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NYC law to mandate salary transparency. Will it bridge inequities?

ADRIAN FLORIDO, HOST:

The New York City Council last month passed a bill that requires private employers to post the salary range for all open jobs. The law is set to take effect in April. Similar laws already exist in a handful of places around the country. Their goal is to improve pay transparency and tackle inequities that often affect women, Black and brown people and other groups.

To learn more about these laws, we called someone who studies them. Professor Teresa Ghilarducci teaches economics and policy at the New School of Social Research in New York. Professor Ghilarducci, welcome.

TERESA GHILARDUCCI: Hello. Hi, Adrian.

FLORIDO: What exactly does this new law require of New York employers?

GHILARDUCCI: Well, New York employers, if the mayor signs it and it will go into effect four months later, will require that job postings have a range, a narrow range of salary. So instead of workers applying for jobs, figuring out where their best match is, what - you know, what their move is by just sort of guessing what that new job might pay, workers will know, you know, what the market is paying. What the research shows and every labor economist knows and teaches is that if salaries are kept secret, the employer pays less than they otherwise would. They gain more profits than they otherwise would. Job mobility is hindered. And the most desperate workers, the ones who have less mobility, less bargaining power, will be hurt the most.

FLORIDO: Proponents of the law also argue that more pay transparency would help close gender and racial wage gaps. How so?

GHILARDUCCI: Let's talk about gender. Let's talk about women. Women are often less likely to move for a better job. They're kind of tied to a particular location or a commute schedule because of their family. So they're reluctant to do market checks, you know, to go out and to see what they actually are worth, you know, for historically gender, division of labor reasons. If pay was transparent, the employer would have to kind of fess up that they're probably paying their male workers more, you know, for fear of losing those male workers, where they don't have that fear with female workers. So it should close the gender gap probably overnight.

I've had that experience in my own workplace. When I was at - teaching at the University of Notre Dame, we - women professors revealed our pay, found out what the pay was of our male colleagues, you know, who had exactly the same job, the same number of articles, the same footnote and references and citations. And our pay went up overnight by tens of thousands of dollars. You know, so I suspect that the gender pay gap will be closed and the effect will be immediate.

With non-white male workers, I suspect that it will take a little bit longer, even though we'll have the same effect on initial negotiations being more fair for the non-white male worker. But over time, employers will probably actually pay the Black men and brown men more money even before they post the salary because if they post a salary, then their current workers will know that they're being underpaid. So I suspect a month before the bill goes into effect, we'll see a lot of pay inequity being solved across the board.

FLORIDO: I imagine there are a lot of employers out there who say, hey, you know, we need the ability to pay some people a lot more than others, even within the same job title, because some employees are much better performers than others. This could hurt our ability to retain good workers. What do you say?

GHILARDUCCI: I say that any pay difference has to be explained. And if the pay difference can't be explained, then it's inexplicable and unfair. What I will tell my colleagues, the employers, is if you have a transparent pay and merit system, that you're quite clear about what's expected on the job and what a good job is and what a medium job is and what a poor job is, then you'll have no problem paying different people different wages, you know, or bonuses because of their performance. But if you're not clear about why you're paying somebody more than another person in the same job category, then it's probably because you're being unfair.

So what it will do for employers is really up their game. They'll become better managers. They'll be clear to themselves about what the job description is and what good performance in that job is.

FLORIDO: You know, one of the things we've seen during this pandemic is some of the power that employers have long had over work conditions, pay shifting to employees, who've realized, hey, maybe things don't have to be the way they've always been. Maybe I can work from home. Maybe I can afford to quit and find a better-paying job. Do you see this move by New York City as being sort of a validation of that shift and a way to urge it...

GHILARDUCCI: Yeah.

FLORIDO: ...Along?

GHILARDUCCI: We're seeing a period of what people have called in the press the great resignation. I think it's the take-your-job-and-shove-it movement, you know, where people are finally - are seeing that they don't have to put up with not so much the pay, but the working conditions. That has alarmed employers. And the city council is responding to that and will actually help out employers, that your employees won't have to quit to do a market check. So I could see the city council being advised by very conservative economists to say, hey, if everybody all at once, you know, peels off the Band-Aid and reveals the salary, there may not be so much quitting just to find out what other people are being paid.

FLORIDO: That was Teresa Ghilarducci. She's the Irene and Bernard L. Schwartz professor of economics and policy analysis at the New School of Social Research in New York. Professor Ghilarducci, thanks for joining us.

GHILARDUCCI: Oh, thank you. Transcript provided by NPR, Copyright NPR.