Salary transparency alone won’t close the pay gap

A growing number of US states and localities have laws mandating pay transparency, with requirements varying from state to state. Beginning in 2021, Colorado required all companies to include a salary range and benefits on their job listings. A law put on the books in New York City last fall is similar, adding a “good faith” range in pay on each posting. And states like California and Rhode Island make employers provide a salary range only to candidates that request it during the interview process.

Although their mileage varies, the laws are aimed at equipping American workers with more information around compensation and empowering them in salary conversations. Its impacts may help with an enduring issue in the workplace, too: closing the gender pay gap, which has notably stalled in recent years. According to experts, salary transparency can help historically underpaid workers begin earning their full worth.

“We’ve really identified transparency as a leading tool for closing gender and racial wage gaps,” said Andrea Johnson, director of state policy at the National Women’s Law Center, who works on equal pay issues. For one, pay transparency has been shown to reduce unconscious bias or overt bias in salary-setting.

Today in the US, women on average make 84 cents to every dollar that a white, non-Hispanic man makes, according to the NWLC. The gap also widens along racial lines. While Asian American, Native Hawaiian, and Pacific Islander women make 92 cents to that dollar, greater pay disparities exist for Black women, who make 67 cents. Behind them, Latina and Indigenous women each make just 57 cents to the dollar.

But while salary laws are one step towards pay equity, it’s only one tool to closing the wage gap. We’ll need more than transparency laws to correct a history of bias in pay—and achieve pay equity for all workers.

A brief history of the gender pay gap

Despite substantially lessening in the past half-century, the gender wage gap is upheld by a long history of biases that pay women less within the workforce. Just over a century ago, only 20% of “gainful workers,” or those who work outside of the home, were women; of that share, only 5% were married. But thanks to shifting cultural norms and emerging educational opportunities beginning in the mid-1930s, women’s participation in the workforce began to rise, especially among married women. By 1970, 40% of married women and half of single women joined the workforce.

As more women worked, new inequities arose. Landmark laws like Title VII of the Civil Rights Act of 1964 and Pregnancy Discrimination Act in 1978 changed the treatment of pregnant workers, but moms of today are still held to a different standard than their male counterparts. And mothers—you guessed it—are typically paid less than fathers, 74 cents to the dollar in 2023.

While women made up 57% of the workforce in 2019, the pandemic threw progress for a loop. By April 2020, 5 million American men and women were pushed out of the workforce, but as the months wore on, disparities in household responsibilities, like child and elder care, resulted in women dropping out more rapidly. In September 2020, 863,000 women left the labor force, while only 168,000 men did.

Despite women’s workforce participation slowly bouncing back, with college-educated US women now participating more in the workforce than their male counterparts, progress in closing the wage gap has stalled. But as emerging salary transparency laws aim to empower workers with more information about compensation, experts say, they’re not a full-stop fix for a persistent pay gap.

Can salary transparency laws help close the pay gap?

Laws mandating salary transparency could help women identify their full earning potential—and negotiate to reach it. Experts focused on pay equity stress that gaps won’t be closed by individuals. They can only be fixed with system-wide changes, and transparency laws are a good start.

“This is important to say: you cannot out-earn existing pay gaps. Neither the gender or racial wage gaps are solvable at the individual level,” said Samantha Ghanie, a senior national financial resource manager at the nonprofit COOP, where she works with low-income and first-generation college graduates to close employment gaps. “They exist for a multitude of systemic reasons, and only changing laws and policy will accomplish this.”

That’s why experts are hopeful for what salary transparency can bring, even if measures are rolling out slowly across US states.

“Our laws are woefully out of date at the federal level. The state level has really been our best chance for making progress,” Johnson said. Pay transparency is beneficial to candidates, employees and employers. “It strengthens worker power and workers’ voices to ensure that they are being paid fairly, but it also strengthens employer accountability.” And in an already volatile job market, she added, it helps companies attract and retain talent.

“[Salary transparency] helps workers have information and give parameters to an employer as well, but if they’re going to pay outside that range, they can,” Johnson said.

But while these newly-introduced salary transparency laws can help empower workers facing gender and racial pay gaps to ask for more, they won’t correct inequities alone, especially while laws vary from state to state. Reaching equitable pay will also require changing systems that uphold biases.

How companies can prioritize equal pay, too

To address gender biases in pay, companies should work towards implementing a number of practices and policies that focus on closing the gender pay gap.

Conduct pay equity audits. “A pay equity audit is when an organization does a review of the salary compensation for all of their employees across function, promotion level, and demographics to see what inequities exist,” said Latesha Byrd, CEO of the talent development agency Perfeqta. “Pay equity audits point clearly to the fact that people from historically excluded groups, generally, are underpaid.”

Undertaking an audit is proven to work, too. Last year, the US EEOC released a study with the National Academies to analyze pay data it had collected from private employers between 2017 and 2018. Its conclusion: Auditing pay equity is a key tool to correct discrimination.

Hire for roles that are focused on equity. Byrd said some organizations are hiring executives specifically to oversee equitable pay. A head of rewards and recognition, she added, leads compensation, payroll, and benefits, and can be responsible for reconciling disparities in pay.

“Organizations are putting that into an executive seat,” she said. With a compensation leader who, the role can complement the work of other leaders focused on inclusion and equity.

Introduce transparency to org charts and salary bands. Much like pay transparency laws afford ample information for those in the hiring process, offering transparent communication around compensation creates an environment for employee empowerment, according to Byrd.

“Anyone at the organization can look at their level and be able to assess if they’re getting paid appropriately or not,” Byrd said. By surfacing any inequities, the practice keeps employers accountable to fair paying practices, too.

Offer better policies for caregivers. When women disproportionately bear the burden of caregiving, whether that’s to raise a child or care for an ailing family member, resulting career gaps can leave them behind in pay when they return to work. The US, too, is the only wealthy country without a nationwide parental leave policy.

To combat these breaks, companies can offer strong paid parental leave policies, funding for childcare, and remote or hybrid office models that allow parents to care more flexibly. With better benefits for care, women are more likely to stay in the workforce—and not lose steam in their salaries. Skills-building programs that address these career breaks can help women pick up where they left off.

Task men at all levels with allyship. The gender wage gap will not be solved solely by those getting paid less on account of their gender, added Byrd. Men need to be better allies to women, too, especially at the leadership level.

“That could be being a mentor or a sponsor paying attention to whether women colleagues have the same access to building social capital at an organization, [or] if they have the same access to gaining visibility when it comes to special projects,” she said. Even during the hiring process, allies can speak up to ensure the talent pool is diverse. She says this can look like asking questions like, “Why aren’t there more women interviewing for this role?”

Pay transparency laws are a strong start to combating pay gaps in the US states they’ve been passed. But the laws are just one tool. By focusing on bigger systems and a series of practices between companies and governmental policy, we’ll be much closer to pay parity for all workers.