While policy makers agree that the gender pay gap exists, finding a solution has remained elusive. Now, one U.S. state is taking aim at the disparity in compensation between men and women. And if the approach catches on elsewhere around the country, the result could benefit all workers, experts say.
Massachusetts is aiming to chip away at gender pay discrepancies with a new law that bars companies from asking a standard question in the hiring process: “How much did you make at your previous job?” The law, the first of its kind in America, is aimed at breaking what can become a cycle of unfair pay for women and people of color.
Women make about 79 cents for every $1 men earn, which hampers women in a number of ways, ranging from lower Social Security checks at retirement to having less money at hand to pay for necessities or save for a rainy day.
Women who work in high-skill jobs that require years of training aren’t immune from the gender effect on their pay. Employment site Glassdoor finds that female physicians earn 18 percent less than male doctors. Occupations with a lack of pay transparency can allow biases to have free reign, something the Massachusetts’ law is aiming to reduce. Research also shows that women’s choice of occupation accounts for roughly half of the pay gap with men.
“When standards and compensation is more opaque, you see a consistent pay gap,” said Victoria Budson, executive director of the Women and Public Policy Program at the Harvard Kennedy School, adding that the gender pay gap is smaller in fields with more transparency, such as government jobs and public universities. The new law “breaks the cycle of implicit or explicit discrimination in salaries.”
The law “is written to help any employee,” she added. “This won’t only help women. It helps every single person manage their career because their salary will be benchmarked against their skills and experience,” rather than previous pay.
Under the Massachusetts law, which takes effect in 2018, employers will have to tell job candidates upfront what a position pays, instead of the more typical process of asking people what they previously made and basing a job offer in part on that information. Budson predicts that other states interested in shrinking the gender pay gap will follow Massachusetts’ lead, using the law as a model.
The bipartisan law drew support on both sides of the political spectrum, which may be partly due to another provision in the law. That section states that if an employer has undertaken a self-evaluation of its pay practices and can show it has taken steps to reduce its own gender pay gap, it will have an “affirmative defense to liability” with pay discrimination claims.
While some believe the gender pay gap is an issue that only impacts women, the disparity has wide-reaching implications for the economy, as well as men, families and people of all races. It’s not a small problem, given that women now comprise 47 percent of the U.S. workforce and contribute about 40 percent of their families’ total earnings.
If there were no pay gap, working women and their families would have an additional $447.6 billion in earnings, according to the Institute for Women’s Policy Research. If the gap were cut in half, the U.S. economy would be 5 percent larger by 2030, according to the Organization for Economic Cooperation and Development.
People of color, regardless of gender, also typically earn less than white men, with the exception of Asian men. Latino women earn 54 cents for every $1 earned by men, while black women earn 64 cents on the dollar.
The pay gap “impacts your Social Security, it impacts the amount of your wages that you are able to save, and more of your wage goes to basic living expenses. It impacts your ability to be signaling what your value is,” Budson said. “If one cannot ask about pay in past jobs or training roles, it means the employer has to give out that first signal.”
She added, “How do we design our world so that we get the best candidates and we don’t let our implicit biases impact how people are paid?”
Barring hiring managers from asking how much job candidates have earned in past jobs “is one way to take away a piece of bias,” she said.