Are pay transparency laws working?

Sofia, a 28-year-old tech worker, who was recently laid off in California, is part of this majority. “If I can’t see a salary range on a job, it makes me wonder what the company is trying to hide,” she says. Fundamentally, says Sofia, whose last name is being withheld to protect job prospects, she’s looking for an employer who is comfortable with transparency on everything – and that extends to compensation.

She also says that a general move towards greater transparency across the labour market has made her feel more confident advocating for herself and asking for an estimated salary – even if the job in question is in a state without pay range legislation. “In the past, I’ve often been asked in job interviews what my salary expectations are. But I always feel like that’s a trick question because I might be underselling myself,” she says. “I’m definitely not going to fall for that again.”

And she believes, more fundamentally, the laws that have passed have moved the conversation around pay equity into the mainstream. This is good, she says, as it creates more public scrutiny, and encourages self-advocacy among employees who might consider themselves undervalued.

Too many loopholes

Beyond this, however, both academics and legal practitioners are sceptical about their larger effects.

Even though there’s no data yet to illustrate the impact of the new laws, some say they’re not sure how effective they’ll be. In principle, laws like this are a good thing, they say, but in practice, the evidence that they can effectively remedy pay gaps and stamp out inequity has yet to stack up.

One of the key shortcomings of many of the state laws is that loopholes exist that can relatively easily be exploited. The New York law, for example, is based on “good faith”, and mandates companies to determine ranges based on their best estimates. But there’s no mechanism to check whether ultimate offers fall within the ranges initially provided. And almost immediately after the New York pay range laws came into effect, companies began posting intentionally broad on some job advertisements. Some workers have observed range differentials of more than $100,000 on posted listings. Companies also aren’t required to list exact figures around bonuses or equity, which changes the compensation calculation, too, and can also reinforce biases.

This sort of behaviour indicates that there’s still much work to be done, says Tom Spiggle, an employment lawyer based in Virginia. “Employers posting wide salary ranges does little to help prospective employees know how to negotiate an appropriate salary,” he explains. He’s hopeful, however, that “courts and regulatory bodies will eventually weigh in as contested cases move through the system.” This, says Spiggle, will offer an “opportunity to curb abuses”.

Jennifer Gant, a lecturer in law at the University of Derby in the UK, explains that the underlying problem with requiring strict or narrow salary ranges is that it limits flexibility in terms of negotiation.

And employees who are able to negotiate salaries report that the ads feel ineffective. Tim, a 28-year-old finance professional, who’s based in New Jersey but works in New York City, said that he received a job offer that was $10,000 dollars above the range stipulated in the advertisement. “I negotiated hard and managed to get them up higher,” he explains, “which makes me think the pay range legislation is pretty useless.”

Part of a broader solution 

Ultimately, experts agree that even though some elements of pay transparency laws are effective, they’re generally only part of a broader solution for fixing inequity in the workplace.

In addition to more transparency, the scholars suggest companies need to address structural inequities by conducting honest pay audits, offer better policies relating to things like parental and carers’ leave.

“It’s a great first step,” says Spiggle. “As someone who represents employees, pay disparity cases can be difficult when employers claim that pay data is confidential.”

He says transparency laws are a “crucial first step”, because they provide employees a tool to use to find out what their peers are paid. “This is particularly important for women, as women in some industries are systematically paid less than their male counterparts,” he adds. “These laws provide a little bit of sunshine into compensation practices.”

Gant agrees. “Salary transparency is definitely worth it, as it will have reduced discriminatory practices,” she says. “It may not be a perfect solution, but it is a good start.”