‘What’s Your Current Salary?’ ‘None of Your Business!’

By: - June 25, 2018 12:00 am

Fans protest for higher wages for the U.S. women’s soccer players at a match against Colombia in East Hartford, Connecticut. The women’s team has won three World Cups but its players are paid significantly less than the U.S. men. To help close the gender pay gap, some cities and states are barring employers from asking new hires about their current salary. Jessica Hill/AP

Editor’s note: This story was updated June 25 to describe the Institute for Women’s Policy Research as a social science research institute. The group does not advocate for state pay-history bans.

Next time you get asked, “What’s your current salary?” in a job interview, check your ZIP code. It is now illegal for employers to ask job applicants about their previous salary in at least eight states and eight counties and cities.  

The laws and ordinances passed in the last two years are aimed at narrowing the persistent pay gap between men and women. A prospective employer who knows your current salary can offer you a pay bump based on that figure – or keep your new salary low. If you’re a woman, you likely make less in your current job than a male recruit with the same skills and experience.

An employer can offer a woman a pay bump for a new job and still pay her less than a man.

“We’re seeing tremendous momentum behind the idea of banning questions about prior salary,” says Vicki Shabo, vice president of the National Partnership for Women and Families, which advocates for state pay-history bans. “It’s a specific, very actionable thing that can be put in place in a proactive way … and helps to stop the cycle of systemic wage disparities.”

Prohibiting salary-history questions likely benefits managerial and professional job candidates the most, Shabo said. But it also will benefit people who might have moved from a low-cost region to a more competitive market, or who took time off from work. “That’s a lot of people in an era where caregiving is common, where migration is common.”

Even proponents of eliminating the question, however, aren’t sure whether wage-history bans will help close the gender pay gap. Business groups including chambers of commerce and the Society for Human Resource Management oppose the bans. Some economists think it could backfire on the women it is supposed to help. And two states, Wisconsin and Michigan, have enacted laws designed to pre-empt salary-history bans.

A Persistent Gap

Across all occupations, women working full time earn about 82 percent of what men do, according to the Institute for Women’s Policy Research, a social science research institute.

It’s a disadvantage that follows women throughout their career, said Mary Pollock, a government relations coordinator for the Michigan chapter of the American Association of University Women. They’re not basing starting salaries on experience, she said.

“A lot of them want to find out the cheapest they can get an employee for, so they offer a bit more than the person is currently making,” Pollock said. And getting a lowball starting salary “goes right into how much Social Security you have, and how much 401(k) you have, and how much pension you have.”

Causes of the gender pay gap range from discrimination to women taking time off from work for caregiving and raising children, and negotiating less aggressively for raises. Research shows that women who negotiate for raises could be punished for it in ways that men aren’t.

“There are a lot of different factors that go into the gender pay gap and there are a lot of different remedies, but this is one important piece,” said Kate Nielson, state policy counsel for the American Association of University Women. “People are sick of being paid unfairly. The ban on salary history is something incredibly tangible.”

Massachusetts enacted the first salary-history ban in 2016. Oregon, California, New York, Delaware, Vermont and Connecticut have since followed suit, as has Puerto Rico. New Jersey bans public employers from asking about a previous salary. The Hawaii Legislature passed a ban proposal and sent it to the governor. Republican Gov. Bruce Rauner of Illinois vetoed a ban last year, but the Legislature revived similar legislation this year.

On the flip side, Michigan and Wisconsin have enacted laws blocking city and county bans, as part of broader legislation seeking to pre-empt employer mandates such as paid sick leave.

A Familiar Question

To its proponents, a ban on asking the previous salary question makes intuitive sense.

“So many of us have been in the position of having to respond to that question,” said Andrea Johnson, senior counsel for state policy at the National Women’s Law Center. “It’s also an easy fix. It’s not that hard for employers to stop having this information and using it in the hiring process.”        

Barring wage-history questions is one proposal seeking to narrow the gender wage gap. Others include requiring paid sick leave and family leave. Because salary-history bans incur no public costs, they’re easier to get enacted by state legislatures, Johnson said. But it’s too soon to know if the laws will have an impact.

