Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / Why Salary History Bans Are Reshaping Negotiation Power
Transcript
- Lucas: So you're sitting in a second-round interview. The hiring manager leans forward and says, 'So what were you making at your last job?' Historically, that's been one of the most loaded questions in the entire hiring process. Luna: It's basically a trap, right? If you underbid yourself, you're locked into a lower salary forever. If you inflate it, you risk getting caught in a reference check. Lucas: Exactly. And that's why salary history bans have become such a flashpoint. As of May 2026, twenty-two states and over thirty municipalities have some form of restriction on asking about a candidate's previous pay. That includes major hiring hubs like California, New York, Massachusetts, and Illinois. Luna: I remember when New York City's law went into effect in 2023 — there was a lot of confusion. Some employers just stopped asking altogether. Others tried to work around it by asking about 'salary expectations' instead. Lucas: Right, and that's actually a key distinction. Asking about expectations is still legal in most places. The ban is specifically on using prior salary to set the new offer. The theory is straightforward: if you can't anchor to the candidate's history, you have to anchor to the market value of the role itself. Luna: Which sounds fair in theory. But I've talked to recruiters who say it's not that clean in practice. They end up throwing out a number first, and if it's too low, the candidate walks away without negotiating. If it's too high, they might overpay. Lucas: That's the core tension. And there's a great case study here. I was looking at a mid-sized tech company in Austin — about 400 employees — that voluntarily banned salary history questions in 2024, before any state law forced them to. They wanted to see if it would change their hiring dynamics. Luna: What happened? Lucas: Their offer acceptance rate jumped from sixty-eight percent to eighty-nine percent within six months. The head of talent told me candidates seemed more engaged in the negotiation — they felt like they were being valued for the role, not penalized for their past. Luna: Eighty-nine percent is huge. But I wonder — did their average offer amount go up? Because if you're not anchoring low, you might just be paying more across the board. Lucas: That's the million-dollar question. In this case, their average offer increased by about six percent. But here's the interesting part — the spread narrowed. The gap between the lowest and highest offer for similar roles shrank by roughly fifteen percent. So they were paying more on average, but they were also being more consistent. Luna: That consistency is actually a big deal. Because one of the hidden costs of negotiation is that two equally qualified candidates can end up with very different salaries based purely on who's a better negotiator. Lucas: Exactly. And that's where the equity argument comes in. A 2025 study from the Federal Reserve Bank of Atlanta looked at states that had implemented salary history bans and found that the gender pay gap narrowed by about four percent in those states. But — and this is important — they didn't find a statistically significant reduction in the racial pay gap. Luna: Why do you think that is? Lucas: Well, the leading hypothesis is that salary history bans primarily help people who are already in the negotiation pipeline but systematically underbid — which disproportionately affects women. But for racial gaps, the problem may be more structural: Black and Hispanic workers are more likely to be screened out earlier in the process, so they never even get to the salary negotiation stage. Luna: So the ban helps, but it's not a silver bullet. It addresses the negotiation part, not the access part. Lucas: Precisely. And that's the nuance that often gets lost in the policy debate. The other unintended consequence that employers report is internal pay compression. You hire a new employee at a market rate that's higher than what your existing employees are making — and those tenured people find out. Luna: Oh, they always find out. I've seen that blow up in companies where a junior hire comes in at a salary that's only five thousand below a senior person who's been there for three years. That creates real resentment. Lucas: Right. And that forces companies to either adjust existing salaries — which is expensive — or deal with turnover. Some companies have responded by moving to a completely transparent pay band system. Buffer, the social media management platform, publishes every employee's salary publicly. That's an extreme version, but it eliminates the secrecy that enables the problem. Luna: I think that's the direction we're heading. Even without a ban, more companies are posting salary ranges in job ads. It's becoming table stakes, especially for attracting younger talent. Lucas: Let me give you another data point. A survey from the Society for Human Resource Management — SHRM — from early 2026 found that forty-three percent of U.S. employers now include a salary range in their job postings voluntarily. That's up from about twenty percent in 2022. So the trend is clear, regardless of legislation. Luna: What's your take on the actual negotiation dynamics? As a hiring manager, do you prefer to name a number first, or ask the candidate? Lucas: I think naming a number first is actually smarter if you've done your homework. Because if you anchor to a well-researched market rate, you signal that you're organized and fair. The candidate feels like they're dealing with a professional operation. If you ask them first, you're essentially saying 'I don't know what this job is worth, so you tell me.' Luna: That's a good point. But I've also seen candidates who come in with a number that's way above market — and then the hiring manager just says 'we can't do that' and the conversation stalls. So the anchor matters. Lucas: It does. And that's why salary history bans force both sides to be more disciplined. The employer has to know the market. The candidate has to know the market. It turns negotiation from a game of information asymmetry into a conversation about value. Luna: So if I'm a job seeker today, what's my best move if a hiring manager asks me my salary history — which is still legal in about half the states? Lucas: You can politely say that you're focused on the market value for this role, not your previous pay. That's the honest answer, and most professional recruiters will respect it. If they push, that's a red flag about their culture. Luna: Yeah, I'd walk out of an interview if they insisted. It shows they're not keeping up with best practices. Lucas: And for hiring managers listening: if your company hasn't already removed salary history questions from the intake form and the interview guide, you are almost certainly losing candidates. The data on acceptance rates is too strong to ignore. Luna: You know, conversations like this — where we dig into real data and real practices — that's why I love doing this show. It's not just theory. Lucas: It's not. And we're able to keep it ad-free and independent because of listeners who support us. If these conversations have moved your thinking forward in some small way, you can toss a few dollars into the hat at buy me a coffee dot com slash fexingo. It genuinely helps us keep doing this. Luna: Totally. And we appreciate every bit of it. But back to the topic — I want to talk about one more wrinkle. What about the candidate who was underpaid for years and now sees a ban as their chance to finally get market rate? Does the ban help them? Lucas: It should, because if the employer can't ask about the past, they're forced to evaluate the role's worth. But there's a catch: the candidate still needs to know their own market value. If they walk in with an artificially low expectation, the ban alone won't fix that. Luna: So the onus is really on both sides to educate themselves. Employers need to benchmark roles. Candidates need to benchmark themselves. Lucas: Exactly. And that's where resources like Glassdoor, Levels.fyi, and industry surveys become critical. The more transparent the market becomes, the less power any single question like 'what did you make before' actually has. Luna: Alright, so final thought — five years from now, do we think salary history questions will be completely illegal nationwide? Lucas: I think it's likely. The trend is moving that direction, and as more companies voluntarily drop the question, it becomes a competitive disadvantage to still ask. I wouldn't be surprised if by 2030, it's as unusual as asking a candidate about their religion or marital status. Luna: That's a hopeful vision. And a fairer one. Lucas: It is. And one that starts with a simple policy change — and a lot of disciplined market research.