Right now, organizations of all kinds are taking steps to become more diverse, inclusive, equitable places to work.
For too long, too many diversity and inclusion efforts have stagnated. Executives have expressed their commitment to creating better and more welcoming environments, but little has changed. Workplaces have remained largely homogenous. Patterns of harassment and discrimination have continued. People have been shut out of careers or entire fields due to skin tone, cultural identity, gender, age, beliefs, socioeconomic background, and disability status. Millions and millions of customers have gone ignored and underserved.
As a result, organizations have lost out on innumerable passionate, talented employees, as well as countless opportunities to make money and make the world a better place. Meanwhile, the “conversation” about DEI has become more of a monologue—and a needlessly politicized and complex one: What does diversity actually mean? Are we focusing too much on people’s identities? Is this just a trend? Are the challenges and costs of DEI really worth it?
The truth is both simple and incontrovertible. Diversity is good for people and for business. It’s not about checking a box or making sure your workforce looks a certain way. It’s about giving everyone—everyone—the respect and empowerment they deserve.
One way to NOT do that is to ask someone how much they made at their last job.
This is known as the “salary history” question, and it’s quickly becoming a major HR faux pas, as well as an increasingly illegal practice. More than a dozen states have outlawed the question in recent years, with more states likely on the way.
Economists and researchers James Bessen, Erich Denk, and James Kossuth of Boston University decided to gauge the impact of this trend. In a June article in the Harvard Business Review, they write about their recent study, which shows how companies can “substantially reduce pay disparities for Black and women employees” by simply refusing to ask interviewees about prior pay.
Besse, Denk, and Kossuth explain:
“We know that this policy has a major effect on pay disparities because 14 states have banned this practice during the last three years. We have analyzed differences between areas with salary history bans (SHB) and neighboring counties in states without bans. We find that these new laws generated substantial pay increases for Black (+13%) and female (+8%) candidates who took new jobs.
Why do disadvantaged groups see higher pay offers when employers don’t use salary history information? Simply put, that information gives employers a bargaining advantage. Knowing that a job applicant is currently underpaid, employers can offer a bit more than their current pay level, confident that the applicant will accept. But the applicant may still be paid less than they are worth. In this way, pay inequalities are perpetuated. But when access to salary histories is limited, Black and female job applicants see a more level playing field.”
But don’t employers need to know what candidates have made, and what salary expectations they might have for the job? That’s where things get interesting. Not only does the research show that “employers can hire just as effectively without using this information,” but that salary histories are more transparent overall in states that have banned the question:
“Our data show sharp increases in the use of salary ranges in job postings after state-wide enactment of SHB legislation, and not just by employers subject to the ban. Applicants, too, can learn about an employer’s salary range from websites like Glassdoor, which allows current and former employees to post information about their salary and work environment. The greater transparency offers applicants a level playing field, thus reducing discrimination and other inequities both in the hiring process and over time on the job.”
In other words, these laws break critical information out of the bounds of private, potentially biased conversations between interviewers and job applicants. This, according to the researchers, “benefits both employers and applicants, and also satisfies the needs of HR professionals and CEOs.”
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