Latest / The Diversity Career Podcast with Fexingo: Inclusion, Equity, and Underrepresented Professionals / How Salary History Bans Fix the Gender Pay Gap
Transcript
- Lucas: If we've helped you think through a career move or decision this week, there's a simple way to keep those conversations happening without ads cluttering the signal. Luna: Exactly, because independence matters when you're talking about sensitive topics like pay and equity. Lucas: Right. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Thanks for supporting the network, now let's get back to why your old paycheck shouldn't dictate your new one. Lucas: So, here is a question I hear constantly from early-career professionals, especially women and people of color: How do you negotiate a fair starting salary when you have no leverage? Luna: It feels like a trap. You either lowball yourself to stay safe, or you ask for more and risk looking 'difficult' before you even start. Lucas: Precisely. And for decades, the mechanism that cemented that disadvantage was the salary history inquiry. Employers would ask, 'What did you make at your last job?' and then offer a percentage bump on top of that number. Luna: Which just perpetuates the initial mistake. If you were underpaid before, you are now systematically underpaid again. Lucas: That is the core logic behind the salary history bans. It’s not just a nice to have diversity initiative; it is an economic correction tool. As of September seventh, twenty twenty six, nine states and over fifty municipalities have made it illegal for employers to ask about your past compensation. Luna: But does actually banning the question change the outcome, or do recruiters just find other ways to dig up that information? Lucas: Good question. The data suggests it changes the outcome significantly. When companies are forced to anchor their offers to the value of the role rather than the history of the worker, the pay gap narrows. Luna: I remember reading a study from New York City where they analyzed the effect of their ban. Did the numbers hold up? Lucas: They did. The study found that the gender wage gap among workers who changed jobs decreased by roughly three percent after the ban took effect. For minority workers, the reduction was even steeper. Luna: Three percent sounds small, but in cumulative lifetime earnings, that is hundreds of thousands of dollars. Lucas: Exactly. It compounds. But here is where it gets tricky for job seekers. If the employer cannot ask what you made, what are they supposed to use as a reference point? Luna: They should be using market rates for the specific role, right? Based on skills, experience level, and geographic cost of living. Lucas: Yes, but in practice, many hiring managers are lazy or risk-averse. They want to know 'what will it take to hire this person?' Without a history anchor, they often default to the lower end of their budget. Luna: So the burden shifts entirely onto the candidate to articulate their worth based on future potential rather than past precedent. Lucas: That is a huge shift in skill set. Negotiating based on history is easy. You say, 'I made fifty thousand, I'd like sixty.' Negotiating based on value requires research, confidence, and usually, some external data points. Luna: This is why salary transparency bands are becoming so critical. If the company publishes the range upfront, the candidate doesn't have to guess. Lucas: Right. We are seeing a correlation between salary history bans and salary transparency laws. States like Colorado, California, and Washington have passed legislation requiring companies to disclose pay ranges in job postings. Luna: It creates a two-layer protection. First, they can't ask what you made. Second, they have to tell you what they are willing to pay before you even interview. Lucas: Exactly. And this is where the power dynamic flips. In the old model, the employer held all the information. They knew the budget, and they guessed your minimum acceptable salary. Luna: Now, if the range is published, and you see it starts at eighty thousand, and you have the skills, you walk in with a clear floor. Lucas: But not everyone benefits equally from this transparency. There is a nuance here regarding senior leadership roles. Many transparency laws exclude executive positions above a certain pay threshold. Luna: That makes sense. C-suite negotiations are inherently different. They are bespoke deals, not standardized roles. Lucas: True. But the real battleground is the middle class. The software engineer, the project manager, the marketing director. These are the roles where systemic bias has historically suppressed wages. Luna: And these are also the roles where underrepresented groups are most likely to be filtered out during the initial screening if they don't fit a traditional profile. Lucas: Yes. When you remove the salary history check, you also remove a proxy for bias. Recruiters sometimes use past salary as a heuristic for 'success' or 'competence,' which is flawed but pervasive. Luna: It rewards people who happened to work at firms that paid well, regardless of their actual individual performance. Lucas: Spot on. It creates a ceiling for high performers from lower-paying industries and a floor for mediocre performers from high-paying industries. Both distortions vanish when you focus purely on the role. Luna: So for our listeners, what is the practical takeaway if they are currently job hunting in a state with these protections? Lucas: First, know your rights. If an employer asks for your W-two or your last pay stub, you can politely decline and cite the local ordinance. Most reputable companies comply because the legal risk isn't worth it. Luna: Second, prepare your value narrative. Since they can't rely on your history, you need to be ready to discuss your achievements and market value confidently. Lucas: And third, look for companies that voluntarily adopt transparency even in states where it isn't required. It signals a mature HR function that understands equity drives retention. Luna: Retention is key. When people feel they are paid fairly relative to the market, they stay longer. That reduces turnover costs for the company too. Lucas: It’s a win-win, theoretically. Though implementation varies. Some companies struggle with internal equity adjustments. If a new hire comes in at a higher rate due to market demand, existing employees might notice. Luna: That’s the 'red-circling' problem. Companies have to proactively adjust existing staff salaries, which is expensive and often resisted by finance departments. Lucas: Right. So the policy change is necessary, but it requires active management. You can't just ban the question and hope for the best. You have to audit your own payroll. Luna: Which brings us back to the broader cultural shift. Transparency isn't just a legal compliance issue; it's a trust builder. Lucas: Absolutely. Candidates can smell secrecy. When a company hides its pay structure, it raises red flags about culture and fairness. Luna: Do you think this trend will eventually become federal law? Or will it remain a patchwork of state and city regulations? Lucas: The federal Fair Pay Act has been introduced multiple times but stalled in Congress. Given the current political climate in September twenty twenty six, a nationwide mandate seems unlikely in the short term. Luna: So we’ll likely continue to see a map of progress. Coastal states leading, while others lag behind. That creates migration pressure for talent. Lucas: Exactly. Skilled workers will increasingly favor jurisdictions with stronger protections. It becomes a competitive advantage for those regions to attract diverse talent pools. Luna: It’s fascinating how a single line item on a job application — 'previous salary' — can shape entire economies. Lucas: It’s a reminder that small procedural changes can have massive structural impacts. Removing that barrier forces the market to price labor based on merit, not momentum. Luna: And for the listener sitting at their computer right now, applying for that dream job, knowing that their past doesn't define their future is powerful. Lucas: It is. So next time you’re asked for your history, remember: you’re not withholding information. You’re correcting a historical error. Luna: A small act of defiance that could redefine your entire career trajectory. Lucas: Let’s see if the next generation of hires finally breaks the cycle of compounding inequality.