Pay transparency’s rise isn’t tied to expected explanations

Employers are increasingly providing pay information in job postings despite the fact that a relatively small number of states require the practice.

Minnesota will join that number on January 1, 2025, when a law requiring employers to provide pay information in job postings takes effect. Minnesota’s mandate follows similar obligations put into effect in 2020–2023 in four states: California, Colorado, New York, and Washington. Similarly focused requirements will take effect in 2025 in Hawaii; Illinois; and Washington, D.C.¹

Alongside this increase in state mandates has been an increase in job postings that include pay information, both in states where listing that information is required and in states where it is not. Earlier analysis by the Federal Reserve Bank of Minneapolis using data from the hiring platform Indeed found that the practice of including pay information in job ads—what we call pay transparency—has grown notably in the previous five years. In the four states that required pay transparency, the share of job ads with pay information rose by over 50 percentage points from 2019 through 2023. As shown in Figure 1, over the same time period the share of job postings with pay information in states that have not enacted pay transparency laws increased by nearly 30 percentage points, from 15 percent to 42 percent of postings.

Understanding why employers are choosing to provide pay transparency in the absence of government intervention helps shed light on the potential impact of future policy. And for the Community Development and Engagement team at the Minneapolis Fed, exploring pay transparency trends furthers our mission to provide better evidence to leaders as they seek to remove labor market barriers for lower-income workers.

Why has pay transparency increased in states without relevant laws?

We hypothesized four different explanations for the recent increase in pay transparency in states without relevant laws.

First, pay transparency laws in one state could directly affect the practices of employers in other states. This could happen with remote positions, where states with pay transparency laws usually require postings for out-of-state remote jobs to include pay information. Or it could arise from multistate employers adopting uniform hiring practices. That is, employers with locations in states that have pay transparency laws may apply transparency practices to postings for positions located in other states. Research shows that labor market policies in one geographic area can impact employees in another geographic area due to consistency in employer-wide procedures. And there is some analysis consistent with “halo” effects of pay transparency laws.

Second, labor market competition could be driving the increase in pay transparency in states without relevant laws. It could be that employers increase their use of pay transparency at times of low unemployment when they must compete for workers. If pay transparency helps employers attract workers, an implication could be that it benefits applicants, such as by enabling applicants to easily compare different employers’ pay ranges. Or it could be that employers increase transparency in times of high unemployment when there is an abundance of potential workers. If pay transparency helps employers when it is easy to hire workers, an implication could be that pay transparency benefits employers, such as by discouraging applicants from bargaining over pay. Earlier research found that when the unemployment rate was low, employers were less likely to provide pay information and would instead bargain over wages.

Third, the rise in pay transparency could follow earlier occupational patterns. Prior to the recent rise in pay transparency, postings with pay information were concentrated in certain occupations, such as those with more similarity in skills among workers or with lower wages. The posting of pay information in these occupations was associated with limited pay bargaining.

Fourth, attitudes about gender could be driving the rise in pay transparency. The movement to close the gender pay gap has motivated the adoption of pay transparency policies, specific to job postings and more broadly.

However, using data from the hiring platform Indeed and other relevant sources, we find no evidence in support of any of these hypotheses. That is, remote work, uniform practices for multistate firms, labor market conditions, occupational characteristics, and gender attitudes do not appear to explain the rise in pay transparency in states without relevant laws. What did our analysis reveal, exactly? We discuss our findings about each hypothesis below.

Diving into the data

First, as seen in Figure 2, remote work requirements or uniform hiring practices for multistate employers do not appear to be a significant factor. The first two columns of Figure 2, in gold, shed light on whether state laws requiring that postings for remote jobs include pay information are spurring employers in states without pay transparency laws to include pay information in their own postings for remote jobs. The columns show that postings for remote and hybrid jobs were only 3 to 4 percentage points more likely to include pay information in 2023.² Given that remote and hybrid job postings only made up about 7 percent of all postings in 2023, the overall impact of remote job listings on pay transparency is negligible. Remote work would account for less than 1 percentage point of the nearly 30 percentage point increase in pay transparency from 2019 through 2023.

