Amazon Salary Policy May Hurt Women

Amazon has promised to hire at least 100,000 new employees in the US this year. And it won’t ask any of them about their prior job history.

According to a report in Buzzfeed yesterday (Jan. 17), Amazon is pledging to do voluntarily what many companies are now being forced to do by law: bar its US hiring managers from asking job candidates their prior salary.

The policy is an attempt to help correct a gender pay gap that’s perpetuated when starting salaries are based on previously low salaries. On Jan. 1, California became the largest state in the US to institute a law barring the practice, joining Massachusetts, New York City, and other states and cities with similar laws.

But there’s reason to believe the law could backfire, and end up punishing women. That’s because taking information away from employers doesn’t make them stop caring about the information, said Jennifer Doleac, an economist at the University of Virginia.

When employers can’t ask about salary history, they’ll make assumptions based on what they think they know, Doleac said. “When we make them guess, it hurts the best applicants in the groups we’re caring about, because we have no way to distinguish them, and they get grouped together with the rest.”

Doleac cautions that it’s too early to know how the ban on asking about previous salaries will play out, because the laws are so new, and it’s possible they’ll have no negative effects. But she points to the unintended consequences of a similar effort to deny employers information about applicant’s criminal history, the “Ban the Box” movement—named for the check boxes on job applications—designed to help the employment prospects of black men, who are more likely to have criminal records than white men.

When employers no longer knew which applicants had criminal records, they made assumptions about black men that were different than those they made about white men.

In a study that looked at what happened when New York and New Jersey passed Ban the Box laws, economists sent employers fake applications for white and black men, with and without criminal records. White men got the benefit of the doubt when their past was unknown, and were called in for an interview even more frequently than when employers knew they had no record. For the fictional black men, the opposite was true: when they didn’t know, employers guessed they had a criminal record, and calls for interviews fell.

If women were well paid in their previous jobs, and are offered a lower salary at their new place of work, they’ll be forced to negotiate for the wage they already had, Doleac said. For women who can’t prove they earned more, or are unwilling to haggle, they’ll get less, she said. And low-paid women will be in the same position as they were before the laws were passed.

“We know women don’t negotiate, even when it would be really easy for them to push back,” she said, referring to prior research. “Putting that extra hoop there for them to jump through is going to hurt.”

Employers want to know prior salaries as a bargaining tool, but also because it signals how a job applicant was valued by their previous employer, Doleac said. Because there are legitimate uses for the information, Doleac thinks the solution should be more disclosure, not less. If job candidates knew the range of salaries for the jobs to which they were applying, they’d be in a much better bargaining position.

While requiring companies to provide all salary information may seem farfetched, it’s already the case that the pay of many government employees are public, including that of Doleac, who works for the state of Virginia. Making salaries public tends to have a leveling effect, with the pay of top earners falling and low earners climbing.

When the salaries of all municipal employees in California was made public in 2010, the pay for top managers fell 7%. And when Norway put the tax data for the entire country online in 2001—giving the entire nation access to the earnings of their peers—lower-paid workers were more likely to quit and find higher paying jobs.

There are no simple solutions, and even Amazon would likely resist a mandate that it make all its salaries available to applicants. But one thing is clear, Doleac said: “Hiding information tend to backfire.”