Moneybox

Massachusetts Just Banned Companies From Asking Job Applicants How Much They Make

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When it comes to negotiating salaries, employers tend to have some built-in advantages over workers—namely, they know more. Companies spend lots of money on consultants who can tell them the market rate for, say, an accountant or database manager. They can ask job applicants about their previous salaries. They often discourage staff from discussing their pay among themselves, even when doing so might violate the law, making it tough for Cathy in marketing to figure out whether the guy two cubicles down really makes more than her.

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You and me? We can go on sites like PayScale or Glassdoor to try and figure out our worth. We can talk with friends in the industry. But, when it comes time to haggle, the end result is almost always a case of asymmetric information.

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This week, Massachusetts enacted a new law that could even the playing field a bit, by barring employers from asking job applicants about their salary history. Prospective hires can still choose to tell companies how much they earn. But no longer will residents of the Bay State be forced to fudge their pay by a few grand every time they fill out a job form; they can just leave the HR department in the dark and force corporate to make a decent offer.

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Massachusetts is the first state to pass such a rule. Primarily, the statute is designed to help close the wage gap between men and women, the logic being that if women fall behind on salary early in their career, whether because of discrimination or motherhood or shyness about asking for a raise, the new law will keep it from penalizing them when they move on to a new job. That said, the rule could help anybody who started off their working life on a slightly weak foot, and might cut down on the role of luck a bit in what both men and women make over time. People who graduate into a recession, for instance, tend to earn lower salaries for years after the economy has recovered, mostly because they picked the wrong moment to go out for their first job; the Massachusetts law might make it easier to make up for that kind of early disadvantage.

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There are other potentially helpful parts of the law, too. On the gender equity front, it requires companies to pay men and women the same when they do “comparable” work—not just when they have the exact same, potentially meaningless job title. It also guarantees employees the right to discuss their pay with their colleagues. That right is supposed to be enshrined in federal law under the National Labor Relations Act, but that law doesn’t apply to supervisors, and many employers ignore it by enforcing pay secrecy agreements, knowing they’re unlikely to be punished. Making sure that workers can talk among themselves should make workplaces a bit more transparent, and make it easier for people to make sure they are paid what they deserve.

Could this new law backfire? There’s always a chance of unintended consequences—maybe companies will start trying to low-ball more potential hires, knowing that job applicants who currently earn more will ask for a better deal. But this mostly strikes me as an interesting experiment, not to mention a good example of how laws meant to help women can help everybody.

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