There’s a new tool available to those out looking for their next job: Experts say new California legislation calling for the disclosure of salary range on job listings may serve to decrease salary gaps across gender, economic, race and ethnicity lines.

But a new academic study suggests the new law is also putting downward pressure on average wages for all employees.

Beginning in September, California Senate Bill SB1162 required employers whose companies consist of 15 or more employees to include the salary range for the job in all job postings. Or, if the job is not listed, the action calls for employers to supply that information to job seekers upon request. An Equal Pay and Opportunities Act took effect in Washington state on Jan. 1, and similar laws are already in place in New York, Colorado and several other states.

Locally, the bill follows on the heels of California Labor Code 432.3, passed in 2018, that bars employers from asking a job applicant to provide a salary history when determining the salary to be offered to the potential employee. This code applies to companies of any size. Both requirements apply whether the company employs a recruiter to aid in filling the post or relies on its own company postings.

Some companies have already been called out for trying to evade the intent of the law. In late November the website Make It cited reports of companies posting bizarrely broad salary ranges including $50,000-$145,000 for a reporter job, $106,000-$241,000 for a position as a general counsel and $125,000 to $211,300 for a senior technical writer. Gothamist reported that New York-based Citigroup listed several jobs with a range of $0 to $2 million, but the company later said the range was caused by computer error.

Still, some employment services are enthusiastic about the new requirement. “With pay transparency, the genie is out of the bottle and there is no going back,” Maggie Hulce, executive vice president and general manager of enterprise for Indeed, a worldwide employment website for job listings based in Austin, said in an email. “By setting clearer pay expectations upfront between a job seeker and employer, better matches happen — faster. Pay transparency can also help close pay gaps that still exist across gender, race/ethnicity and other factors.”

But Emily Nix, Professor of Finance and Business Economics at USC’s Marshall School of Business, cited a 2021 paper from the National Bureau of Economic Research that concludes that salary range disclosure on job listings has driven down wages by an average of 2% since a significant number of states have adopted the policy.

“A key insight is that employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others under transparency,” the document states. The study also reports that declines are “progressively smaller” in occupations with high unionization rates because of collective bargaining.

“There are two countervailing forces,” Nix said. “On the one hand, evidence has shown that it’s been pretty good in decreasing pay gaps for certain groups, men and women, and both underrepresented and non-underrepresented minorities. (But) it does maybe put a ceiling on performance pay increases…what they think is happening here is that say I’m an employer posting a higher wage — if I see that I’m paying so much more than the other guys, I’ll drop my pay.”

Added Nix, “The flip side of that is that if you are a working and you want to have a big pay raise based on your productivity, now employers are worried that they might have to pay everyone in this grouping more.”

Peter Deragon, an executive recruiter at Stanton Chase International Inc. – based in Baltimore with offices around the world – said salary transparency, as well as more readily available demographic information, will educate employees about their own role. “I think the intention of the law is good because the intention is to remove the glass ceiling.”

However, a more informed employee drives a harder bargain, and he noted that the difficulty and expense of finding the most qualified employee at the executive level is always a factor in trying to motivate those employees to stay when weighed against trying to find someone equally good at a lower salary.

“In many cases, it can be internally inflationary to the company if the employees that are maybe comparable are going to ask for more because they feel like an equivalent position is being paid more than they are,” Deragon said. “That’s not the intention – but the law of unintended consequences can result in that kind of an outcome.”