This is what happens when employers can’t ask job applicants about salary history
Silence can be golden for workers when it comes revealing their salary history, a new study suggests.
Workers who did not show potential employers their pay history had double-digit jumps in their wages and were able to bargain better wages than workers who revealed their past pay, according to a study circulated Monday by the National Bureau of Economic Research.
Researchers at the University of Minnesota and MIT Sloan School of Management devised an experiment where almost 3,000 employers posting job openings on an unidentified online job site could not see the wages previous employers paid an applicant during a two-week period.
A separate group of 3,000 employers could see applicants’ pay history.
The experiment found:
• Employers who couldn’t see the pay history asked 13% more questions of applicants, but once the experiment was over they asked 22% fewer questions than during the experiment.
• Workers whose pay history was hidden from view accepted wages that were 9% more of their initial bid compared to workers whose previous wages were known.
• Employers without the salary information considered more candidates, asked applicants more questions about their capabilities — and were actually more likely to hire.
• It also helped people who were paid lower wages in their previous jobs. Employers who could not see pay history hired workers with 13% lower past average wages.
The working paper comes as a growing number of states and cities are enacting rules forbidding employers from asking job applicants what they’ve been paid in the past.
The Chamber of Commerce for Greater Philadelphia sued that city over its 2017 ban, arguing it violates members’ free speech rights. The case is pending before the Third Circuit Court of Appeals.
Salary history ban proponents say when employers can inquire about pasty salary, that can unfairly drag down wages, especially for women already hampered by a wage gap.
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Last year, the Democrat-controlled U.S. House of Representatives passed the “Paycheck Fairness Act,” a measure that would impose a federal ban on questions about salary history, among other steps.
Despite the bill’s passage in the House, its chances of passage in the Republican-controlled Senate are tougher.
Mitch McConnell, a Republican from Kentucky, the Senate majority leader, called an earlier version of the bill “just another Democratic idea that threatens to hurt the very people that it claims to help.”
One observer at the Heritage Foundation, a conservative think tank, said the Paycheck Fairness Act would lead to “rigid pay scales” and increased business costs because employers would lack the discretion to negotiate pay.
The researchers for the latest paper, professor Moshe Barach of the University of Minnesota and professor John Horton of the MIT Sloan School of Management, acknowledge that asking for a previous salary can signal how much a past employer valued an application.
They noted, however — at least in the specific context of online hires for short-term work — “our findings suggest that policies that limit employer access to compensation history would more or less have the intended effects, benefiting those with relatively low wages, with no overall reduction in hiring.”
Barach told MarketWatch the paper wasn’t taking particular stances on certain salary ban laws, but at least in the specific context of their experiment, “the vast majority of concerns over public policy are unfounded. … Employers can always ask questions.”
To be sure, the study focused on only a small portion of jobs — publicly available, hourly jobs where any applicant could throw their hat in the ring. Employers might have a different approach to compensation for long-term salaried jobs.
The study’s findings of a boost in wages align with past research on salary negotiations and the so-called “anchoring effect.“ Researchers say people tend to give more weight to the first piece of information they take in — so a hiring manager might give undue weight to salary history.
One 2011 study in the Journal of Applied Social Psychology found people who jokingly threw out a high salary offer, thereby establishing a more pricey anchor, made more than people who earnestly named their salary request.
But if there is no anchor to peg the salary talks, workers may have more latitude to name a higher price.
A 2017 survey of 15,000 people by Payscale.com, a website letting users compare salaries, found some possible gender bias in the way employers treated job applicants who refused to disclose their previous salary.
It concluded that women who refused to discuss their pay history earned 1.8% less than women who discussed the number. Yet when men refused to talk about pay, they ended up with 1.2% more compared to male counterparts who did discuss their past pay.