make clear that the candidate will be placed in the range based on their specific skill set or experience level.

The negotiation process is an opportunity to start a healthy conversation about the way pay is established and managed at an organization. Rather than approaching it as a way to save money, employers and hiring managers can use pay negotiations to build trust with a candidate – man or woman – right from the start.

It remains to be seen whether legislation banning employers from asking the salary history question will have any positive impact in terms of closing the gender pay gap. On the one hand, if what’s happening is unconscious bias from employers toward women who refuse to answer the question, then not being able to ask may alleviate some of the gap we’re seeing in offers to female disclosers versus refusers. If, however, the real issue is around employers filling in the salary blanks differently based on gender when candidates don’t share their current salary, a ban on asking for pay history may not get the job done.