Employers Are Being Forced to Make Salaries Public — and That’s Good News for Your Paycheck
14th November 2021
When it comes to salaries, this is what it’s always been like for job applicants. You make your best guess of how much to ask for, based on the few tidbits about pay ranges that you’ve been able to glean from friends and co-workers and job apps, and then you negotiate in the dark. It’s a system of secrecy that benefits employers: By treating everyone’s salaries as “confidential,” companies are able to keep workers guessing about how much they’re willing and able to pay.
That’s all about to change. A growing number of states are enacting measures known as “pay transparency,” which force companies to disclose their compensation levels. New laws set to take effect in Connecticut and Nevada next month, and in Rhode Island in 2023, require employers to provide applicants the salary range they pay for each position at some point in the hiring process. Four other states and two cities have enacted similar mandates, some of which also require employers to disclose their pay scales to existing employees. The most far-reaching law, which Colorado implemented in January, compels businesses to include their salary ranges in every job posting — effectively making their payroll public.
The backbone of a market economy is the price system – we depend on prices being accurate reflections of the value of the use of a resource for that particular ‘product’. The chief hole in directed economies (such as communism) is that, whatever its imperfections, the price system beats central planning six ways from Sunday at allocating resources satisfactorily.
One of the constant temptations in business, a temptation that is rarely resisted, is to promote inefficiency in favor of the business by hiding efficient price information from one side of the transaction. In hiring, this disadvantaged party is the employee. Nothing is so common as a company that won’t tell you what the salary for a position is (or could be), but hides behind the fog-speak ‘competitive pay’. (Competitive with what? With whom?) I’ve never worked at a company where telling somebody else in the company what you are paid won’t get you fired (if they catch you).
And historically it has been very difficult for prospective employees to educate themselves in this area. But times are changing.