• Katica Roy

Pay Transparency Laws Create Confusion & Controversy—What’s Going On?


Welcome to my weekly Q&A feature. (Scroll down to find the Q&A.)


If this is your first time here, welcome. I spend a fair amount of time speaking at events and conferences. At the end of my presentations, I leave space for audience members to ask questions—tough questions, brave questions, you name it. The level of candor and curiosity always inspires me, and I want to share that sentiment with you. Each week I pick one question that I believe others would find most instructive and publish my response to it here.


The purpose of this weekly tradition is transparency and inclusion.

  • Transparency: a behind-the-scenes look at my day-to-day.

  • Inclusion: bringing others along on the journey.


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Sifting Through Pay Transparency Laws


Question:


After seeing the reaction to Colorado’s pay transparency law and now New York City’s law, is it right to claim that these laws aren’t working and maybe even disadvantaging workers in those locations?


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Answer:


We don't know. We don’t know because we don’t have enough data yet to evaluate the effectiveness of pay transparency legislation, especially relative to workers in states without pay transparency legislation.


The question we need to answer is: What sort of behavior will pay transparency laws produce in the long-term? What are the third and fourth order effects? We don’t know yet.

For those of you unfamiliar with what’s been going on with pay transparency in Colorado and New York City (and in other states, too), here’s a summary of the situation.


Pay Transparency Laws In Colorado & New York City


On January 15, 2022, New York City passed a law requiring companies with four or more employees to include salary ranges in their job postings. Say you’re an employer and want to hire someone for a position located in New York City. Your job posting needs to list the minimum and maximum salary you’re willing to pay for the open position.


Salary range requirements apply to all jobs, promotions, and transfer opportunities posted on behalf of your company. And, you must use ranges, not floors or ceilings (i.e. maximum $75,000 per year, $25 per hour and up, etc).


But what if you’re unsure about how much to pay for a position? What if you find someone and decide they’re worth more (or less) than your advertised rate? According to the law, that’s okay. The employer must list what they, “in good faith” believe the salary range should be at the time of the posting.


New York City wants to promote pay equity. That’s why they passed this law, which will go into effect on November 1, 2022. They aren’t the first movers in this space.


Colorado’s Equal Pay for Equal Work Act went into effect in January 2021. Among other things, Colorado’s law requires employers to list total compensation details (salary + benefits) for open jobs and promotion opportunities.


How Are People Reacting To Pay Transparency Legislation?


You may have learned about these pay transparency laws from the cynical media attention they garnered. In June 2021, the Wall Street Journal ran a story with the headline “Many Companies Want Remote Workers—Except From Colorado.”


The reasoning goes that, as more organizations expand the geographic boundaries of their talent pool via remote work, they can circumvent pay transparency laws by engineering Coloradans (or any person living in a jurisdiction with a pay transparency law) out of the talent search.


If you’re an employer in the state and want to hire your next remote CFO but don’t want to include salary information in the job posting, you might add an “excludes people living in Colorado” clause to side-step compliance.


The website coloradoexcluded.com popped up in reaction to the exclusionary job postings. It shows that at least 211 companies across 488 job listings have avoided hiring people in Colorado. The Colorado Department of Labor and Employment has since issued guidance on the matter.


At this point, it’s easy to get lost in the nuances of the laws. So let’s take a step back and look at the bigger picture. Forest, not trees.


Context Matters: We Need To Look At The Bigger Picture


Right now we are working with anec-data and confirmation bias. If you want coverage that shows the negative impact of pay transparency legislation, you’ll find it. If you want coverage that shows the positive impact of pay transparency, you’ll find it too.


The question we need to answer is: What sort of behavior will pay transparency laws produce in the long-term? What are the third and fourth order effects? We don’t know yet.


What we do know, however, is that pay inequity exists. At current rates of progress, the aggregate pay gap won’t close until 2111. For Latinas, it won’t close until 2197. For Black women, it won’t close ever. So if we want to accelerate progress toward pay equity, then we need to take action.


And pay transparency legislation is one way we can take action to alleviate the severity of pay inequity.

  • It sheds light on the issue of pay inequity

  • It returns agency to workers by removing information asymmetries

  • It provides companies with a competitive advantage in a tight labor market

  • It allows workers to use salary information to craft their career paths in a manner that best suits their economic needs


Conclusion


→ Is pay transparency the solution to close the gender pay equity gap? No, this is a systemic issue that requires a systemic solution.


→ Does legislation put up guard rails to steer companies toward pay equity? Yes.


→ Is pay transparency a step in the right direction toward a more equitable world? Yes.

 

Curious about something? ​Ask your question here for a chance to have it answered in an upcoming edition of this newsletter.


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