New Study Shows That Asking For Salary History Perpetuates Systemic Racism

Banning employers from using salary history against prospective employees substantially closes wage gaps, increasing pay for women by eight percent and Black people by 13 percent, a new study by economists at Boston University School of Law found.

Beginning with legislation passed in Massachusetts in 2016, 19 states and the District of Columbia now ban employers from asking for salary histories from potential employees. Citing a substantial pay gap between full time employees which saw women earning earn 84.3 percent of the wages earned by men, Massachusetts legislators amended the state's existing Equal Pay Act with 2016's An Act to Establish Pay Equity. Part of that new legislation made it unlawful for employers to "seek the wage or salary history of a prospective employee."

Advocates for the salary history ban argued that the practice perpetuates discrimination, because low wages paid by a prejudiced or exploitative employer could be used to justify an offer of lower pay at the worker's next job. Salary histories provided a bargaining advantage to employers that would preserve past inequities.

"Perpetuating Inequality: What Salary History Bans Reveal About Wages," a new paper from the Technology and Policy Research Initiative at Boston University School of Law validates the aims of the legislation. It found empirical confirmation that salary history ban legislation resulted in more companies posting wages in job listings, increased bargaining power for job changers and overall wage increases, particularly for workers most likely to be paid less.

"People ignore institutional discrimination, where the actors may not be individually biased against Black people, or against women, but the actions they end up taking create or perpetuate inequities," James Bessen, Executive Director of the Technology and Policy Research Initiative and the paper's lead author told Newsweek in a telephone interview. "Our finding is that there is substantial institutional discrimination, at least in the sense of perpetuating past inequities. Salary information is a source for particular inequities. And that puts a major problem on policy makers' desks."

Low wages and wage discrimination have been a substantial part of racial justice initiatives, including at this 2016 protest in San Diego. BILL WECHTER/AFP via Getty Images

Coauthored by Erich Denk and Chen Meng, both of the Technology and Policy Research Initiative, the new study compared changes in earnings between states with and without salary history bans. They also compared states data before and after the enactment of bans. Using data from online job listings aggregated by market analytics firm Burning Glass Technologies (which captures more than 60 percent of all job openings) and monthly survey data collected by the Bureau of Labor Statistics, Bessen and his coauthors found substantial effects attributable to salary history bans.

Whereas people changing jobs typically saw hourly wage increases of just under four percent, average hourly wages for people changing jobs in states with enacted salary history bans increased by 7.9 percent—a four percent improvement. The results were even more dramatic for women and Black people, significantly narrowing wage gaps in those states.

"I'm thrilled," Katie Donovan, founder of Equal Pay Negotiations LLC, told Newsweek in response to the new research. Donovan, a consultant and advocate for pay equality, authored the original salary history ban language added to the Massachusetts Equal Pay Act.

"It's wonderful to have the confirmation that institutional pay bias truly is a process problem. There has never been a doubt in my mind this day would come since I began the advocacy for salary history bans in 2011. Advocates' arguments for such bans just became a bit easier," Donovan said.

Women dramatize the wage gap at the Democratic National Committee in 2016 in Washington D.C. by charging men more at a lemonade stand. Women's advocacy groups were crucial to the passage of salary history bans in multiple states, including Massachusetts. New research demonstrates the bans also substantially benefit Black workers. MOLLY RILEY/AFP via Getty Images

"This research shows that pay inequality is indeed a systemic issue, and banning salary history requests can reduce inequality," Massachusetts State Senator Patricia Jehlen, one of the lead sponsors of the Act to Establish Pay Equity, told Newsweek in emailed comments. "All job changers got higher pay after bans, but women and Black workers benefited significantly more than most. I am so happy that our law is making a real difference for all workers and particularly for those who have been undervalued."

Critics of salary history bans argued the legislation would have the opposite of its intended effect, similar to what some studies have revealed regarding "ban the box" legislation and drug testing prohibitions. In 2016, a paper found that bans on employers asking applicants about their criminal records didn't result in wider access to jobs. Instead, prospective Black employees were more than five percent less likely to be hired.

Unable to ask about a felony history, employers instead tended to statistically discriminate, more often assuming Black applicants had a criminal record and refusing to hire them.

Similar results have been found when drug testing is banned: employers become less likely to hire Black people, because they are more likely to assume Black applicants are drug users, despite the federal National Survey on Drug Use and Health consistently finding that white people use illicit drugs more than Black or Latino people.

In those cases, legislation intended to help commonly discriminated against applicants find jobs backfired, creating new obstacles when an absence of information led to employers falling back on personal prejudices and stereotyping. But Bessen's new paper didn't find any such counterintuitive results when it came to bans on salary histories.

"We can now argue pretty well that there really aren't adverse effects from less information and that less information is better in this context, in terms of providing job applicants with a fairer chance at a well-paid job," Bessen said.

Some people claim there is no systemic discrimination in the US. Our new paper finds that a recent policy change reveals how much institutions have been perpetuating pay inequities. 1/

— James Bessen (@JamesBessen) June 18, 2020

But more than validation of salary history bans, the new study provides further evidence of institutional discrimination and systemic racism, in which the structure of social institutions create or maintain race and gender inequities, even in the absence of conscious prejudice. While research has previously demonstrated systemic racism in housing, access to health care, immigration and higher education, the concept is evoked particularly in critiques of policing practices.

According to the Washington Post, evidence for systemic racism is "overwhelming": Black drivers are disproportionately stopped and searched (despite being less likely to have contraband), while Black men are nearly three times more likely to be killed by police than white men (and are disproportionately killed while unarmed). Despite the evidence, some politicians routinely reject the existence of institutional discrimination, sometimes citing, as President Donald Trump has, a "bad apples" theory of law enforcement failures.

"I don't believe there is systemic racism in the U.S.," White House economic advisor Larry Kudlow told CNBC in June, in response to the higher unemployment rate experienced by Black people, even as unemployment declined overall in May. "I'm not going to go into a long riff on it."

"The sort of shocking thing here is that we were able to put a number on it and it's a big number," Bessen said of the institutional discrimination demonstrated in the new findings about salary history bans. "I think there's going to be some people who are of the belief that, 'Well this kind of stuff just doesn't happen.' There's not much I can say to those people."

In light of the new findings, Donovan not only anticipates more states will adopt salary history bans, but also urges employers to adopt the "now-proven best practice" until federal legislation can be enacted. But salary history bans will be only one component activists and legislators will pursue in addressing pay inequities.

"The use of salary history is just one of the many steps in the hiring and compensation processes that systematically perpetuates and compounds the underpayment of people of color, women, and others," Donovan said, in response to emailed questions. "I'm looking forward to expanding this conversation to additional changes in hiring and compensation processes needed to fully close pay gaps."