Will Philly’s salary-history law close the pay gap?

Alex Capano, a nurse practitioner in Philadelphia, was filling out a job application to work at a health clinic not too long ago when she was asked about her current salary.

She answered the question reluctantly.

“I was also wanting to know, ‘do they check up on this? How honest do I have to be? Am I setting myself up for a low-ball offer?'”

And that’s what happened: the employer extended an underwhelming salary offer. She turned down the job.

The situation is a common one, said Marianne Bellesorte with the anti-poverty advocacy group PathWays.

“If a woman, or a minority, or really anyone, goes into a job early in their career with a low income, that low income is going to follow them place to place if they have to continue to disclose what they earned,” Bellesorte said.

Attacking this problem is at the heart of a new law Philadelphia Mayor Jim Kenney recently signed outlawing businesses operating within Philadelphia city limits from asking job applicants, no matter where they live, salary-history questions.

If successful, it will winnow the gap between what men and women make for the same work. In Pennsylvania, according to federal statistics, women make about 79 cents for every dollar a man earns. And African-American women are paid 68 for every dollar paid to a man.

While pay equity advocates are celebrating the measure, some business groups and employment experts say there may be some unintended consequences.

Rob Wonderling, who heads the Chamber of Commerce for Greater Philadelphia said, since no other city has tried this, there’s no guarantee it’s going to work. It’s kind of a big experiment, Wonderling argues, maybe even one that will yield the opposite of its intended effect. 

Massachusetts passed a similar law last year barring companies from inquiring about past earnings, but it doesn’t go into effect until 2018.

To Wonderling, that’s a compelling reason to hold off until there’s more evidence to study about whether the measure will work. 

Instead, enacting the law now, he said “is really not thoughtful, pragmatic, analytical public policy.”

Philadelphia City Councilman Bill Greenlee Spokeswoman Holly Maher said while it’s true that this type of law has not been tested elsewhere, there’s also no data supporting the argument that it will make the gender pay gap worse. Greenlee sponsored the bill.

“We are not naive to think this will completely solve the problem, but it is a possible common sense solution,” Maher said.

Wonderling, though, worries businesses will decide to open shop elsewhere, and that existing employers might flee the city, frustrated by what he says is another layer of government-mandated red tape.

“We heard quite a bit about what I’ll describe as the ‘hassle factor,'” he said.

At the Wharton School at the University of Pennslvania, professor Peter Cappelli studies HR department issues. He doesn’t buy the argument that avoiding a sole question will be pain for employers. Yet he’s skeptical the law will solve the gender pay gap — because he said differences in what fields they choose is really the biggest driver of the earnings divide.

“Women tend to be less inclined to go into science and technology fields, engineering in particular for example. What’s going on there? And is there bias there? I think that would be a reasonable place to focus, because that seems to matter a lot,” Cappelli said. “Most of the aggregate difference between what men and women earn is because they’re in different occupations.”

But denying companies information? That’s a risky gamble, Cappelli said.

“This is one of the problems when you deny information that they want, is that they guess. And in this case, the guesses might make things worse,” he said.

Sure, said Capano, the Philadelphia nurse. But if the guess is too low, people can always reject it. It’s something women should do more often, she said.

“Women aren’t told to or taught to negotiate as well as their male counterparts and are often feeling like they have to accept the first offer that comes their way,” Capano said.

When the law takes effect, in May, asking job applicants about their previous salary could become a an actual expense. The Human Relations Commission can fine companies $2,000 fine per violation if a job applicant complains to them about a company that goes there.

“If it doesn’t work, at least they tried to do something,” Capano. “And that gives me some hope for the future that this is being analyzed and action is being placed.”