Summary
In the article, “Don’t Ask Me About My Salary History”, Kristin Wong, the author concludes that wage disparities are still rife across the United States. However, different states are taking significant steps to address this problem through legislation. For example, Massachusetts has banned employers from asking job candidates how much they earned in their previous jobs. Such a question is discriminatory as it allows employers to tie an employee’s current wages to historical salaries. This trend has negative ramifications, especially in an era when the country is pursuing equal pay regardless of gender. The author uses primary sources including state and local laws and bills to support her thesis. She also quotes policymakers supporting equitable pay and the reduced wage gap.
Taste-Based and Statistical Discrimination
Taste-based discrimination, also known as preference-based discrimination is based on the idea that employers may not want to hire employers from some population groups due to perceived psychological costs of hiring such individuals. In other words, employees are hired based on their gender, race, religion, and other related demographics. On the other hand, statistical discrimination occurs when hiring decisions are based on statistical evidence. For instance, statistics indicate that women are more likely to quit their jobs after getting children as compared to their male counterparts. Therefore, companies may decide to employ men to avoid costs associated with hiring and training replacements. The proposed law addressing equal pay and gender wage gap will not change hiring patterns if firms have taste-based or statistical discrimination. The policy only addresses the issue of wage gap or pay inequalities, but taste-based and statistical discrimination happens pre-hiring while wage discussions arise after hiring has taken place. Consequently, the question of a job candidate’s previous pay will not arise because if someone belongs to a certain group or gender, he or she will not be considered for a job opening in the first place.
However, in some cases where taste-based discrimination exists, companies would avoid hiring certain employees completely. For instance, in cases where whites do not prefer to work with blacks, employers can pay the whites compensating wage differential to convince them to work with blacks. In this case, blacks could be paid minimum wage and the difference is added to the whites and thus companies do not suffer losses in compensating wage differentials. However, with equal pay, it means that such companies will pay blacks and whites equal salary based on work done. Therefore, paying compensating wage differential to whites would be an extra expense on the company. In this case, organizations would rather avoid hiring blacks to cut the costs associated with compensating wage differential. The same applies to businesses practicing statistical discrimination.
Gender Wage Gap Policies
The policy requiring employers not to ask a job candidate’s salary history will not help close the gender wage gap. Currently, the job market operates under assumptions informed by stereotypes concerning how much women should earn and why. Statistically, paying women lower wages as compared to their male counterparts is not based on any form of gender prejudice. Therefore, even if a woman does not reveal her salary history will be offered lower wages the employer is a rational utility agent seeking to maximize returns based on the available information, which is, in the long term, women perform poorly in the workplace as opposed to men. Additionally, employers hold asymmetric beliefs regarding the utility of women in the workplace. Some beliefs about women are self-confirming or endogenous and the proposed policy may not change them. For example, employers are unlikely to hire women in positions requiring job attachment, and thus women are highly likely to commit to child-rearing activities. Therefore, such women do not have enough time to develop the skills needed for such positions. This scenario confirms the asymmetric belief by employers such women are not suited to positions requiring job attachment. Therefore, the legislation will not help to change such self-confirming beliefs.
Policies that intend to reduce discrimination do not always have intended consequences because they normally legislate on the wrong variable. For instance, the policy directing employers not to ask the salary history of a job candidate does not address the underlying taste-based or statistical discrimination experienced in the workplace. In this case, the problem is employers discriminating against certain groups of people based on different demographics, not wage disparities. Therefore, while the policy is timely and intervening in some aspects, it addresses the wrong problem.
Personal Accounts
I talked to two individuals – one working in the IT industry and the other in the manufacturing sector both with a combined experience of 30 years. They both noted that their salary history has always played a central role in their wage negotiations. One of them had changed jobs four times over the last 15 years and every time he talked about wage issues with his bosses they would always start by asking how much he earned in his previous position. The other person had changed jobs twice and he had similar experiences. They both felt that their salaries were tied assumptions about how much they earned previously. The person in the manufacturing industry cited a case where he deliberately paid lower as compared to his workmates purely based on what he had earned in his previous job, and he had to quit after five months. The accounts of these two employees are consistent with the issues described throughout this paper that salary history matters when job candidates are negotiating wages with their potential employers.