Power and Pay Secrecy

Abstract

The legal momentum toward pay transparency is widespread and fast-moving. Since 2010, over a dozen states have passed laws prohibiting employers from telling workers they may not talk about wages. Proponents see these and related transparency laws as crucial steps to combat sex- and race-based pay discrimination in the workplace. But do state anti-secrecy laws actually reduce pay secrecy in the first place? That basic question remains largely unexplored. This Article fills the gap through a unique national survey that includes information about pay discussion rules and a range of other relevant employer and employee characteristics across the fifty states.

We find that just under half of all workers in states that have prohibited pay secrecy rules still confront one at work. Surprisingly, this is only slightly less than the fraction of workers who are subject to pay secrecy rules in states without a law against them. Moreover, employers seem to react to state laws not by removing the expectation that workers should remain silent but by making their pay secrecy rules more informal — though no less illegal. Our analyses also show that state variations in the types and severities of employer penalties for violating the law have little overall impact on the prevalence or formality of pay secrecy rules, with the notable exception of California and its especially comprehensive remedies. But even in California, 4 in 10 workers remain subject to an illegal pay secrecy policy.

Though employment law enforcement is notoriously poor, pay secrecy rules seem uniquely durable — and state pay secrecy bans uniquely futile. In considering why, we document the old and new arguments used to understand secrecy’s persistence. But even in combination these factors are not adequately explanatory. We contend instead that the dominant driver is employer power, in two forms. The first, coercive power, is widely documented and understood. The second, known as legitimating power, is not. We find strong evidence for this latter form and suggest it is the key to explaining the pervasiveness of illegal pay secrecy rules. The insight helps critique the newest efforts to legislate transparency, like mandated pay ranges in job postings. Most importantly, a legitimate power lens clarifies the best paths towards nationwide pay transparency in the future.

Keywords: employment law, labor law, pay transparency, employment law enforcement

JEL Classification: K31