The last two columns in Figure 2 examine the role of employer-wide practices. Focusing on postings in states that did not have pay transparency laws by 2023, we compared employers that also had postings in California, Colorado, New York, and Washington in 2023 and employers that did not. We found that employers with postings in California, Colorado, New York, and Washington were not significantly more likely to include pay information for jobs in other states.³

Figure 3 examines the relationship between pay transparency and unemployment. It shows a steady increase in pay transparency from 2019 through 2023 despite large changes in the unemployment rate over that time.⁴ The recent rise in pay transparency does not appear to occur in times of high unemployment when employers have more power during the hiring process, nor does it fade during times of low unemployment when employers may need to bargain with workers in order to hire them. In part, this pattern of results could arise from the fact that employers often provide wide pay ranges in their postings,⁵ which reduces the usefulness of the information. The net value of the recent rise in pay transparency is not obvious for workers or employers from this analysis.

In Figure 4, we explore whether the occupational factors that explained pay transparency in 2019 continue to explain pay transparency in 2023. The figure categorizes occupational sectors by the percent of postings that included pay information in 2019. The bars represent the increase in transparency from 2019 through 2023. Across the distribution of 2019 pay transparency, we see a relatively uniform increase of nearly 30 percentage points through 2023. Occupations with historically limited pay bargaining, which are represented by the “High” category in Figure 4, only saw slightly faster growth in pay transparency from 2019 through 2023.⁶

Figure 4 thus suggests that although some of the historical trends associated with pay transparency that we referred to earlier in this article continue to exist today, the recent rise in pay transparency is not concentrated in occupations with historically limited pay bargaining. Because pay bargaining can be useful for workers, the recent rise in pay transparency may therefore not be as beneficial for employers as historical pay transparency had been.

Lastly, we correlate the increase in pay transparency with a measure of gender bias to examine whether a motivation to close gender gaps is driving the increase in pay transparency. We use data from the Gender-Career Implicit Association Test from Project Implicit at Harvard University. The test seeks to uncover implicit attitudes on gender roles; high scores are associated with more gender bias. We find that counties with low and high scores had similar increases in pay transparency of about 26 to 27 percentage points on average from 2019 through 2023.⁷ Attitudes about gender thus do not appear to be driving the recent increase in pay transparency in states without relevant laws.

More research is needed

Investigating why employers choose to provide pay information in job postings in the absence of pay transparency laws helps us understand who benefits from pay transparency. Our analysis of expected explanations rules out a large role for other states’ laws, labor market conditions, occupational characteristics, and gender-bias factors.

Additional research on changes in employment rates and wages following the enactment of pay transparency laws, as well as more research examining how pay transparency affects employer outcomes—such as the amount of time it takes to hire an applicant, or the total number of applicants—could help shed light on who benefits most from pay transparency’s rise.

Endnotes

1 Several other states, including Connecticut, Maryland, Nevada, and Rhode Island, require employers to provide the salary range at another point in the hiring process.

2 Regression analysis that controls for firm size, state, and occupational sector also finds that remote work may have a limited relationship with the prevalence of pay transparency.

3 The patterns in the figure are replicated in regression analysis when controlling for firm size, state, occupational sector, and remote work status.

4 Panel regressions at the county-month level that use data from Indeed and Local Area Unemployment statistics from the U.S. Bureau of Labor Statistics and control for county and month effects rule out an effect of 0.2 percentage points for every 1 percentage point increase in the unemployment rate. This equals less than 1 percent of the nearly 30 percentage point increase in pay transparency during this time.

5 The average posting that included a full pay range in 2023 listed a maximum pay more than 25 percent higher than the minimum pay, with an average range of about $16,000. Ten percent of postings had a range larger than $40,000. Some research shows that salary ranges in postings have been widening in certain areas.

6 Regression analysis finds that 1 additional percentage point of pay transparency in 2019 is associated with a 0.13 percentage point increase in the growth of pay transparency from 2019 through 2023 when weighting by occupation size. This increase is marginally significant at the 10 percent level. Scaled by the roughly 30 percentage point difference between the sectors with the maximum and minimum levels of 2019 pay transparency, this estimate corresponds to a 4 percentage point faster growth in pay transparency from 2019 through 2023 between the sectors with the maximum and minimum levels of pay transparency. The role of sectors is thus small compared to the average increase of nearly 30 percentage points during this time.

7 Focusing for precision on counties with more than 10 completed tests, regression analysis that controls for firm size, state, occupational sector, remote work status, and hosting location finds that moving from the fifth to ninety-fifth percentile of county Gender-Career Implicit Association Test scores would be associated with only about a 1 percentage point increase in pay transparency from 2019 through 2023.