Career Advice

Salary History Bans Are Starting To Improve the Wage Gap—Here Are 6 Other Changes That May Level the Field

Erin Magner

Erin MagnerAugust 6, 2020

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Of all the questions a hiring manager may ask in a job interview, one of the simplest to answer is also one of the most loaded: How much money are you making in your current position? That’s because employers often use past and current compensation information to determine the salary offers extended to job candidates—a practice that can trap underpaid workers in a cycle of earning less than deserved for… basically forever.

In a bid for greater pay equity, 19 states and 21 local governments have passed salary-history bans, which function exactly as they sound: They are laws banning employers from asking about salary history. Now, about three years after that legislation began rolling out, research from Boston University shows the bans have had an overall positive effect, with an average of a 5 to 6 percent increase in salary among those covered under the laws, who have changed jobs in the past year.

This makes sense: When an employer doesn’t have access to a job candidate’s history of underpayment, data seems to show that candidate is able to compete on a more level playing field.  “Asking for new hires to share their salary history from a previous role creates an unfair comparison point between how much someone theoretically ‘should’ be paid based on past wages, rather than being fairly based on the scope of work and transferable skills they are being asked to do at the new company,” says Tiffany Waddell Tate, career coach and founder of Career Maven Consulting. 

For example, say someone who’s currently underpaid at $50,000 applies for a job with a salary range of $75,000 to $100,000. “If [the candidate] is currently making $50,000, then [the employer] would be more likely to pay them at the low end,” says Dorianne St Fleur, a diversity and inclusion strategist and career coach. “There is a lot of hesitancy to give someone a $30,000 to $50,000 jump. Eliminating that from the conversation makes it more likely that [an employer] is saying, ‘This is what this role is worth, and based on your level of experience and the scope of the work, that’s how we’ll decide [the offer].’ If you were historically underpaid, you don’t have to continue that cycle.”

Even so, salary history bans aren’t a one-and-done solution to the racial wage gap. Despite the progress toward pay parity to which the bans have given way, Black workers are still making less on average than white, Asian, and non-American-citizen workers. Black women, in particular, make only 62 cents for every dollar earned by a white man. The situation is even more dire for Indigenous and Latinx women, who earn 57 cents and 54 cents to a white man’s dollar, respectively. So, what needs to be done beyond salary history bans in order to ensure that all employees receive fair pay?

Salary history bans are a step in the right direction for pay parity—but they don’t counteract all the root causes of how the inequity first took shape.

In order to talk about closing the pay gap across all impacted populations, we need to talk about why inequity exists in the first place. According to Tate, the cycle, as it pertains to race, starts early, before anyone enters the workforce. “Variability in educational access for Black people and other people of color directly impacts how hirable they are and their negotiation power,” she says.

For various systemic reasons—including underfunding of schools in communities of color and a lack of diversity among teachers—Black, Latinx, and Indigenous students are less likely to obtain a high school diploma or college degree than their white or Asian peers. “If most low-paying jobs require little to no education, but higher-paying jobs require a bachelor’s or master’s degree simply to be considered, [educational background] becomes a key factor in driving a workplace landscape where wage disparity can exist and persist.”

That said, higher education doesn’t automatically guarantee BIPOC, Latinx people, or women an equal seat at the table. Bias remains a major hurdle in workplaces that are run by those who are in privileged positions. “[Employers] unconsciously—and, unfortunately, consciously—give lower salaries to people in historically underrepresented groups, including Black folks and Latinx folks,” says St Fleur.

One key reason for this is what St Fleur calls “under-leveling,” or hiring an employee for a position that’s beneath what they’re qualified to do. “Let’s say that we have two people who are going up for the same role. One person is Black, the other person is white, and they’re coming in to do the same thing,” says St Fleur. “Statistically speaking, the white person will be brought in at a higher level than the Black person. Because of bias, the Black person has to prove herself more—maybe she wasn’t the right ‘fit’ or didn’t have the right ‘experience’ so was given that lower-level role, which then impacts the compensation she’s able to make.”

“The Black person has to prove herself more. Maybe she wasn’t the right ‘fit’ or didn’t have the right ‘experience’ so was given that lower-level role, which then impacts the compensation she’s able to make.” —Dorianne St Fleur, diversity and inclusion strategist

If there were more underrepresented groups in positions of power, bias would likely not be such an obstacle to earning power for Black, Indigenous, and Latinx workers. But that’s not the case—only 28 percent of corporate-level managers are men and women of color, while that number drops significantly for every jump in title. “If you don’t have fair representation as far as people in the workforce, you’re definitely not going to have fair representation when it comes to pay,” says Ariel Lopez, career coach and founder and CEO of job-application platform Knac. “And if that representation is missing from management—from the C-suite down to the team leads—typically, it makes it hard for people not only to get paid what they’re worth but also to move up.”

Then, there’s the fact that BIPOC and Latinx employees may be more hesitant to negotiate their pay when starting a new role. This is something that Lopez, St Fleur, and Tate have all seen firsthand among their clients. “When you’re thinking about communities where the system wasn’t really built for us, it’s harder for people to advocate for themselves,” says Lopez. “People of color don’t typically know how to have those conversations and we aren’t typically the ones asking for a raise.” Even if a Black job candidate does attempt to negotiate a higher salary, bias may prevent their efforts from being successful. Multiple studies have found that racially biased evaluators offer Black candidates less than white candidates when they attempt to make counteroffers during salary negotiations.

Other than salary history bans, what can employers do to ensure that all employees are receiving fair compensation?

Clearly, salary history bans will only go so far when it comes to closing the pay gap for all affected workers. Systemic change needs to happen on many different levels; below find six places where experts suggest employers start.

