NEW YORK – Nearly half of U.S. states have enacted a ban to stop employers – both public and private – from asking prospective or current employees about their salary history and compensation. By ending this practice, the ban is intended to put more negotiating power back in the hands of employees and help them make bigger salary gains. As historical inequalities relating to gender, race, ethnicity, and other protected classes persist, the ban is meant to close gaps in pay. However, new research finds that these measures aren’t stopping disclosure – particularly when a business outsources hiring to a recruiter. New research from Columbia Business School Professor Bo Cowgill finds that 28% of workers disclose even when not asked, and that candidates who disclosed their salaries to recruiters saw an increase in job offers compared to those that remained silent.

In an ambitious study, Professor Cowgill and co-authors Rutgers University Professor Amanda Agan and Tufts University Associate Professor Laura Gee created a fictitious company and hired 256 recruiters to assess 2,048 applicants for a software engineer opening based on real resumes. Because the researchers could control what the recruiters were shown, they randomly varied whether the job application form asks for salary history, and whether the candidate answers the question (or volunteers their salary history unprompted in another section of the application or remained silent). The researchers then measured how these changes improved or hurt a candidate’s chances.

The researchers found that recruiters translated a lack of response as a negative signal, even if the candidate had not been asked. On average, recruiters acted as if “no news” was “bad news.” Despite this average, the study found that some job candidates could improve aspects of their bargaining positions by remaining silent. High-salary candidates who shared their salaries could be deemed too expensive to employ. The study also had implications for gender: Among women, recruiters took into account that female silence may be non-strategic. Recruiters also discount male wage premiums, acting as if these inflated numbers were not indicative of candidate quality. However, despite relative knowledge of the gender wage gap, recruiters did not always fully eliminate the gap in their own recommendations.

The study raises important issues that policymakers should consider about how bans can be used to help workers. The ban was meant to close gaps, but as the study has shown, the gaps have remained under some implementations of the ban, and candidates and employers are working around the ban by volunteering salaries unprompted. Recruiters and policymakers should consider these responses as they explore more effective ways at closing those gaps. In the meantime, salary bans have shaped the way workers and employers negotiate.

The study, Salary History and Employer Demand: Evidence From a Two-Sided Audit, is available online here.

To learn more about the cutting-edge research being conducted at Columbia Business School, please visit gsb.columbia.edu.  

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