In response to nationwide protests, CEOs have committed to fighting discrimination and intolerance and have renewed pledges to increase diversity and fairness within their organizations. But how can they demonstrate that these are more than just empty promises? New research (by Bessen, Denk, and co-author Chen Meng) shows that CEOs can take one simple, immediate action to substantially reduce pay disparities for Black and women employees: Stop asking job applicants about prior pay.
Stop Asking Job Candidates for Their Salary History
Companies can take one simple, immediate action to substantially reduce pay disparities for Black and female employees: Stop asking job applicants about prior pay. Salary history bans have been enacted in 14 states during the last three years, and the authors find that these new laws generated substantial pay increases for Black (+13%) and female (+8%) candidates who took new jobs. Instead of asking for salary histories, companies can ask what candidates hope to earn or post salary ranges in job postings — both of which are becoming more common. The authors’ analysis, based on the states that banned employers from using salary histories, shows that employers can hire just as effectively without using salary history — rates of turnover, for example, did not increase in states with bans. At the same time, employers who avoided asking for salary histories were able to significantly reduce unfair pay differences.