Women and people of color continue to earn lower wages than white men. One big reason is because many employers require job applicants to reveal their previous salary in order to set their new one. This strips workers of bargaining power, and can lock in lower compensation.
A new study from Boston University’s School of Law looked at what happens when employers are banned from requiring job seekers to share their salary history. Since 2016, 20 US states, cities, and territories—including Massachusetts, Puerto Rico, and the District of Columbia—have passed salary history bans. These laws are working, especially for women and Black workers, the study found.
After the bans were passed, many employers started switching from bargaining the wages of prospective hires to listing salaries in help-wanted ads. The share of online ads with salary information jumped to around 30% in the first quarter of 2019 from less than 10% before the laws were put in place, according to the study, which looked at data from 41 million online job postings collected by data analytics company Burning Glass.
The researchers also found that workers who changed jobs in the private sector earned an average of 5 to 6% more annually. The gains were even greater for women and African Americans.
The big salary increases among Black workers after the bans suggest the bargaining process is keeping their wages lower than those of white workers, the report’s authors noted. One of them pointed to the study’s results as evidence of structural racism.
African Americans and women are paid significantly less than white men, regardless of their experience, education, and overall productivity. In the fourth quarter of 2019, the median weekly earnings of women were about 17% less than those of men, according to the US Bureau of Labor Statistics. Black women and men earned around 30% less than white men.
These pay gaps can also add up quickly and compound over time. One estimate calculated a woman’s lifetime loss at $900,000 over the span of a 40-year career, according to the most recent report by Payscale, a compensation software and data company.