Philadelphia Mayor Jim Kenney signed a bill on Monday that prohibits employers from asking candidates about their salary history. Like the Massachusetts bill that passed this summer (but won't go into effect until January 1, 2018), the goal is to help end gender pay discrimination.

The theory is that since women tend to have lower salaries than men, and since many businesses make their current salary offer based on previous salaries, one underpaid job in 1992 can affect you the rest of your life. By prohibiting employers from asking about your salary history, hiring managers will have to make a salary offer based on market data and won't be influenced by a low previous salary.

I'm not a fan of government regulations, but I like the idea behind these laws. Businesses should be looking at market data. They should be the ones to say, "this job pays $X per year, are you interested?" I don't think this will solve all problems, but I do think it will help. However, Wharton Professor Peter Cappelli thinks it could backfire and hurt the people it's claiming to help.

In an interview with Fabiola Cineas at Philadelphia Magazine, Cappelli explained his position:

The problem with the wage legislation is that if employers want to know what a woman was paid and they can't find out, they're going to guess. And if they guess, particularly given all the rhetoric that women are paid inadequately compared to men, employers are likely to guess that they were lower paid. So the employer is going to start off making a first offer to women that could be much lower than the offer they make to men.

There are always unintended consequences to government restrictions on businesses and Cappelli may be right. He compared it to the "ban the box" legislation that is an attempt to get more people with felony convictions into jobs. While it has been helpful getting job offers for people with felony convictions, but it's had a negative effect on young people of color. Companies don't want to hire felons, so they stereotype and don't interview young black men at all.

Cappelli also points out that there's nothing in the law that prevents a woman (or a man) from voluntarily sharing salary information. A highly paid person generally won't leave a job for a lower paying job and will be happy to share information on their current salary. Someone who feels she is underpaid will not want to share that information. The end result will be that if you don't speak up, hiring managers might assume you have a lower salary, and then will give you a low offer.

This isn't without precedent. We see the same behavior in references. Many companies have policies against giving references, but many (but not all) managers are willing to give positive references, in defiance of company policy. They won't break policy to give a bad reference, though. So, recruiters assume that no reference means a bad reference, which means you can lose out on a job offer because your former boss follows company rules.

Overall, Cappelli shares my idea of being wary of imposing legislation in an attempt to fix a problem. He says,

But should local government try to alter particular mechanisms of the workplace? I'd say it's probably not a good idea, particularly because it's so difficult to anticipate what the unintended consequences are. To find something where you don't have a lot of unintended consequences is unfortunately pretty hard to do. There are always these "what happens then" questions.

Comcast has threatened to fight this new law in court, and they have the support of the Philadelphia Chamber. We'll see how it will play out in court, and we'll see if it has positive or negative unintended consequences. One potentially positive consequence may be that it becomes easier to take a pay cut for something like a career change. Or, for an older worker who has been rejected because a new company can't meet a high salary, it may make it possible to make that change.

What do you think? Good idea or a bad idea?

Published on: Jan 25, 2017
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