Several U.S. states or cities have recently introduced, or are considering, a ban on employers inquiring about the salary history of job applicants as part of more extensive equal pay legislation. The reasoning? Because women still face a pay gap in comparison to similarly qualified men – 2.4 percent based on PayScale’s most recent gender equity report released in December 2016 – it was hypothesized that revealing salary history would perpetuate lower pay for women over the life of their careers. And, we do see that the pay gap grows as women advance in their careers. At the executive level, women make more than 6 percent less than their male colleagues (when holding all else constant except gender).
So, we decided to dig into the salary history question a bit more and figure out who’s being asked, how they respond and how that impacts their pay. In a new report released today, we surveyed 15,413 job seekers who had active job offers in hand about whether they disclosed their pay at previous jobs at any point in the interview process.
The possible answers were:
1. No, and they did not ask
2. No, but they asked
3. Yes, they asked about my salary history
4. Yes, I volunteered information about my salary history
We expected that the original hypothesis would hold true. We were wrong: Women who revealed their salary history actually had higher job offers than women who refused to disclose their pay. What was even more surprising was that refusing to disclose salary history didn’t have a negative impact on everyone—just on women. Women who didn’t disclose their salary history when asked received job offers that were 1.8 percent lower, on average, than women who did; however, men who didn’t disclose when asked actually had offers that averaged 1.2 percent higher than men who did disclose. We controlled for all variables that could impact pay such as job title, company size, location, industry, etc. to ensure we were looking at similar candidates when evaluating the compensation offer differences.
So, why are women and men having different results when withholding salary history information during the interview process? I don’t know for sure, but I have some educated guesses.
Unconscious Bias Rears Its Ugly Head…Again
We know for a fact, based on numerous studies, that human beings carry bias about other human beings. We all do. We make snap judgments about other people influenced by our own upbringing and value system, by societal norms, by our anecdotal experiences.
We know that when people act counter to someone’s expectations, it can elicit a negative response. So, is it possible that hiring managers and/or recruiters are reacting more negatively when women refuse to disclose their salary, vs. when men do the same?
In one well-known study by Harvard researcher Hannah Riley Bowles titled, “Social incentives for gender differences in the propensity to initiate negotiations: Sometimes it does hurt to ask,” it was shown that both men and women react negatively when women initiate negotiations and advocate for themselves in negotiations.
Anchoring to a Number
Another argument in ditching the salary history question has been that employers might inadvertently be anchoring to a pay number thrown out by a candidate rather than sticking to the range they set for the position. But, what if female job candidates are anchoring to their own salary history number even when they withhold it from a new potential employer? Too many times, I’ve heard people seeking salary advice say they weren’t sure what to ask for so they just tacked $5K or $10K onto their current salary. That equates to pulling a number out of a hat.
So, with this new data in mind, how should we proceed with the salary history question? Even though the results of this study are different than we might have expected, ultimately, the salary history question is still causing problems. What’s the path forward?
1. Stop asking the question. It puts candidates in an awkward position of having to decide whether to disclose and apparently, it could be negatively impacting female candidates – just not in the way we previously suspected.
2. Price the job, not the person. The best way to price a position has always been to use market data and ensure that data is driving the decisions regarding compensation rather than anecdotal evidence. A candidate’s salary history is one data point. You don’t want it to unreasonably influence the offer. If it does, you could end up with internal pay inequities that lead to higher employee turnover.
About the Author
Lydia Frank is VP of Content Strategy for PayScale, the leader in modern compensation software. PayScale creates products that help employees and employers have more open and mutually beneficial conversations about pay. She writes a column on salary negotiation for Money magazine and has contributed articles to various publications, including Fortune, Harvard Business Review and TechCrunch. She is also a regular speaker on the topics of gender equity and salary negotiation. She holds a bachelor’s degree in journalism from Central Washington University and previously led editorial teams for both MSN and About.com, covering topics including careers, technology and personal finance.
Creator of the world’s largest database of rich salary profiles, PayScale offers modern compensation software and real-time, data-driven insights for employees and employers alike. More than 6,000 organizations, from small businesses to Fortune 500 companies, use PayScale products to power pay decisions for more than 13 million employees. For more information, visit www.payscale.com.