California’s New Employment Law Aims to Narrow the Gender Wage Gap

By R.J. Ruppenthal, AFT 6157 Negotiator, EVC Legal Assisting Faculty

On average, women working in the United States make 22% less than men. California, along with several other states and cities, has acted to address this pay gap. Most recently, Gov. Jerry Brown signed a bill into law that will prohibit employers from asking prospective employees about their salary history. When this bill becomes law on Jan. 1, 2018, we can begin to see whether it has a positive effect on narrowing the wage gap.

The new law, known as AB 168, adds a section to the state’s Labor Code. Its main operative provision consists of the following text: “An employer shall not rely on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.” It goes on to forbid all public and private sector employers from asking about a job applicant’s salary history (though there are exceptions if the applicant voluntarily discloses salary history or if the information is publicly available, such as on a website that lists salary scales).

Since women, on average, make less than men, the idea is that employers should not be able to tailor salary offers to that lower average. Instead, they will be forced to make a more standard offer based upon skills and experience. Rather than perpetuating past patterns, this law could narrow the wage gap by standardizing salaries for certain positions over time.

Possible Criticisms of the Law

However, there are two main criticisms of this approach. First, it upends current practice, which is based to some degree on the free market. An employee can seek a job with higher pay and an employer can recruit that person by offering more than his or her present salary. As that becomes harder, we may see published salary schedules, but employers also will have to work harder to learn what the competition is offering. Counteroffers and bargaining may become more common. And all of that probably creates a higher cost for California employers.

The higher cost will be worthwhile if the new law can narrow the wage gap. But there’s no empirical evidence that it will succeed, according to the second major criticism. In fact, a recent survey indicated that salary history prohibitions may not be an effective way of addressing the pay gap.

Payscale is a site that allows job seekers to evaluate potential job offers to determine whether they are too high or too low, given the person’s experience, geographic area and other factors. According to Harvard Business Review, the Payscale Company launched a survey of its users in early 2017. More than 15,000 users were asked questions about their job title, industry, experience, location and other factors, and then each of these (except gender) was controlled to provide an equal playing field for the survey question.

That question asked users whether they disclosed their salary rate or history at any point during the interview process. And then it looked for patterns in the salaries that users reported to Payscale. Here were the answer choices:
(A) No, and the employer did not ask.
(B) No, but the employer asked.
(C) Yes, the employer asked about my salary history.
(D) Yes, I volunteered information about my salary history.
(E) I do not recall.

Women Still Paid 22% Less than Men

Because other factors were controlled, gender was the only difference that stood out. And unfortunately, the results pointed to one stark difference. When a woman was asked her salary history and did not provide one, she was offered 1.8% LESS in salary than a woman who was asked and did disclose salary history. But men who refused to disclose salary history when asked actually received a HIGHER offer (1.2% higher) than those who disclosed when asked.

Translation: Employers are offering men more money than women, regardless of salary history.

That was one survey. It may have been flawed or imperfect. Payscale may be biased because its business might be adversely impacted if salaries become more standardized and less secretive. And yet, if that survey result is accurate, it indicates that salary history may not be the best place to attack the wage gap.

Is the new law worth a try? Probably so. More information would be best, and such laws should use the least restrictive approach possible, but our society needs to end discrimination. The wage gap has been persistent and we need to eliminate this disadvantage. Good for California and others for attempting this fix; we all hope it works. If not, the state must remain flexible and proactive in seeking other ways to bridge the gap.