THERE IS NO shortage of cringe-worthy questions an eager job applicant might encounter during an interview. “What is your biggest weakness?” “Who are your most profound influences?” “What makes you a better candidate than the person we interviewed ten minutes before you?” But in many states and cities in America, the prickliest of them all—“How much did you make in your last job?”—is now illegal.
In 2016 Massachusetts became the first state to prohibit employers from asking job applicants about pay in previous jobs. Since then such salary history bans (SHBs) have been passed by 17 other states and by 21 municipalities, according to HR Dive, a human-resources trade publication. The goal is to make the application process fairer. Allowing employers to know candidates’ salary histories, policymakers argue, encourages discrimination against those who have been out of the labour force—perhaps caring for children—or whose past positions do not adequately reflect their skills and qualifications. Advocates say this form of discrimination is felt most acutely by women, and that SHBs can help level the playing field.
A new working paper by Benjamin Hansen of the University of Oregon and Drew McNichols of the University of California, San Diego, suggests that they do. Using earnings data from the US Census Bureau’s Current Population Survey for the years 2006-19, Messrs Hansen and McNichols calculated women’s earnings, relative to men’s, by state, age and industry. To estimate what would have happened to wages in the absence of SHBs, the authors created “synthetic” control groups of states similar in every way to the affected states except for the new laws.
The researchers found that, after California’s ban was introduced in 2018, the gender-pay gap for women over 35 narrowed by 2.3 percentage points (around 9.5%). For married women with children over the age of five, the gender pay gap shrank by 4.7 points. Many women in this group may be returning to work after a spell looking after children full-time; without an SHB, they would have suffered a bigger pay penalty. The authors repeated the experiment for other states with SHBs and found a similar pattern. The effect was particularly strong among older workers and those in male-dominated industries (see chart).
These findings suggest that concealing salary histories may help narrow the gender-pay gap. But making everyone’s pay more transparent is also a potent measure. An analysis of faculty salaries at public universities in Canada in 2019 found that pay-transparency laws reduced the gap there by two percentage points, or roughly 30%. Why do full secrecy and full transparency about pay have similar effects? Perhaps it is because both measures ensure that employers and employees have access to the same information. When both sides have no data, or all of it, it becomes harder to discriminate against women.