Perpetuating wage inequality: evidence from salary history bans

Abstract

Pay gaps for women and minorities have persisted after accounting for observable differences. Recently, a dozen US states have banned employer access to salary histories. We analyze the effects of these salary history bans (SHBs) on private employer wage posting and pay. We develop a theoretical model of firms’ choices between posting wages and bargaining, drawing out the implications of SHBs on wages for different groups of jobs. We then implement a comprehensive analysis in a difference-in-differences design, using Burning Glass job posting data in the US and the Current Population Survey. The results show that following SHBs, private employers posted wages more often and increased pay for job changers, particularly for women (6.2%) and non-whites (5.8%). The results imply that when employers can access applicants’ salary histories while bargaining over wages, they can take advantage of past inequities, perpetuating inequality. There is also no evidence of adverse selection of workers overall or adverse employer reactions in the short run. Bargaining behavior and the use of salary histories appear to account for much of the difference in pay between disadvantaged job changers and others.