A new pay equality law, going into statewide effect in July 2018, makes it illegal in Massachusetts for an employer to ask for a job seeker’s salary history. Signed by the state’s Republican governor, Charlie Baker, the law was designed to force employers to pay all employees similar wages for the same or comparable positions.
Women earn less than men as little as one year out of college, across the board. When employers base new salaries on previous salaries, the problem becomes ingrained. "The prohibition is designed to stop perpetuating pay inequality from employer to employer when employers offer to pay women applicants less than their male counterparts because the men were paid more at the last employer," says Amanda Marie Baer, an employment lawyer at Mirick, O'Connell, DeMallie & Lougee, LLP in Massachusetts.
Massachusetts is now the leader in regulation of gender pay equality, but the trend towards equality is widespread. California tried to pass a similar law earlier, but the law was vetoed by democratic Governor Jerry Brown. In 2015, Connecticut, Delaware, North Dakota, and Oregon passed new equal pay laws. Maryland passed two major laws that advocated women’s economic security earlier this year, making it illegal for employers to forbid their employees from comparing salaries and making it easier for low wage earners to go after their employers for underpaying them.
Other states are sure to follow Massachusetts’ lead. States with already strong equal pay laws, like Maryland, California, Illinois, Minnesota, North Dakota, Tennessee, and Vermont will likely be the next to make it illegal for employers to ask for job seekers’ salary histories.
States with weaker laws and greater pay disparity across genders at the moment are more likely to resist the passage of these pro-equality bills. As this graphic from AAUW shows, middle America will likely be slow to follow both coasts in instating new legislation. States like Louisiana, Utah, Wyoming, and West Virginia have 30-34.7% wage gaps between men and women and are likely to show the most resistance.
Massachusetts’ progressive new legislation has triggered a rise in interest in the Paycheck Fairness Act. People are now pushing for Congress to pass the act this November, which would prevent employers from retaliating against employees who try to compare their salaries with their coworkers.
The Paycheck Fairness Act has been stalled in Congress since it was introduced in 2013, but would have a big impact both in states that adopt similar salary laws to Massachusetts’ and states that resist. By making it illegal for employers to forbid their employees to compare compensation, the act would allow women to know when they are being unfairly compensated and to go after an appropriate raise.
How will all of this impact recruiting strategy? At least in Massachusetts, to start, it will now be impossible for hiring managers to ascertain whether they have the salary advantage when making an offer. Before the new legislation, employers could try to woo away top talent by offering better compensation. After the law takes effect, offers will be made without knowing whether or not the offer constitutes a pay increase. In order to still attract top talent and reach high-performing passive candidates, recruiters will have to offer something other than money.
Luckily for employers, millennials are already responding to non-monetary incentives in ways that past generations have not. According to a 2016 study by Fidelity Investments, millennials will take a $7,600 pay cut for a higher quality work life. A higher quality work life was defined as one with a better work-life balance, career development, company culture, and purposeful work. Further, 58% of millennials ranked improved quality of life over financial benefits when evaluating an offer.
Smart hiring managers will take note of these statistics and, particularly in the face of uncertainty over the strength of their offered salaries, will offer improved hours, flexibility for telecommuting, and interesting work with clear growth potential. Mapping out potential career paths with candidates during the recruiting process will become more and more valuable as the law takes effect in Massachusetts and as other states mold their policies accordingly.Want to learn how you can use your company culture to win top talent? Check out Happie’s services.