What to NOT Negotiate About—Salary History

For many of us looking at inequality and how to promote pay equity, the news that certain structural changes in negotiation can make a difference is quite welcome.  One of the hypothesized reasons for women’s pay inequity is that women might not have negotiated great starting salaries and then were held back over the course of their careers by always having to reveal their previous salary.  In other words, if you (like me) did not negotiate your starting salary but then only got raises based off that lower salary or, even when you transferred jobs, were paid only sufficiently more than your previous job to entice you to move, one’s salary could forever be hampered by lack of negotiation at the outset.   Some jurisdictions have now banned asking about salary history in order to rectify this and now we have proof that it works.  In their study of the dozen states that passed this law, James Bessen, Erich Denk, and Chen Meng studied the impact.  As they noted,

Salary histories reveal information about job applicants’ reservation wages to employers, giving employers a bargaining advantage. Correspondingly, salary history bans reveal evidence about the frequency with which employers have exploited this information and the magnitude of the advantage it provided them. Our evidence suggests that this advantage has been an important factor perpetuating wage inequality, especially for women and African-Americans

In fact, salary history bans helps all workers, helping women and minorities even more.  After these bans,

employers posted wages more often and increased pay for job changers by about 5%, with larger increases for women (8%) and African-Americans (13%). Salary histories appear to account for much of the persistence of residual wage gaps.

Fascinating work and helpful for demonstrating where individual negotiation success can be bolstered through legislative and structural changes.