Pay Equity Begins With Pay Transparency

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October 27, 2022

By Beverly Cooper Neufeld and Seher Khawaja

"In the 59 years since the passage of the federal Equal Pay Act, women have been living in an absurd reality: It is unlawful for employers to pay less based on sex but lawful for them to hide salary information that would reveal those gender-based pay disparities.

The farce is finally unraveling. Nov. 1 marks the day that employers with four or more employees must start disclosing wage and salary ranges in advertisements for new jobs, transfers or promotion opportunities for any position that can be carried out in New York City. This new requirement is a game changer for the city’s workers and is already having a ripple effect across the country.

Since the beginning of time, work carried out by women and people of color has been grossly devalued and underpaid. In New York — a city with strong pay equity laws and a progressive reputation — Black and Latina women still make 64 cents and 56 cents, respectively, for every dollar a white man makes. The pay equity movement has brought crucial visibility to these disparities, but, when secrecy reigns, businesses can tout pay equity in public while shamelessly perpetuating inequity behind closed doors. We have seen firsthand how this hypocritical rhetoric compounds the injury for the women we serve.

Indeed, over time and across the country, states have enacted laws that mandate equal pay for equal or substantially similar work. But these laws, while critical, are not enough. The standard equal pay law still places the onus on women to take legal action to challenge discriminatory pay practices that are often impossible to unearth and costly to litigate. No person should have to bring a lawsuit to be paid fairly.

By mandating a degree of transparency in job advertisements, the New York City law finally shifts some of this responsibility to employers. Thus far, employers have had little incentive to remedy discriminatory pay practices because they remain hidden. In fact, many employers continue to argue they must meet candidates before setting a salary range in order to determine the salary.

Yet it is exactly this approach that injects gender and racial bias into the process. Consequently, those whose salaries have been depressed by long-term systemic discrimination continue to be offered less, earn less, and come to the table with less bargaining power. Without the ability to contextualize what a fair wage is, the higher salaries do not go to those with the most talent but rather to those who negotiate best, and have strong networks that can provide salary information. That is one of the reasons pay secrecy is so detrimental to those new to the job market. Being shortchanged in your first job can mean a lifetime of lower pay and retirement with fewer assets.

With salary ranges out in the open, employers must think critically about how they set pay at the front end of their process before they insert unconscious biases. At the same time, women and people of color have more leverage to advocate for themselves and more information to make better decisions about jobs and industries to pursue, helping to combat occupational segregation.

Beyond addressing gender and racial discrimination, pay transparency tells us how a company values its workforce, including whether it pays workers poverty wages while leadership earns millions per year. Pay transparency provides companies with an incentive to contemplate and confront one of the worst labor practices: underpaying workers. And we know pay transparency works as a driver of equity because pay gaps are smaller in sectors where pay scales are already public.

As we have seen with the implementation of a transparency law in Colorado, employers will undoubtedly try to find ways to shirk their duty to comply with the New York City law, including by setting absurdly broad ranges, offering salaries outside the range after the fact, and trying to draft their postings to exclude workers from jurisdictions where laws apply. What employers should realize is that, apart from qualifying as potential violations, many of these tactics are visible, and will generate distrust and reputational harm.

A true commitment to pay equity and fair labor practices requires openness. Next week, New York City, one of the largest business hubs in the world, will take a historic step forward. A similar bill sits on Gov. Hochul’s desk, and we urge her to act on her commitment to pay equity and sign it into law so that all New York workers, employers and the state economy can benefit from salary transparency. This is a moment for New York to once again serve as a model for the rest of the country.

Neufeld is the president of PowHer New York. Khawaja is the senior attorney for economic empowerment at Legal Momentum. Both were centrally involved in the NYC and NYS pay transparency bills."