Dive Brief:
- Colorado’s pay transparency law, which went into effect Jan. 1, 2021, resulted in a 1.5% boost in the labor force participation rate compared to Utah, a neighboring state without such a law, according to an analysis by research hub Recruitonomics.
- In the same period, however, Colorado job postings on Indeed fell comparatively more than in Utah by a margin of 8.2%, the study found. “Salary transparency laws add another step in the process to post a job; as well as repel recruiters unwilling to divulge pay ranges,” Recruitonomics said.
- Recruitonomics noted the study is limited, but used Utah as a comparison due to the state’s similar demographics and economic characteristics.
Dive Insight:
Colorado was among the first states to pass a pay transparency law, approving it in May 2019 and enacting it Jan. 1, 2021. Several more states have passed such laws since, including New York, Washington and Rhode Island.
The law was intended to address salary disparities, with the bill’s text citing research from 2018 showing women in Colorado earned 86 cents for every dollar men earned, while Latinas earned 53.5 cents and Black women earned 63.1 cents for every dollar White men earned.
While it may still be too early to know how well the law is addressing the pay gap, the effects of the law have begun to reverberate. One early, concerning trend that workers and media began to note was the deliberate exclusion of Colorado job candidates from remote roles, which allowed companies to keep salary ranges hidden. One website, Colorado Excluded, even aggregates job postings open to all candidates except those in the state — a list that includes Abercrombie & Fitch, Cigna, Johnson & Johnson and many more.
This exclusion is reflected in Recruitonomics’ findings. The Colorado Excluded site was one of the first things that “tipped us off that perhaps right now employers offering remote positions … are discriminating based on geography,” Sam Kuhn, an economist data analyst for Appcast, which runs Recruitonomics, told HR Dive.
While Colorado job postings have taken a hit, Kuhn doesn’t believe the effect will be permanent. The “cat is out of the bag” now, with employers who want to be competitive having to adopt the policy of revealing salary ranges, he said. Salary transparency also reduces time lost for candidates and employers who aren’t on the same page but have gone several steps into the application process. “I think employers are realizing that there's just an efficiency gain across the board,” Kuhn said.
The backlash to the law from out-of-state companies may have hit hardest the population the law was intended to help, Denver-based magazine 5280 pointed out; women are especially drawn to remote and hybrid work. But Kuhn predicts the job market will move toward greater transparency and equity — not just in Colorado, and not just due to the currently favorable market for workers.
“Initially, Colorado did have to bite the bullet in terms of maybe a slight decline in postings, just because certain employers just didn't want to abide by this,” Kuhn said. “But I think overall, this is where the trend is heading. And whether or not employers like it … this is going to be the new standard.”
