How Massachusetts’s New Pay Law Will Help Close The Gender Wage Gap (And How It Won’t)

You know the “employment history” section on most job applications? Of course you do. That’s where you typically wrestle with whether to lie about how much you made in past jobs in the hope of getting a fatter offer for this one.

By July 2018, though, Massachusetts job seekers will become the first in the nation to be free of that ethical and strategic struggle. On Monday, Republican governor Charlie Baker signed a bipartisan bill making it illegal for employers in the state to ask job applicants to disclose their wage or salary history. Among other things, the law also requires companies to pay men and women equally when they do “comparable” work, not just when they hold identical titles and job descriptions.

It’s an unprecedented step toward closing the gender pay gap—since women typically earn less than men, an employer that bases compensation on a candidate’s earning history is likely to (literally) shortchange her—at a time when states are picking up the slack on the issue from a deadlocked Congress. Most recently, California and New York enacted legislation to promote equal pay and salary transparency.

But while the Massachusetts law is ambitious, it doesn’t block every imaginable tactic employers can deploy to hold down labor costs—even at the disproportionate expense of certain candidates. Here’s what the new measure covers (and what it doesn’t), how employers are responding, and which changes to watch for next.

Talking And Not Talking About Pay

“Overall, it’s hard to legislate prejudice,” says Karim Fadel, founder and principal of the Boston-based real estate investment firm Unison Realty Partners, and the new law reflects that difficulty even while, in Fadel’s view, it does an admirable job of addressing it.

For one thing, the law acknowledges that employers have more than one way of tamping down the compensation they offer job candidates, beyond asking about earnings history. Some have put in place policies barring current employees from discussing their salaries with each other, even though, as ThinkProgress points out, they have a right to do so under the law. The Massachusetts measure expressly prohibits those gag orders, too.

As Fast Company columnist Reva Seth, who’s spent years researching working women, recently argued, professional women are still squeamish about discussing compensation even among each other.

“Growing up, money—especially for the adult women in my life—was never considered an appropriate topic of discussion,” she writes. It’s a belief many carry into their workplaces, which then prove happy to take advantage of it. According to Seth, “this is one difficult conversation it literally pays for women to master,” and the Massachusetts measure removes some of the obstacles to that.

And while “most of the other states with similar legislation have focused on banning salary secrecy,” Fadel points out, “this is the key difference: Instead of tackling the consequences of unequal pay, Massachusetts’s law will focus on making sure equal pay for equal work is the gold standard from the moment a prospective employee walks in the door.”

Workarounds To Watch Out For

But while Massachusetts employers soon won’t be able to ask applicants’ past earnings, they can still ask what they’re hoping to earn.

“As a practical matter, an applicant’s preferred salary range is likely going to be indicative of their wage and salary history,” says Amanda Marie Baer, a labor and employment lawyer at the Massachusetts firm Mirick O’Connell, DeMallie & Lougee, LLP.

That’s one practice that the new law may throw into question, she says. “I expect that we’ll eventually see a case where the court must decide if such question violates the Act.” First, Baer points, it’ll fall to Massachusetts Attorney General Maura Healey to issue new guidelines dictating the law’s enforcement. Then litigation will follow.

“From there, there will likely be a handful of court cases interpreting the contours of the Act.” And most will come from employers that find the new regulations burdensome, particularly smaller ones.

Should Businesses Cheer Or Chafe Against The New Regulations?

By muzzling salary history conversations, the law removes one of the most common baselines that job seekers and employers have come to rely on, despite the clear downsides—to both parties—of doing so.

“At Unison,” says Fadel, “I handle all of the hiring. But if I spend a great deal of time and energy courting a candidate and there wasn’t a mutual salary expectation, I may have wasted a great deal of time, [which] smaller companies can’t afford to lose.” And you could argue (though Fadel himself doesn’t) that asking for salary requirements as a substitute for salary history leads to more aspirational figures.

That may jack up labor costs for employers—which is basically the point. “The key complaints I’ve heard,” says Beth Monaghan, CEO and cofounder of the PR firm InkHouse, “revolve around necessary budget and procedural adjustments to comply with the law. My answer? The evidence is clear that women’s equality is not only the right thing to do, but it’s the right thing for the bottom line.”

Monaghan, who is also a board member for the Alliance for Business Leadership, which was one of the earliest proponents of the new law, points out that companies with greater gender diversity have been found to perform better. Citing a Catalyst study, she adds that those with more women board members in particular “have a 53% higher return on equity, a 42% higher return on sales, and a 66% higher return on invested capital. And women-led companies perform three times better than the S&P 500.” In other words, closing the gender gap, especially at an organization’s upper ranks, more than makes up for any shortfall.

In this view, employers that resist equal pay—and with it, gender diversity itself—are cutting off their disproportionately white, male noses to spite their faces, an argument we’ve heard before that may actually oversell the short-term rationale and downplay longer-term benefits that are less often discussed. In any case, the data suggest that Monaghan is right to see Massachusetts legislators as looking out for both job candidates and employers together—because their interests ultimately overlap—even if not everyone sees it that way.

Fadel agrees. “At Unison, in fact, the most senior, highest paid employees are actually all women, which stems from our practice of considering experience over salary.” Like many small businesses, Unison is young, founded in 2010. That means many of its staff have worked at much more established companies, where past job titles—and the salaries that come with them—don’t really correspond with the “more unique job duties” typical of Unison’s current positions. Instead, says Fadel, “we look to compensate employees based on their contributions to our firm today, as opposed to their historical, more standardized job descriptions of the past.”

What Comes Next

“Given Massachusetts’s track record as a leader in many of the country’s hot-button issues, including gay marriage, health insurance, and transgender rights,” says Baer, “I expect that many states and perhaps the U.S. Congress will adopt similar laws within the next two to five years.”

She points out that there’s been some movement in this direction at the federal level already, with the Equal Employment Opportunity Commission’s recent proposal to require employers of 100 workers to break down their wage and salary data by gender, race, and ethnicity starting next year.

The outcome of the presidential election may not even make a huge difference in the overall progress of equal pay legislation, Baer says. Since momentum is picking up at the state level, “it will likely become increasingly hard for politicians of either party to push back on equal pay policies.” And if Massachusetts proves the bellwether on these new provisions that it’s been on others, there may come a day when all U.S. workers will get to say what they think they’re worth, not what their past employer does.