Why wage transparency laws create ‘the right environment’ for job candidates: Expert
Wage transparency laws have become increasingly popular in the U.S. as supporters argue that they help achieve gender and racial pay parity.
According to Dave Turetsky, vice president of consulting at Salary.com, they can also help attract more candidates to available roles at a time when the U.S. is still struggling with a labor shortage.
“What happens is you’re creating the right environment so that people can understand what it is they’re being asked to do and how much they’re going to get paid for it,” Turetsky said on Yahoo Finance Live (video above). “Too often, we have people who go into interviews not really understanding what the pay is going to be for that role until they get very deep into the interview process, and that causes a lot of distrust.”
New York City is the most recent locale to enact a wage transparency law. Starting on Nov. 1, all job listings in the city are required to post a salary range for the role, and companies that fail to do so face a fine of up to $250,000. The New York State legislature has passed a similar, which is awaiting Gov. Hochul’s signature.
Other states with similar laws include California, Colorado, Connecticut, Maryland, New Jersey, Nevada, Rhode Island, and Washington.
“No law ever goes far enough,” Turetsky said. “But what we’re trying to do is set up an environment where there’s better information for both the job seeker as well as the employer. Having that understanding and that appropriate understanding about what it is that this job is going to be paying gives the candidate a really good understanding about whether or not this is the right job for them. It also kind of self-selects out some people who might be wasting time tire kicking because they won’t be interested in that job if it’s not paying enough.”
The 2022 Pay Clarity Survey from WTW indicated that 17% of North American companies are posting pay range information in U.S. locations, even in places where it’s not required, while 62% are either planning or considering doing so in the future.
Among companies that currently disclose pay rates, 16% have reported an increase in the number of candidate applications and 27% are seeing more inquiries from prospective employees.
According to Turetsky, wage transparency also helps candidates decide whether or not the roles they’re vying for can help them grow and develop their careers.
“It takes that potential employee to be asking: What are the next steps here? Where can my career grow?” Turetsky said. “So they have to be better informed about being able to ask the right question. What’s the promotion potential? If I think my pay is going to be close to that maximum, I really need to be asking: What’s the next step for me?”
While this could be a possible solution to the nation’s ongoing labor shortage, Turetsky noted that a downside to wage transparency laws means possibly “not getting the right people” for the job if pay ranges don’t meet their salary expectations.
“But to be honest, in this competitive market for skills, I really doubt people are going to be turning away just because the pay range may not meet exactly what their hopes and dreams are,” he added.
Another caveat is that wage transparency laws only apply to base pay, meaning that specific information about benefits and bonuses is not required in listings.
Still, Turetsky is confident that the momentum will “absolutely” continue toward more states adopting these laws.
“This is inescapable now,” Turetsky said. “We have the internet, and you can find out what ranges of pay are on the internet anyways. So once the big markets of New York City and California start to go towards transparency, there’s really no turning back. It really will now be a cascading effect of other markets now taking this on.”
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at [email protected].
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