Why you should be cautious about revealing what you were paid in your last job

You’re in a job interview. You think it’s gone reasonably well. The end is approaching so the interviewer casually asks what salary you’re on in your current job. Should you tell them? Talking money might feel like a good sign. After all, they wouldn’t ask unless they were seriously considering offering you the job, would they? If they considered you an unemployable drongo why would they bother inquiring? 

But some say this innocuous question actually represents a trap. The theory is that the divulgence of this information can perpetuate historic pay discrimination as people move from job to job. “The only reason that employers ask this is so that they can low-ball you when they make you an offer,”says one career coach.

It’s claimed that women and ethnic minorities sometimes arrive at a new firm with a low salary relative to their peers because employers (roughly) matched their job and pay offer to that of their previous salary, which may well itself have been unfairly low. And they then remain tethered to this low base over time at the company, even if they get incremental pay rises to match inflation. “Are you underpaid? Then let’s make sure we keep you there” is how the New York psychologist Sonia Banks describes the dynamic.

Another complaint over the question is that employers sometimes treat an existing salary as a signal of how much an individual was valued by a previous employer – and may make a judgement about whether to offer a job at all on the basis of it.

One former female City worker I know suspects she was once not offered a job because she divulged a bonus from a previous prestigious employer which was not deemed large enough. “The problem is I was being undervalued at that other place – so it was an inaccurate signal,” she says.

It’s for these kinds of reasons that some cities in America, including Pittsburgh and New Orleans, have banned employers asking the question about previous salary in interviews. New York became the latest earlier this month.

A number of US states are also considering banning it – though some are encountering resistance.

Nevertheless, some giant corporations, including Bank of America and Amazon, recently decided to get ahead of the law and unilaterally instruct their own interviewers not to ask the question.

But is this proscription really helpful in terms of fighting pay discrimination? Earlier this month I wrote about how mandatory aggregate gender pay gap reporting facilitates transparency and can help to empower a workforce. Doesn’t removing these questions represent a step back in terms of transparency? And don’t many people suggest that we should learn to overcome our reticence to discuss our pay with colleagues in order to flush out glaring pay injustices? Shouldn’t women be encouraged to ask for pay rises, to “lean in”?

Leave aside the evidence that women may get punished, rather than rewarded, for asking for more money: the specific problem here is asymmetric information. Greater transparency is a worthy goal, but when you disclose your previous salary in an interview situation the prospective employer knows more about you than you do about them, at least as regards their sense of how much filling the position ought to cost.

The solution may be to turn the tables and compel a company to disclose what it thinks the specific job is worth. Perhaps what really needs to be proscribed is not the previous salary question but the common practice of firms advertising a salary as merely “competitive”, rather than putting a figure, or a rough price band, on it.

Unlike in the US, making the previous salary question illegal is not on the agenda here in Britain. And the simple reality is that many will find it difficult to refuse to answer a straight question in an interview context. Who really wants to mark themselves out as uncommunicative, or even obstructive, when trying to get that new job? Whatever the advice should be for people on how to handle this dilemma, the US trend towards banning the previous salary question is further evidence that the popular economic theory of financial rewards being linked to “marginal productivity” (in simple terms that you tend to get roughly what you’re worth to the organisation) does a poor job of describing the modern white collar workforce.

The manifest scale of managerial discretion over salary rates, which underpins this whole debate, demonstrates that pay is more a function of power than productivity. And information is a form of power that workers should probably think twice before surrendering.

#asymmetricinformation #genderpaygap #jobinterviews #salary