Personal finance

Pay secrecy norms have ‘simply lost their teeth,’ say experts. Here’s why

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Pay transparency is on the rise for job applicants — and momentum suggests that trend will continue, experts said.

In August, 50% of online job listings advertised salary, up from 18.4% in February 2020, according to Indeed Hiring Lab, the economic research arm of career site Indeed. Such businesses disclose an exact salary or a salary range.

The growth is largely attributable to recent pay transparency laws enacted by states and municipalities. In addition, jobseekers also recently had historically high leverage as employers clamored to hire workers as the pandemic-era economy began to reopen.

“With the growth of such pay transparency, the lingering norms and policies around pay secrecy have simply lost their teeth,” Tomasz Obloj and Todd Zenger, professors at Indiana University and the University of Utah, respectively, recently wrote in Harvard Business Review.

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It appears pay transparency rates “will continue to climb” moving forward, too, said Cory Stahle, an economist at Indeed.

The Indeed stats don’t include ads that post only a maximum salary, due to the ambiguity of the practice, Stahle said. (Those might say a worker can earn “up to” $20 an hour, without stipulating a floor, for example.)

New York just adopted a pay transparency rule

New York on Sunday became the latest state to adopt a pay transparency law. Employers in the state with at least four employees must make a “good faith” salary disclosure in job postings.

It joins California, Colorado and Washington state, as well as New York City.

The pay transparency movement is relatively new. Colorado was the first state to pass such a law, in 2019, and it took effect Jan. 1, 2021.

Other local governments — like the city of Ithaca, along with Albany and Westchester counties in New York, and Jersey City in New Jersey — have enacted pay transparency laws, according to the National Conference of State Legislatures.

Other states have taken “a slightly more flexible approach,” NCSL said.

For instance, states and municipalities such as Cincinnati and Toledo in Ohio; Maryland; Connecticut; Rhode Island; and Nevada have passed laws that allow employers to disclose salary ranges to job applicants upon request, according to the National Women’s Law Center.

A “profusion” of websites — like Glassdoor.com, Payscale.com, and Salary.com — have also provided “rather open access to employer pay information,” Obloj and Zenger said.

There are pros and cons

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Greater access to salary info in job postings poses clear benefits for both workers and businesses, experts said.

For one, transparency can help close persistent pay gaps, especially for women and people of color, said Mandi Woodruff-Santos, a career and money coach.

“It levels the playing field,” she said. “At least they have a starting-off point.”

Salary information also reduces frictions in applying and hiring, since workers can more easily filter and determine the jobs for which they’d prefer to apply, Stahle at Indeed said. It also might help young workers and recent graduates when doing career planning, he said.

It levels the playing field. At least they have a starting-off point.
Mandi Woodruff-Santos
career and money coach

Further, 75% of job seekers are more likely to apply for a job if the salary range is listed in the posting, according to a 2022 Indeed survey. Fifty-six percent are more likely to apply for a company — even if they don’t recognize the company name — if the salary range is listed, Indeed found.

However, there may be drawbacks.

For one, pay transparency may lower overall wages of the broader population of employees, even while raising them for the “inequitably underpaid,” Obloj and Todd Zenger said. That’s because, data suggests, employers might push back against salary negotiations and the practice may therefore “lower employees’ relative bargaining power,” they said.

The practice might also lower worker productivity and change workers’ on-the-job priorities, the duo wrote.

‘There’s still plenty to negotiate’ beyond salary    

Of course, applicants aren’t necessarily beholden to the salary or the pay range posted on a job ad, Woodruff-Santos said. They can ask for more.

“I wouldn’t take it as the final, final word until you’ve asked and they’ve told you,” she said.

Even if there’s not wiggle room on salary, “there’s still plenty to negotiate,” Woodruff-Santos added.

The “big whale” is work-from-home flexibility, which isn’t a direct form of financial compensation but offers value to many workers, she said.

Workers might also be leaving money on the table when quitting an old job, and a new employer can help eat some or all of that financial cost, she said. For example, workers might have to pay back a signing bonus if they depart an employer before the end of a contract period; they might also have an unvested 401(k) match or restricted stock units, for which a new employer may be able to offer financial compensation, Woodruff-Santos said.

Workers may also be able to negotiate a relocation-benefit package if they must move for a new job, or a professional-development budget allowing them to attend conferences or classes to invest in their skills.

They should also generally consider other forms of compensation when applying for a job: wellness benefits like mental health services; health insurance; commuter benefits; tuition reimbursement; retirement benefits; and dependent care flexible spending accounts, for example, Woodruff-Santos said.

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