What is a salary history– and why is it suddenly getting so much media coverage? Here’s the skinny on pay history and what it means for employers.
What is a salary history? It depends on who you ask, an employer or an employee. For some, it is a commercial right and for others a glass ceiling. But workers have been increasingly fighting for the right to start each interview with a clean slate, past salary data excluded. And guess what? State and local governments are taking their side in an attempt to close the ever-existant wage gap.
The Salary History: A Definition
So what is a salary history? A salary history is private information that companies may request as part of the interview process. Typically, an applicant is asked to voluntarily disclose how much he or she earned in earlier jobs in order to determine their eligibility for a contested position. As you may have guessed, this practice is becoming increasingly controversial because it lets the company hold all the cards at the start of a hiring relationship, allowing H.R. Managers to determine an applicant’s worth based on an individual (rather than categorical) basis.
How were Salary Histories Used in the Past?
In a nutshell, salary history disclosures allowed companies to get away with paying each employee as little as possible, thereby maximizing their “investment” in that person. So even if the standard salary for a given role was $20 per hour, if an employee tolerated working for $14 an hour at another company, it was a safe bet that they’d accept an offer to work for $15-$16 per hour, resulting in significant salary-related cost savings for the company. In this scenario, coworkers may earn wildly different salaries while performing the same jobs. This would explain why many companies discouraged transparent salary discussions between employees– a practice that is now largely illegal.
Salary Histories Mean Big Gains for Employers but Even Bigger Losses for Employees
So what happens when salary levels are determined on the basis of how much an applicant has earned before, rather than their skill level or suitability for a role? The result is that people get trapped in inescapable cycles of pay discrimination, which are perpetuated when employers are aware of past discrimination.
From an employee perspective, salary histories only benefit historically high-earners (and people with access to higher-paid jobs at an early age) because they set a pay-precedent with new employers. But what is a salary history to most other people? A barrier to growth for any ethnic, social, or gender-based group experiencing restricted job access or discrimination, such as women, LGTBQ, people of color, and immigrants. Despite doing equal work, they will never be considered the true “equal” of any of their wealthier, straight caucasian counterparts. Not in the eyes of their employers, and certainly not by the society they live in.
Illegal in an Increasing Number of States
Up to 21 U.S. states are researching legislation to prohibit the utilization of Salary Histories and 14 states including Connecticut, California, Massachusetts, Illinois, Delaware, Hawaii, Maine, and Puerto Rico have already enacted state-wide bans. The Paycheck Fairness Act is also back in Congress for a vote, which would ban salary history inquiries on a federal level.