If you are an employer in New York, starting October, you will not be able to ask a candidate interviewing for a job in your company about his previous salaries. By the rule of law, employers have been banned to ask the Salary Question in New York. Massachusetts, the first state to pass this legislation, will adopt this in 2018. Other states in the US are also preparing to pass this legislation. But why ban the salary question? The idea is to lower the gender pay gap and bring equity in pay. Women, if they start with low pay compared with men, the gap keeps compounding as they move up in their careers because the next salary is more often than not based on the previous one.
But does the banning of the salary question bring equity in pay and bridge the man-woman wage divide? Is the question of previous salary so rudimentary to pay equity that it should be banned universally? Will it be helpful to the job-seekers and employers alike, or would it end up harming their prospects of competitive wage?
In this article, we look the positives and negatives of every aspect of banning the salary question.
Positive (+): Standardized pay
Companies may decide to level and equate the salaries given to employees for certain roles, and either narrow or remove the bracket within which employees are paid. This would remove inequitable distribution of salaries, where some employees get more money for the same role than others.
Negative (-): Low pay scales
Companies could use this as an advantage and lower the pay scales for different roles, keeping them all equal. It also eliminates the idea of pay for performance and gives precedence to years of experience than the skills of an individual.
Impact on gender gap:
If pay for different roles is standardized, then the gender pay gap will be diminished. On the condition that women are not hired for roles lesser than their capability because of prevalent unconscious bias in interviewers.
Positive (+): Pay based on salary expectations
Companies are still allowed to ask salary expectations of candidates. A combination of the expectation of the candidate and their performance in the selection process may decide their salary in the potential new job. This will leave room for paying people based on what they think they deserve in their own right.
Negative (-): Decrease in acceptance of offers
Candidates, if are not offered what they expect as their salary; and when employers, who do not have a salary history to take the candidate’s earning history into account, may lower the job acceptance rates of candidates even further – especially if they are offered less than what they were already earning.
What is worth noting is someone’s expectations of a salary are based on the frame of reference of their previous salary. So low earning individuals may suggest lower expected salary compared to individuals earning more.
Impact on gender gap:
Overall, this may not augur well for gender pay equity, because women, if paid less already, will suggest lower expectations than the men being paid higher for the same role. So they may end up getting offered a lesser salary than their male counterparts.
Positive (+): Focus on talent value
With the previous salary not being a benchmark of one’s capability, employees can actually be assessed truly based on their capability and not their current salary. Some employees are underpaid, and even if they have the necessary skill to deserve higher percentages of increment, the hiring managers’ rationale around offering lower than expected is often based on the measly salary the candidate makes from the previous employer.
Talent can now be compensated for the value they create and not for the salary they have been earning.
Negative (-): Bias
Assessment of one’s capability is a subjective task. Deciding a well-reasoned pay for that capability is even more subjective. Bias can always creep in when assessing the capabilities of an individual, and the ones hiring may err in judging the real value of talent.
Impact on gender gap:
The unconscious bias surrounding gender may end up overpowering the objective assessment of talent value – which might instead end up increasing the gap, instead of diminishing it.
Countering unconscious bias
Blind auditions were introduced in the 1970s and 1980s by orchestras to counter the prevailing gender discrimination and misrepresentation of women in orchestras. Blind auditions imply that the judges cannot see who is playing the instrument and select a player based on their musical talent alone. This experiment at the first round of selection increased the chances of women advancing to the finals by 50%.
Salary question ban --> Gender pay equity? No guarantees
Considering the equity in the pros and cons of banning the salary question, it is too early to say whether the ban on the salary question will help in achieving gender pay parity. The cons of the legislation instead suggest that this may be counter-intuitive and lead to even further the pay gap between the two sexes. A research done by PayScale.com has infact suggested this. According to the company’s survey of 15,413 jobseekers, the bias against women is so powerful that a woman who refused to disclose her previous salary was offered 1.8% less than a woman who did disclose. While men who refused to disclose their previous salaries got a salary 1.2% than the men who did. There might be many intervening variables leading to this discrepancy and this needs to be studied at a micro level; but at the macro level, this huge disparity is worrying. This just proves that the demon the legislation has been passed to fight, may end up feeding on it and grow stronger. One can hope that doesn’t happen when New York begins to stop asking the salary question next month.