When pay transparency isn’t so transparent

Imagine you’re searching for a job, and a posting catches your eye. The pay range runs from $130,000 to nearly $500,000 a year — a gap that could leave you anywhere from comfortably in the six figures to making bank. Where do you even start negotiations?

That range isn’t hypothetical. It’s drawn from a real job listing on Indeed. And it isn’t an outlier either. There are hundreds of examples of postings with salary ranges that can span the tens of thousands or hundreds of thousands of dollars.

New research from Cornell University suggests that those wide ranges could undercut the effectiveness of pay transparency laws.

About 15 states have passed laws requiring companies to include salary ranges in job postings, in part to help address wage gaps for women and people of color. But the research suggests the way those ranges are written — particularly how wide or narrow they are — can influence how applicants approach negotiations.

Marketplace’s Nancy Marshall-Genzer spoke with Alice Lee, an assistant professor of organizational behavior at Cornell and lead author of the study. The following is an edited transcript of their conversation.

Nancy Marshall-Genzer: Let's stick with that real-world example for a minute: Based on your research, how might someone — especially a woman — approach salary negotiations with a huge salary range like that?

Alice Lee: So women, on average, tend to be more averse to financial uncertainty. And so if you see a wide range, you have very little idea of where you're actually going to land. Past work suggests that women, like I said, tend to be more risk-averse than men, and — due to that — we found that women, on average, were opting more into job postings that had narrower pay ranges moreso than men were.

Marshall-Genzer: OK, so women prefer postings with narrower ranges. Is that a problem? I mean, are women hurt when they limit themselves that way?

Lee: The preference towards risk aversion in itself, I don't think, is a problem. I think that is a natural tendency, and I think there's good reason to respond in this way to ambiguous signals. The problem isn't the preference in itself, but sort of what happens after that. What we found in our research is that those who apply to narrow ranges are then more satisfied with an average offer. They're less likely to initiate negotiations, and when they do, they make offers that are much less assertive — meaning lower and are thus less likely to end up with a higher salary than those that might have applied to a wider salary range.

Marshall-Genzer: Oh, so interesting — so less likely to negotiate, lower salary in the end. So could these pay range transparency laws actually be perpetuating the very pay gaps they were designed to close?

Lee: I think that's exactly right, and this cycle that we were finding does suggest that this could lead to a perpetuation, because if women, or those that are more generally averse to risk, are disproportionately applying to jobs with narrow pay ranges and afterwards, then negotiating less assertively. You could imagine how this then leads to a certain demographic ending up with a lower salary at the end.

Marshall-Genzer: What is the solution here then? I mean, do we need new laws?

Lee: I want to start off by acknowledging that employers, I think, do need some flexibility and how they set ranges a single job title might span multiple experience levels. I think remote roles need to account for geographic cost of living differences and industries have variable compensation, like bonuses and equity.

So the goal, I don't think should be to eliminate discretion, but I think it's the fact that discretion comes at a cost of clarity, sometimes. New Jersey's law, I think, is a good model. It's capped the width of posted ranges at 60% of the minimum salary. Another, I think, important finding from our work is that when you provide contextual information alongside the range, it could help mitigate the ambiguity. So just explaining your range, not just posting it, auditing it, but also recognizing what your pay ranges will be signaling. I think these are some things that employers can keep in mind.

More on pay transparency

• From January 2022: New NYC wage transparency law aims to reduce pay inequities

• From October 2022: New pay transparency laws mean companies will have to account for disparities

• From March 2023: Eight states have passed pay transparency laws. How effective are they so far?

• From October 2023: As pay transparency laws proliferate, some employers remain resistant

• From “Million Bazillion”: Why do some people get paid more than others?