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Pay Transparency Laws and Union Organization are Increasing in Popularity, are they Correlated?

In 2014 I was working for a global private security company that maintained federal and state contracts. In April of 2014 the Office of Federal Contract Compliance Programs (OFCCP) amended regulations to implement President Obama's Executive Order 13665, the so-called "Pay Secrecy" or "Pay Transparency" order; barring federal contractors and subcontractors from retaliating or discriminating against an employee or applicant for inquiring about, discussing, or disclosing his or her own compensation, or the compensation of any other employee or applicant. While the order did not take effect until January 11, 2016, I was excited to see yet another step, following the Lilly Ledbetter Fair Pay Act of 2009, towards ensuring equal pay for equal work. My young HR mind thought that if the U.S. Government was taking strides towards pay transparency, certainly the private sector would follow.


Colorado was the first to adopt a salary transparency law in 2019, followed by California, Maryland, Nevada, Rhode Island, Connecticut, and Washington, as well as a small but growing number of cities across the country. While rules for salary disclosures vary in each state or city each law aims to reduce gender and racial pay gaps. Some legislation protects workers’ rights to discuss pay without retaliation, although the act of discussing pay in the workplace is already protected nationwide by the National Labor Relations Act (NLRA), while others prevent employers from asking candidates about their salary histories. Colorado’s law, as well as New Year City, California, and Washington, take pay transparency to the onset of the recruitment process by requiring employers to post the pay range for a job when they start recruiting. Pay transparency laws are increasingly popular among workers however their effects on reducing the gender and racial pay gaps are yet to be seen.


While pay transparency laws are fairly new, we are yet to see the intended effects materialize. Granted, a world-wide pandemic, the great resignation with greater than 4 million workers quitting their job each month since June of 2021, and a looming recession with some of us are already experiencing large layoffs and reduced headcounts, could certainly slow these intended effects, data from U.S. Bureau of Labor Statistics show the wage gap decreasing by 0.4% since 2014.

A paper published by Statistics Canada estimates that Canadian salary-disclosure laws implemented between 1996 and 2016 narrowed the gender pay gap of university professors by 20-30%. The paper cites another study of a Danish pay-transparency law adopted in 2006 that shrank the gender pay gap by 13%. Both studies suggest that a reduction in the gender wage gap was driven in part by lowering the salaries of men. These studies bring to light the reduction in the pay gap that can be driven by pay transparency laws, however the assumption is pay transparency laws will close the pay gap by increasing women’s wages, rather than lowering men’s wages. These actions may have the unintended action of lowering wages overall as companies are pressured to disclose salary ranges.


In the Canadian study, the effects of salary disclosure on average wages and gender wage gap were more pronounced in unionized workplaces. The U.S. Bureau of Labor Statistics finds that unionized women make on average 23% more than women without a union. Union contracts provide transparency and equality as collective bargaining agreements apply to all workers at a job, despite their age, race, gender, or other protected characteristics. According to a Gallup poll, sixty-eight percent of Americans approve of labor unions, which is the highest approval rating since 1965. Considering the increase in popularity of both pay transparency laws and unions since 2009, it is clear the United States workforce wants to close the pay gap, however it is incredibly difficult to unionize in the United States.


As I reflect on my time spent within Tulane Law School’s MJ-LEL program, I recall during each course taught by Professor Matambanadzo, we were encouraged to be forward thinkers and predict the law. Based on the data, I wonder whether pay transparency laws in the United States will have similar effects found in the Canadian and Danish studies, with companies using wage compression as a mechanism to close the pay gap. Furthermore, will the workforce respond with increased concerted activity in workplaces or will the U.S. Government take the lead, as they did in 2014, with passage of the PRO Act which would make the unionization process easier thus more pay equality.


Something Interesting © 2023 by Tara Spracklen is licensed under CC BY 4.0. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/


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