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Does pay transparency bring inclusion? The data says yes

In January 2021, Colorado enacted a law that required companies to disclose pay ranges for their positions in the state. Last week, New York City said it will require companies to do so as well. According to the Wall Street Journal, the reason for the Colorado law was “an effort to narrow gender wage gaps and provide greater pay transparency.” And according to NPR, “the biggest beneficiaries of those kinds of laws? Women and people of color.”

At Textio, pay transparency is more than just legal jargon. We strive to be an inclusive company where our employees feel like they belong, and as a part of that, we want to lead the way in offering transparency to our team and the industry, and to demonstrate how we are building an inclusive culture. Last year, we brought pay transparency to our entire company by giving everyone access to the pay bands and equity offered for each role. This was not a process we undertook lightly, knowing that for people to feel safe, they would want to understand not just what they are getting paid, but also why we pay the salaries we do. We worked with market data vendors and a labor economist, and retained an external counsel, to help us with pay equity.

More and more companies are also considering pay transparency, either because of the new laws, or because of their own desire for equity and inclusion in their organizations.

Including salary leads to more inclusive language overall

Since the Colorado law has been in effect for a year, we were curious about whether it was achieving the goals around “narrowing wage gaps.” Textio did an analysis on job posts in Colorado over the last year, and found some compelling results:

Bar chart labeled "With pay transparency, language in job posts becomes more inclusive of women" showing  job posts in 2020 that contain salary use 15% more language that is more inclusive toward women than job posts without salary, and showing job posts in 2021 that contain salary use 83% more language that is more inclusive toward women than job posts without salary

In January of 2020, only 23% of Colorado job posts contained salary—and those that did contain this information had slightly (about 15%) more appeal to women. By Jan of 2021, 61% of Colorado job posts contained salary, and by Dec 2021, it was up to 73% of Colorado job posts containing salary. Most strikingly, in 2021, job posts that included salary used a whopping 83% more language that engages women job applicants than posts that did not contain salary.

A job post from 2021 that includes salary info is 50% more likely to use language that appeals to all ages than a job post that does not. So complying with the requirement to include job salary info in jobs seems to have caused companies to be more thoughtful in their communication, especially how they appeal to women and people of all ages. This is extra interesting given how much the pandemic has impacted women and working parents in the workforce especially.

Graphic with quote ""A job post from 2021 that includes salary info is 50% more likely to use language that appeals to all ages than a job post that does not." Does pay equity bring inclusion? The data says yes"

Pay transparency: at Textio, and in your state(s)

Given the compelling results of this analysis, we wanted to share a bit more about how we use pay equity at Textio, in case it helps other companies bring this to the forefront of their DEI strategy:

  • At Textio, we use pay bands as part of our compensation, hiring, performance management, and career development.
  • Pay bands are not only posted internally for all employees to see, but beginning this year we also post them on all job posts regardless of the states we hire in so that there is never a question as to what people are paid based on the work that they do.
  • People at Textio also know that if they are to be promoted to a different pay band, there are different job competencies they are expected to meet.
  • Because of the upfront work we did with the labor economist, market data vendor, and pay equity counsel, we have reduced the possibility that bias is playing a part in how someone is being paid.
  • By bringing pay transparency forward in this way, all people at Textio know what is expected from them on a day-to-day basis as well as have a solid idea of what their career path can be.
  • This allows for equal pay for equal work.
  • It also allows people to feel confident that their work is being fairly evaluated and that they do not have to speculate that there are others being paid more because of being liked. They know that it is based on merit.

Likely you’re looking at how pay transparency will affect you in the years ahead—and even if you aren’t hiring in New York or Colorado, it will affect you. Here are some of the US locales that have instituted some form of pay transparency:

  • Laws in Maryland and Washington State require employers to disclose the pay range for a position upon an applicant's request.
  • In California, an applicant who has been interviewed for a position may request the pay range.
  • In Nevada, employers must provide salary range information to any applicant who has been interviewed for a position, even absent a request.
  • In Connecticut, employers must disclose the wage range upon the earlier of (i) the applicant's request or (ii) when a job offer is made.
  • Rhode Island enacted a similar law, scheduled to go into effect on January 1, 2023, which will require employers to provide applicants with the salary range for a position upon the earlier of (i) the applicant's request, (ii) when inquiring about an applicant's salary expectations, or (iii) when an offer is made.
  • In Ohio, local laws in Toledo and Cincinnati require employers to provide the salary scale for a position if an applicant who has received a conditional offer requests the information.

Taken together, the trend is clear: Pay transparency is coming to a state near you. The other thing that’s clear, looking at the data: Pay transparency and inclusion go hand in hand. If you’re serious about building an inclusive workforce, investing in pay transparency is an important step.

Recommended reading: Rethinking your approach to inclusion

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