1. Implement salary transparency

While only about 17 percent of private-sector employers currently make their salary information public, salary transparency can go a long way toward creating a more equitable workplace. “If everyone knows what everyone makes, it’s in an organization’s best interest to be more fair in the process,” says St Fleur. “They don’t want an issue of, ‘Why is this person making this and I’m making that?'” In order for this initiative to be successful, employers need to examine the pay inequalities that exist and take steps to correct them.

St Fleur advocates for more transparency during the hiring process, wherein new hires would receive detailed breakdowns of what their total compensation package looks like, what’s negotiable and what’s not, and what their equity options are.

She’d also like employers to take more time to walk potential new hires through the process. “All of this is counter to what organizations do because they want to keep things close to the vest and save money,” she says. “Acting as a coach with an employee could really change things. How awesome would it be if, during the hiring process, there’s a webinar where candidates can learn how to negotiate the best salary for themselves? Companies should want to deal with employees who stand up for themselves, speak up for what they’re worth, and ask the hard questions, so they should facilitate that process.”

2. Give new hires a clear path to career growth

As Lopez points out, some startups and small companies can’t afford to pay employees at the very top end of their respective salary ranges. In these cases, it’s important that employees receive a clear plan for how they’re going to develop their skills, so they can eventually command a more senior role—and a higher pay grade along with it.

“It’s not just about salary. It’s about growth and opportunities for professional development so that over time, they can really earn the money they deserve.” —Ariel Lopez, career coach

“So often people are hired, and there’s not a strong roadmap or trajectory for them,” Lopez says. “If someone comes in as a junior project manager and the goal is for them to become a team lead, what is it going to take for them to get there? How long will it take for them to get there? And what positions would they need to attain first? It’s not just about salary. It’s about growth and opportunities for professional development so that over time, they can really earn the money they deserve.”

3. Conduct an audit to see whether employees are in the right positions

Given that Black employees are often underemployed in relation to their skills and education, even in states with salary history bans, St Fleur suggests that employers look closely at whether workers are really in the right positions when considering their years of experience, education, and performance metrics. And, if they aren’t, make a plan to get them where they should be. Instituting this process would help to avoid “under-leveling” in the first place.

“There could be some sort of objective scoring system where people have to answer not based on subjective opinions but based on competencies, and then [a computer program] spits out a level or recommendation of sorts,” St Fleur says. “If an employer is deviating from that recommendation, they’d have to write down the specific reasons why and have people push back against those reasons if they feel too vague, coded, or inherently biased.”

4. Do away with unlimited vacation days and encourage employees to take time off

“A lot of perks are painted as fun or valuable when they’re really just forcing you to work more and you don’t even realize it,” says Lopez. One of these good-on-paper benefits is unlimited PTO. Research has found that employees of companies with this policy take less time off each year than those with a set number of vacation days.”When you don’t have that structure and those guidelines, it blurs the lines for everyone,” says Lopez.

St Fleur suspects this phenomenon could be particularly detrimental for BIPOC and Latinx employees. “There’s this narrative around having to work twice as hard for half of the results, so [underrepresented groups] may be unwilling to take that time off because they don’t want to be viewed in a certain way,” she says.

“Paid time off is part of your compensation, and not taking that time you need to recharge is also something that’s detrimental to your development and well-being at work,” St Fleur adds. Plus, when an employee leaves a company with unlimited vacation days, they lose out on getting paid for the PTO that they’d otherwise have remaining. The solution? Give employees a generous, yet structured PTO policy, encourage them to actually take time off, and pay them for unused time when they move on.

5. Educate employees on navigating and negotiating equity

In some instances, employees receive shares in the company as part of their compensation package. But St Fleur says that workers who aren’t familiar with the equity process can end up shortchanged. “A lot of times, people from underrepresented groups are coming in at a disadvantage because of the lack of exposure,” she says. “They may not know you can negotiate your equity, you can negotiate the vesting cycle, you can negotiate a lot of things that turn into dollars in your bank account. There are so many women I’ve spoken with who said ‘Yeah I saw this, but I didn’t get it.'”

In order to create a more level field for all employees, she recommends that employers educate their staff on the ins and outs of equity—and for employees to do their own research to ensure they’re getting the most out of their offers.

6. Ensure that taking leave doesn’t negatively impact an employee’s earnings

Another key aspect of an employee’s compensation package is paid medical and family leave—and this is one more area in which Black and Latinx employees often come up short. Research shows that only 23 percent of Latinx workers and 43 percent of Black workers have access to paid or partially paid parental leave, compared to 50 percent of white workers. Latinx and Black workers are also more likely than white workers to report that they aren’t able to take family or medical leave when they need to for financial reasons.

The obvious fix for this would be for employers to offer paid leave benefits for every employee, regardless of their position in the company. The U.S. government recently instituted such a policy for 2.1 million federal employees, while there’s ample discussion around creating a national paid family and medical leave policy.  Tate believes that parental leave should be expanded to include both parents—not just a primary caregiver—and should last for 16 weeks to a year as it does in many other countries worldwide. The reforms shouldn’t stop with leave policies, adds Lopez. “When an employee leaves and comes back, are they coming back in the same position at the same pay or have things shifted around?” she says. “[Make] sure people have good options to come back.”

Bottom line? Any company that’s committed to anti-racism work should be taking the racial pay gap seriously and making moves to close it, beyond just relying on salary history bans. “Don’t be on the PR trail making sure that you’re a part of the conversation and saying you’ve committed funds, but then people actually working at the company are suffering,” says Lopez. “Black Lives Matter deserves all the funds, but Black people who work at your company should be getting paid way before they get paid. Just pay people what they’re worth.”

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