More States Pass Pay Transparency Laws to Close Gender, Racial Pay Gaps

Last month, Massachusetts became the 12th state to pass a pay transparency law, and other states are working on similar legislation that advocates say is critical to ending the pay gap for women and people of color.

On average, women across all racial and ethnic groups earn 16% less than men, according to the U.S. Bureau of Labor Statistics. It also found that Black women earn 85% of what white women earn, while Hispanic women earn 79% of what white women earn. Meanwhile, Black men earn 75% of what white men earn, and Hispanic men earn 73% of what white men earn.

“This new law is an important next step toward closing wage gaps, especially for people of color and women,” Massachusetts Gov. Maura Healey, a Democrat, said in a statement. “It will also strengthen the ability of Massachusetts employers to build diverse, talented teams.”

Pay transparency laws and penalties differ from state to state. Some laws require employers to post salary ranges in job ads, while others require employers to provide applicants a pay range during the interview process. These laws may also require employers to disclose to their current employees the salary ranges for their jobs.

The laws also carry financial penalties. For example, companies in Colorado that violate its pay transparency law can be fined up to $10,000 per violation. Fines for violating New York City’s law can reach as much as $250,000.

The new Massachusetts law is comprehensive, requiring employers to post salary ranges in job postings, disclose pay ranges to employees being promoted or transferred to a new position, and provide pay ranges to existing employees.

The theory behind all these laws is the same: Having more information will enable all people to negotiate their compensation more fairly and eliminate the pay gaps frequently experienced by women and people of color.

Empowering Workers

“If workers are empowered with this knowledge going into the application process, that disadvantage would at least decrease,” said Vasu Reddy, director of state policy for workplace justice at the National Women’s Law Center in Washington, D.C.

Reddy added that salaries for most federal government positions are public knowledge, and female government employees earn 94 cents for every dollar their male counterparts make—better than the 84 cents for women nationwide.

Some evidence of success has emerged. Colorado enacted its pay transparency law in 2021, becoming the first state to require employers to post salaries in their job ads. The state’s gender pay gap has shrunk by 7 cents since then: Women now earn 85 cents for every dollar a man earns, up from 78 cents, according to economic research conducted for the nonprofit Women’s Foundation of Colorado. Meanwhile, another recent study found that posted salaries in Colorado increased by 3.6% since its pay transparency law went into effect.

Some employers have resisted the laws. Multi-state employers say it is difficult to adhere to a patchwork of regulations for employees in states with different pay transparency laws. Others claim that broadcasting salaries could affect their competitiveness in the marketplace, and some worry that workers may leave if they realize they can earn more elsewhere.

Yet, a study SHRM released last year found that 70% of organizations that list pay ranges on their job postings said the move has led to more applications. Additionally, nearly two-thirds of such organizations said the quality of their applicants increased. In fact, SHRM found that 82% of U.S. workers are more likely to consider applying for a job if a pay range is listed.

But listing pay ranges won’t help prospective employees reap these benefits if the range is exceptionally wide, experts said. The New York City Commission on Human Rights filed complaints against employers for advertising jobs with pay ranges that weren’t made “in good faith,” as many laws require. For example, News Corp. received a complaint late last year for listing a salary range of between $50,000 to $180,000 a year for a job as an education reporter for Dow Jones, and for posting a salary range of $31,000 to $125,000 for an Albany bureau chief for the New York Post.

Scott Furst, a New York City-based lawyer specializing in business issues at Sichenzia Ross Ference Carmel, said the problem with some pay transparency laws is the vagueness of the “in good faith” legal requirement of companies, which is not cut-and-dried.

Furst also said that determining a pay range isn’t as simple as many believe, because many factors, including education, specialization, experience, and compensation for past employees, are combined to set a salary. It can be challenging for some employers, especially smaller ones, to come up with a range because doing so requires time and resources.

“It’s all about drafting the laws,” Furst said. “I would not be surprised if many of these statutes are amended.”