Bridging the Wage Gap With the Pay Transparency Act

By Bill Wang

A recent study in California found that “of top earners making more than $128,960, only

36% were women compared to 64% of men [1].” Despite existing pay discrimination laws in California, hundreds of large corporations across the state actively engage in pay discrimination, contributing to this statewide trend. In response to this, California recently introduced an amendment to the Pay Transparency Act which requires greater pay transparency from corporations across the state, in efforts to decrease pay discrimination. Pay discrimination is defined by the U.S. Equal Economic Opportunity Commission as a difference in compensation on a basis of race, color, religion, sex, national origin, disability, age, or genetic information [2]. The new Pay Transparency Act in California will significantly disrupt the job market over the next two decades by providing significantly decreased wage discrimination, increased competition among employers, and greater transparency to prospective job searchers.

Pay Discrimination in California

Pay discrimination has long existed across the United States and California is no exception to this pattern. Despite over 50 years of efforts at both the state and federal effort to end the wage gap, significant pay discrimination still exists. For example, at a national level on average, women earn only 84 cents for every dollar men earn [3]. When examining the wage gap between women of color and white men, the divide grows larger. When compared to white men in the United States (100%), Black (63%), Asian (87%), and Hispanic (54%) women all make significantly less [4]. Furthermore, a recent study on households in the United States found that women are more likely to be the heads of the household or sole breadwinners in households of color [5]. With more people to provide for and less income, it becomes clear that Black, Latinx, and other minority households experience far harsher consequences from pay discrimination than White households. Undoubtedly, pay discrimination is a systemic issue which significantly contributes to economic inequality in both the United States and California, especially for minority populations and communities of color.

California’s Recent Amendments to the Pay Transparency Act

California’s recent amendments to the Pay Transparency Act require corporations with more than 15 employees to include pay ranges across all job postings. Additionally, larger corporations with more than 100 employees are required to submit an annual report to the government detailing employee compensation, broken down by ethnicity and gender. Companies that fail to comply with these regulations will be charged a hefty financial fine for each violation of the new policy [6]. These changes to the Pay Transparency Act have been effective since January of 2023, resulting in a 20% increase (from 41% to 61%) in job postings with pay ranges between December 2022 and January 2023. These statistics are only expected to continue to grow as the government begins to enforce its hefty penalties against non compliant corporations. As compliance with the act continues to grow, job seekers will have greater access to wage information across all industries.

What do these changes mean?

Although these policy changes may seem minor, they signify a big step in the right direction for combatting pay discrimination in California. This policy grants prospective employees with additional information critical to evaluating corporations, even before they begin applying. Existing employees will also be able to identify if they are underpaid by examining similar postings to compare and better understand their deserved compensation. Additionally, annual reports strongly discourage corporations from enabling pay discrimination and give the government greater ability to identify instances of pay discrimination and enforce anti discrimination policies. These benefits are all provided with little cost to prospective employees and, instead, on companies to comply. Furthermore, California’s decision to introduce significant pay transparency policies signifies a growing movement across the United States to combat pay discrimination. States including Colorado, New York, and California have all implemented similar regulations to force corporations to increase transparency and decrease the country’s wage gap. California’s participation in this movement will hopefully encourage other states across the country to follow suit in providing fairer and more equitable access to the job market.

What’s next?

While the long term effects of the Pay Transparency Act are yet to be seen, there are strong indications that it will benefit millions of workers across California. However, even with these new regulations, the increased transparency is not likely to completely eradicate pay discrimination and economic inequality in California. While this policy may slightly lessen the severity of economic inequality, more progressive and impactful policy, such as systemic reforms to education and law enforcement, must be created to bridge the significant wage gaps experienced by Black, Latinx, and other minority communities across both California and the United States.

Works Cited