Pay transparency laws gather momentum in 2023 — a boon for workers
On January 1, new pay transparency laws requiring employers to post salary ranges on all advertised job postings went into effect in California and Washington state, with a similar one following later in the year in New York state.
Comparable pay disclosure laws are already in place in Colorado and New York City. Other states such as Maryland and Rhode Island require salary information to be provided when an applicant requests it.
Publicly revealing how much positions pay is slowly becoming a reality in the workplace despite a reluctance by employers to do so. For job seekers and those looking for promotions at their current employer, pay transparency can be a game changer.
“The momentum going into 2023 is encouraging that real change is ahead – not only in areas where laws are taking effect, but increasingly at the national level as well,” Maggie Hulce, executive vice president and general manager of enterprise at Indeed, told Yahoo Finance. “More employers are also starting to see it as a competitive edge to attract talent in a tight labor market. And pay transparency can also help close pay gaps that still exist across gender, race, and ethnicity.”
Why the new state laws are eye-catching
The California and Washington laws apply to firms with 15 or more workers posting job listings on a company’s careers page or third-party job boards like Indeed or LinkedIn. Businesses must also provide the pay scale to an employee for the job they currently hold, upon request.
In Washington, the pay scale must be included in the job posting if the position may be filled either in-person or remotely, according to the Labor Commissioner. Plus, a general description of all of the benefits and other compensation to be offered to the hired applicant.
Starting September 17, 2023, New York state will begin requiring employers to list salary ranges for all advertised jobs and promotions. New York Governor Kathy Hochul last month signed the legislation establishing the statewide pay transparency law, which applies to employers located in New York state with four or more employees.
The new laws are noteworthy because California and New York are juggernauts for large corporate employers and have the potential to set an example for employers in other states to emulate.
California, for instance, is the headquarters to powerful companies such as Wells Fargo, The Walt Disney Company, and Apple. Washington is home to Microsoft. And New York hosts big players like IBM and JPMorgan Chase.
“In recent years, states like Colorado, California, and New York have been willing to push the status quo on everything from recreational marijuana and criminal justice to minimum wages and salary transparency,” Kory Kantenga, a senior economist at LinkedIn, told Yahoo Finance. “Other states and the federal government often look toward them to see if their gambles are successful and follow suit when they are.”
The laws may be in effect, but employers can be slow to make the change
As of Dec. 4, nearly half (45%) of the U.S. postings on job board Indeed provided employer-provided pay information. And by the end of this year, roughly 1 in 4 workers will be covered by a state or local law that requires businesses to be transparent about their pay ranges, according to Payscale’s data, which takes into account all states and localities that have passed pay transparency legislation, including those that require pay ranges in job postings and those that just require disclosure upon request.
But even once the laws take effect, it can take some time for employers to get up to speed. As of Oct. 1, roughly 27% of New York City job postings on Indeed’s job board included employer-provided pay information. By Dec. 4, (the most recent data available,) a month after the new law was in place, that figure was 61% of job postings.
But employers, too, may find they benefit from the disclosures.
“Sharing salary ranges in job postings can also help give companies an edge on their recruiting and discover more qualified and interested talent,” Kantenga said.
Pay transparency and pay gaps
Another benefit to pay transparency is how it could help shrink the gender pay gap.
For instance, the gender pay gap was slashed by up to 45% in transparent organizations compared with those that didn’t disclose pay, according to a 2022 study published in the journal “Nature Human Behaviour.”
Disclosing pay has long been a no-no in the work world. Nearly half the full-time workers in this country are either discouraged or prohibited from discussing salaries, according to a 2021 report by the Washington, D.C.-based Institute for Women’s Policy Research (IWPR). That can put people of color and women at a disadvantage when it comes to salary negotiations. Pay transparency can help mitigate that, but it’s not a panacea.
“The underlying thought is that by making things more transparent and giving jobseekers a better sense of what the pay range is, women will be more inclined to negotiate, and the gap decreases,” Lise Vesterlund, a professor of economics at the University of Pittsburgh and co-author of “The No Club: Putting a Stop to Women’s Dead-End Work,” told Yahoo Finance.
“While pay transparency has been shown to decrease the gender pay gap, the policy fails to address the much larger structural problems that give rise to and sustain the gender gap in compensation.”
Kerry is a Senior Columnist and Senior Reporter at Yahoo Finance. Follow her on Twitter @kerryhannon.
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