Colorado’s Equal Pay for Equal Work Act likely contributed to fewer online job postings in the state, especially for remote positions offered by national employers, while at the same time boosting the number of active jobseekers, according to a study from labor market research hub Recruitonomics.
“This version of what Colorado passed is the broadest definition of salary transparency that can be considered,” said Sam Kuhn, a labor economist with Recruitonomics, adding what happened in Colorado is worth studying as more states like New York, Washington and Rhode Island implement similar requirements.
Pay is the top item workers consider when pursuing a particular job and polls show the public overwhelmingly supports greater pay transparency, which is considered a key way to reduce pay disparities based on race and gender. But disclosure rules aren’t popular with some employers, who feel revealing too much information can leave them at a disadvantage in attracting applicants and negotiating with potential hires.
At the start of 2021, Colorado was a pioneer in requiring employers to include pay ranges with job postings made within the state. While some employers balked and avoided advertising jobs in Colorado, pay transparency requirements are spreading.
Kuhn studied thousands of online job postings in 2020 and 2021 to determine what impact the requirements might have had on the number of online postings on Indeed, the country’s largest job site. He also looked at the share of the working-age population either working or actively looking for work, what is known as the labor force participation rate.
Utah was chosen as the control state to measure against Colorado because it is a regional neighbor, has a growing population with comparable demographics, and its economy is somewhat similar to Colorado with a mix of tourism and technology. Unlike Colorado, it doesn’t have pay disclosure rules.
What the study found was that Colorado’s labor force participation was 1.5% higher relative to Utah, which proved helpful given the ultra-tight labor market in recent months. At the same time, daily job postings on Indeed were 8.2% lower in Colorado than in Utah.
“We aren’t saying this is caused by that, but there is some correlation,” Kuhn said.
The shift to remote work because of the pandemic likely contributed to a larger number of job postings across a variety of markets, which might have disadvantaged Colorado. Last year, employers like Galvanize and Airbnb posted advertisements stating that Colorado applicants need not apply, in part to get around the state disclosure requirements.
Colorado Excluded, a website that tracks employers drawing circles around the state, counts 211 companies that have ads excluding Colorado hires. But as more states adopt transparency rules, and as more younger workers who favor disclosure join the job market, trying to bypass markets may be less effective, said Andrew Flowers, a labor economist with Appcast, a provider of labor recruitment technology behind Recruitonomics.
Pay disclosure can be closely tied to how loose or tight the labor market is at a given point, Flowers said. Following the Great Recession, employers pulled back and were less forthcoming. With the currently tight market, more employers are open to sharing salary ranges even if not required to do so.
Disclosures can eliminate what is known as “friction” in labor markets. If a pay range is too low for a job seeker, that person might just say pass and focus on something else, saving a company the headache of screening an applicant who is going to reject the final offer. At the same time, if an offer is higher than expected, it could draw more interest and bring in applicants who are currently working.
More robust pay disclosures might help explain why Colorado has a higher than average “quit” rate during what some call the Great Resignation, although additional research is needed to confirm that.
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