An increasing number of states across the country are requiring employers to disclose salary amounts on job applications.

Massachusetts is the latest state to mandate salary transparency, with Gov. Maura Healey signing a bill in late July that requires companies with more than 25 employees to disclose salary ranges when posting job openings.

Advocates advocate ending pay secrecy as a way to level the playing field and reduce the pay gap, especially for women and people of color. Women earn about 84 cents for every dollar a man earns, according to the U.S. Department of Labor. Meanwhile, black, Latino and Native American workers earn an average of 73 to 77 cents for every dollar a white worker earns.

While the legislation is seen as a significant step towards equal pay, it can also have downsides: companies may be able to hire or retain fewer workers, and the transparency can affect workplace morale and lower productivity.

The trend started in Colorado, where a law went into effect in 2021 requiring employers to disclose hourly or base salary in job postings.

Since then, California, Hawaii, Illinois, Minnesota, New York, Washington, and the District of Columbia have passed similar pay transparency laws. The Illinois and Minnesota laws go into effect in January 2025.

Connecticut, Maryland, Nevada and Rhode Island have enacted laws requiring salary ranges to be disclosed at some point in the interview process or when candidates ask for a salary range.

Some cities, including Ithaca, New York, Jersey City, New Jersey, and Cincinnati, Ohio, have also passed laws requiring salary ranges in job advertisements.

The new Massachusetts law also protects an employee’s right to ask their employer about salary ranges when applying for a job or seeking a promotion.

The law “is part of a growing trend in which 13 states and the District of Columbia now require employers to disclose salary range information during the hiring process,” said Vasu Reddy, director of state policy for workplace justice and senior counsel at the National Women’s Law Center (NWLC). Newsweek.

“These laws reflect an understanding that pay disparities thrive in the shadows, and that transparency gives workers a valuable tool to ensure they are paid fairly. This is especially important for women workers of color, who face the largest pay gaps due to the combined effects of sexism and racism.”

Transparency can also “save valuable time in the hiring process by ensuring that candidates’ salary expectations align with the position,” Reddy said.

Allison Elias, professor at the Darden School of Business and author The Rise of Corporate Feminismhe said Newsweek that persistent gender and racial pay gaps are driving pay transparency efforts, with the idea being that “greater transparency in pay ranges could reduce differences in starting salaries.”

She said: “We know that sharing more information about pay can mitigate gender differences in some aspects of negotiation behavior.”

Elias added that providing a salary range “may encourage women to start negotiating at the time of hire or possibly agree on a higher amount than if there was no range specified.”

Tomasz Obłoj, assistant professor at the Kelley School of Business at Indiana University, said: Newsweek Research, including his own, has shown that transparency reduces pay gaps, particularly the gender pay gap.

“While little is known about the actual effects of pay ranges, we now have quite a bit of evidence on pay transparency more broadly,” Obloj said. “First, there is clear evidence that transparency reduces pay gaps, and the gender pay gap in particular. In that sense, it is extremely effective.”

Publishing salary ranges is expected to “have other beneficial effects as well, such as encouraging candidates (particularly those from underrepresented minorities) to apply for more diverse positions, thereby increasing their chances of finding an appropriately paid and well-matched position,” he added.

The results from the earliest state pay transparency laws “show that they are having the desired effect: job postings in states with strong pay transparency laws were more likely to include salary information, including in industries that typically have low rates of pay disclosure,” Reddy said.

Pay transparency laws also have an impact in states without them. An NWLC analysis of Glassdoor data found that some employers were “actively jumping on the pay transparency bandwagon” and including salary information in job postings, even without a legal requirement.

“More and more companies are also recognizing the benefits of salary transparency in attracting a diverse group of high-quality candidates, as surveys show that candidates are more interested in applying for positions that include salary information,” Reddy said.

However, pay transparency comes with certain risks.

Researchers at the Federal Reserve Bank of Minneapolis noted that implementing pay transparency policies could prove costly for employers if they have to change existing pay practices to ensure that employees’ salaries match those advertised in job advertisements.

Obloj pointed to research that has shown that pay transparency “can lead to a shift of greater bargaining power towards employers and result in lower wages, on average.”

Pay transparency “often results in wage compression,” he said, “when there is little difference in pay between employees, regardless of differences in their knowledge, skills, experience or position in the hierarchy.”

He and Todd Zenger, a professor at the David Eccles School of Business at the University of Utah, wrote in an article for Harvard Business Review that “a weakened link between pay and performance can lead to lower worker productivity—and that outcome seems to depend on what pay transparency reveals (and to whom).”

“While there is nothing fundamentally wrong with this, it could lead to companies suppressing incentives and potentially failing to attract and retain the most productive employees,” Obloj said. Newsweek.

And as with any policy, “the devil is in the detail,” he said. “When the ranges are broad (and they often are), they still leave a lot of room for pay disparities after negotiations, which would likely result in little being done about the pay gaps the policy aims to close.”