Study finds salary history bans boost pay for African-Americans, women
African-Americans and women saw increases that were respectively 13% and 8% higher
As many companies across the U.S. explore ways to promote more racial equality in hiring, new research suggests banning salary history questions for job applicants provides considerable benefits for African-Americans and women.
Researchers at Boston University in a working paper released this week found that after states implemented salary history bans -- which limit employers' ability to ask applicants about their past earnings -- pay for job switchers increased 5% more on average than for comparable job changers not covered by such a ban. The benefits were even greater for African-Americans and women, who saw increases that were respectively 13% and 8% higher, the study found.
The thinking is that employers who don't know how much a worker is earning at their old job can't use that to offer less than they would otherwise, according to James Bessen, the study's lead author and an economist at Boston University School of Law.
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The bans may benefit women and minorities more than others because they make it harder for employers' salary offers to perpetuate any past pay inequities a worker may have experienced due to discrimination, he said.
(istock)
"When economists think about discrimination, they tend not to think of institutional discrimination," he said. The study's findings suggest "we have a situation where employers might not be personally biased, but they are taking actions that result in substantial inequities for discriminated groups," Mr. Bessen said.
The research comes as many corporations are pledging donations and action around issues of racial injustice following the killing last month of George Floyd, an African-American man, while in custody of Minneapolis police, and amid subsequent nationwide protests against police brutality and racial inequality. Questions linger over whether the corporations' commitment will endure and bring substantial change to their culture and racial makeup.
"More than paying lip service to the idea of diversity among their staff and employees, corporations can attempt to embrace a culture that understands that what have become standard hiring practices, unfortunately, can lead to less diverse staff," said Beth Avery, senior staff attorney at the National Employment Law Project, an advocacy and research group.
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Ms. Avery has researched so-called ban-the-box laws, which limit employers' ability to ask about jobs applicants' arrest and criminal records to prevent employers from discriminating against them.
Massachusetts in 2016 became the first state to pass a salary history ban into law, and several states and local jurisdictions have since followed suit. The specific nature of the bans varies by location.
Advocates have argued salary, criminal and credit history checks can hurt employment outcomes for groups that have historically faced discrimination in the labor market, such as women and minorities.
"What the salary history ban does is it takes away that bargaining advantage" from employers, Mr. Bessen said.
He and his co-authors analyzed about 41 million job advertisements compiled by a labor-market analytics company and posted between January 2010 and December 2018. The researchers also considered monthly labor-force data from January 2013 to February 2020 compiled by the U.S. Labor Department and Census Bureau.
Looking at the data, the researchers concluded that the share of online job postings that listed salary information roughly tripled following the first salary history ban laws. The finding suggests that before the bans, "large numbers of employers may have eschewed posting wages in order to gain bargaining advantages from salary histories," the study said.
The authors also looked at workers in the same commuting zones, comparing those in counties covered by a salary history ban with those in counties that weren't. The study found job changers where a salary history ban was in effect had wages that were on average 5% higher a year later, after controlling for worker characteristics. The relative increases were greater among women and African-Americans.
Mr. Bessen said the results could offer insight into why wage gaps persist between races and genders.
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The findings are "saying a lot of the wage gap is something not related to productivity, but the unfairness of the way wages are assigned," he said.
Mr. Bessen said limitations of the study include the analysis being done on data compiled during a relatively strong labor market. The study also reached no conclusions about what happened to workers' wages after they were hired.
Other studies have found that laws limiting the applicant information employers have can hurt groups that have historically faced discrimination, and perhaps worsen it.
Research from economists Jennifer Doleac and Benjamin Hansen, for example, found ban-the-box laws resulted in a net reduction in employment for young black and Hispanic men without college degrees.
Ms. Doleac, an associate professor of economics at Texas A&M University, said the findings of her study were consistent with the hypothesis that without criminal history information, employers used race as a proxy for who was likely to have a criminal record.
"Removing that information in effect broadens the discrimination to the entire group," she said.
"So now young black men who don't have a criminal record aren't getting interviews and aren't able to get the job because employers aren't able to distinguish them at first glance from those who have a record."
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Ms. Avery of the National Employment Law Center has pushed back against such findings, arguing they highlight the need for greater protections against hiring discrimination. She said the spirit behind measures such as ban the box should also be noted.
"No one asserts that ban-the-box and fair-chance hiring policies are a silver bullet to solving the problem of racial inequities in hiring," Ms. Avery said.
"It is one important step in the right direction and I think that's how these other policies should be viewed. They're not going to solve the problems on their own, but they are one important aspect of attempting to level the playing field for people of different races and people with different economic needs."