US Salary History Bans -- Strategic Disclosure by Job Applicants and the Gender Pay Gap

Abstract

I study the effects of US salary history bans which restrict employers from inquiring about job applicants' pay history during the hiring process, but allow candidates to voluntarily share information.Using a difference-in-differences design, I show that these policies narrowed the gender pay gap significantly by 2 p.p., driven almost entirely by an increase in female earnings. The bans were also successful in weakening the auto-correlation between current and future earnings, especially among job-changers. I provide novel evidence 1 showing that when employers could no longer nudge candidates for information, the likelihood of voluntarily disclosing salary history decreased among job applicants and by 2 p.p. more among women. I then develop a salary negotiation model with asymmetric information, where I allow job applicants to choose whether to reveal pay history, and use this framework to explain my empirical findings on disclosure behavior and gender pay gap.

Gender Differences in Negotiation: Can Interventions Reduce the Gap?

“…Examining differential responses by gender, the authors find that choosing not to disclose salary information is penalized less for women than for men. This is consistent with women being perceived to have higher disclosure costs than men (Cowgill et al 2023, Sinha 2022). The study also finds that dollars disclosed by men are discounted relative to other sources of variation in wages, such as variation in pay between and within firms, potentially indicating that men's disclosures are seen as less indicative of actual productivity.…”

“…Davis et al (2022) examine the changes in wages for new hires in the public sector in response to SHBs introduced in 14 US states and find no aggregate effect on the gender pay gap, but they document improved female-to-male earnings in occupations with higher historical gender differences in pay and in occupations where women have been underrepresented. By contrast, Sinha (2022) finds that SHBs implemented across various states in the United States led to a 2 percentage point reduction in the overall gender gap in earnings. While female wages increased, those of men remained unchanged; note, however, that the estimated reduction in the gender pay gap is driven by the private sector response.…”

“…17 The response would be similar to that seen for attempts to reduce discriminatory practices by banning questions on criminal background, where ban-the-box initiatives had the unintended consequence of increasing discrimination against Black men who were, after the reform, assumed to be more likely to have such a history (see, e.g., Doleac & Hansen 2017, Agan & Starr 2018. 18 Sinha (2022) estimates an increase in the overall gender pay gap in the public sector of 2-3 percentage points. It is challenging to reconcile this with Davis et al's (2022) finding of a null effect of SHBs on the gender pay gap for new hires in the public sector.…”

“…22 A total of 48% of men and 54% of women agree with the statement that they feel "fundamentally uncomfortable answering the salary history question when asked by a potential employer." In a nationally representative survey of US workers, Sinha (2022) finds that over 70% of respondents would disclose past pay information only when asked, and among those unwilling to disclose, 30% agree with the statement that they feel uncomfortable talking about salary (and women are 10% more likely than men to agree with the statement). 23 For other experiments studying the impact of SHBs on bargaining and wages, readers are referred to Khanna (2020) and Barach & Horton (2021).…”

“…Women are also 29% less likely to know their colleagues' salaries and 14% less likely to know someone who negotiated their pay Biasi & Sarsons (2021). show that differences in both information and confidence help explain the gender gap in negotiation.16 Estimates from the United States show that 25% to 50% of potential employees are asked to disclose past salary (e.g.,Hall & Krueger 2012, Agan et al 2020, Barach & Horton 2021, Sinha 2022).…”