Three state-level laws compelling employers to post salary ranges in job listings took effect on the first day of the new year.
Companies in California, Washington, and Rhode Island now have to provide payment information to prospective employees. Approximately 71% of companies already post pay ranges in notices for open positions, according to an analysis from the job listing platform Indeed.
Senate Bill 1162 in California requires employers to provide “the pay scale for the position in which the employee is currently employed” upon request, while employers with 15 or more workers must offer “the pay scale for a position in any job posting,” according to a summary of the law.
The statute, which will impact Disney, Uber, Apple, and other leading corporations, requires firms to submit a pay data report to the state’s Civil Rights Department that includes “the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category.”
The Equal Pay and Opportunities Act in Washington says employers must “disclose in each posting for each job opening the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered,” according to the text of the law, which likewise entered into effect on January 1 and applies only to firms with 15 or more employees. The new statute will apply to companies such as Starbucks, Microsoft, and Amazon.
The Pay Equity Act enacted by Rhode Island on January 1 also mandates that “during the course of employment, upon an employee’s request, an employer shall provide the wage range for the employee’s position,” according to the bill’s text. Companies must provide payment information to applicants upon request and are barred from retaliating against current or prospective employees who inquire about payment information.
Supporters of salary transparency legislation assert that offering pay information reduces disparities and encourages more applications.
“Salary is one of the most important pieces of information that job seekers value when looking at a job,” Indeed Chief People Officer Priscilla Koranteng remarked in the analysis. “And wanting more insight into expected salary ranges of a job is one of the top pieces of feedback that we receive from job seekers.”
Research from Harvard University, on the other hand, found that salary transparency laws reduce overall wages by 2% under some circumstances as “employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others under transparency.”
“Our model predicts that transparency reduces the individual bargaining power of workers, leading to lower average wages,” according to a study published last year. “In situations where workers do not have individual bargaining power, such as under a collective bargaining agreement or in markets with posted wages, greater transparency has a muted impact on average wages.”
The new pay transparency legislation takes effect as the job market reels from a low supply of workers. Labor force participation failed to recover after the lockdown-induced recession, worsening a decades-long trend of declining engagement in the workforce. The metric dropped from 63.4% in February 2020 to 60.2% in April 2020, according to data from the Bureau of Labor Statistics, before climbing to 62.1% as of November 2022.