Salary History and Employer Demand: Evidence from a Two-Sided Audit

Abstract

We study how salary history disclosures affect employer demand, and how salary history bans shape hiring and wages. We show how these effects depend on the properties of the labor market and measure the key properties using a novel, two-sided field experiment. Our field experiment features hundreds of recruiters and over two thousand job applications. We randomize the presence of salary history questions as well as job candidates' disclosures. We find that employers make negative inferences about non-disclosing candidates, and anticipate positive selection into disclosure. Recruiters view salary history as a stronger signal about competing options than about worker quality. Disclosures by men (and other highly-paid candidates) yield higher salary offers, however they are negative signals of value (net of salary), and thus yield fewer callbacks. While disclosures (especially high amounts) generally increase recruiter beliefs about quality and competing offers, male wage premiums are regarded as a weaker signal of quality than other sources (such as the premiums from working at higher paying firms, or being well-paid compared to peers). Recruiters correctly anticipate that women are less likely to disclose salary history at any level, and thus punish women less than men for silence. When we simulate the effect of salary history bans using our results, we find muted effects on callbacks. Gender inequality in salary offers is reduced; however equality comes at the expense of lower salary offers overall (and especially for men).