“The hope is that it will focus companies and line managers on having more explicit pay policies and starting to rely on people’s skills and experience rather than their prior salary,” said Ariane Hegewisch, the program director for employment and earnings at the women’s policy research institute. “Because it hasn’t been implemented, we cannot say with certainty that it has been happening. But that is the hope.”

Cities including Pittsburgh, New Orleans, Chicago and San Francisco have adopted ordinances that prohibit asking new city workers for their salary history. Despite Wisconsin’s pre-emption of salary-history bans for private employers, Milwaukee last month adopted an ordinance prohibiting city agencies from asking applicants about salary history.

“It’s important to send a message to the private sector,” said Tony Zielinski, the alderman who sponsored the ordinance. “Success begets success. Eventually this will spill over into the private sector.”

It may end up in court first. The wage-history argument got a boost when a federal appeals court ruled in favor of a math teacher, Aileen Rizo, who sued the Fresno, California, school district for paying her a lower starting salary than her male colleagues based on her previous salary in a different state.

Prior salary is not a justification for paying women less than their male counterparts, the court ruled. Fresno officials said they would appeal the April decision to the U.S. Supreme Court.

Wage-history prohibitions have also been challenged in Philadelphia, which last year adopted a salary-history ban for private employers as well as public agencies. A dozen of Philadelphia’s largest employers and the local Chamber of Commerce sued, saying the bill infringed on First Amendment rights. A federal judge agreed, saying the law infringed on employers’ free speech rights, but also ruling that companies could not rely on previous salaries to set pay. The city is appealing.               

Will It Help or Hurt?

But a ban on asking a job applicant’s previous salary could backfire, said Jennifer Doleac, an economist at the University of Texas A&M who has studied “ban the box” laws that forbid employers from asking about applicants’ criminal history.

Because of ban the box laws, Doleac found, employers interviewed fewer African-American and Hispanic men, excluding demographic groups they believed likely to have criminal records.

Without information on pay history, employers will still try to offer women lower salaries, Doleac said. “It’s a pretty good guess that if you’re offering a job to a woman, she’s probably being paid less than men, so you might as well lowball her.”

“Women who are making a better than average salary will have to negotiate all over again,” she said. “It winds up hurting members of the group who don’t have the problem and doesn’t help members of the group who do have the problem.”

In California, the Chamber of Commerce argued businesses need salary information to keep their own pay scales at market rates.

Business groups in Michigan and Wisconsin lobbied for the state laws preventing municipalities from imposing bans.

“There is no reason that businesses in our state should have to worry about expensive HR mandates being enacted by the nearly 2,000 units of local government in Wisconsin,” said Chris Reader, a director at the business association Wisconsin Manufacturers and Commerce, when GOP Gov. Scott Walker signed the bill into law in April.

“We want everybody to be going into a job interview with their eyes wide open,” said Wendy Block, vice president of business advocacy for the Michigan Chamber of Commerce. Prohibiting employers from asking about a previous salary “doesn’t get to the root of the problem and just causes more problems in the hiring process.”

Businesses fear that salary-history bans will result in a patchwork of regulation that is difficult for businesses to comply with, said Mike Aitken, a vice president at the Alexandria, Virginia-based Society for Human Resource Management. “Right now, we can’t even agree what’s causing” pay inequity.

“We think it really needs to be a comprehensive discussion,” he said, “and not be doing it in a piecemeal fashion on a state-by-state and locality-by-locality basis.”

Some major companies have already stopped asking about applicants’ previous salaries, including Amazon, Google, Starbucks and Wells Fargo. Bank of America in January said its move was intended to “ensure we consider new hires for individual qualifications, roles and performance, rather than how they may have been compensated in the past.”

When large states such as California and New York require employers to skip the salary question, large employers adopt the standard for all their operations, Shabo said. Big companies adopt “new norms” because they realize “it’s easier to comply with whatever the highest standard is.”

Major companies are unlikely to be setting their salary ranges according to “something as uncontrollable and unknowable as market rates,” Hegewisch said. But many smaller businesses make offers based on what new hires earned elsewhere. “You take the labor market rate and you give them a little bit extra.”

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