Colorado’s Equal Pay for Equal Work Act, a first-in-the-nation law that went into effect last year and aims to solve historical wage inequities, probably couldn’t have existed 10 or 15 years ago.
Passage of the law, which requires that employers post salary ranges for open positions and prohibits them from asking jobseekers about their wage histories, would likely have been politically infeasible during periods of higher unemployment and looser labor markets, environments where the pendulum of relative power swung decidedly on the side of companies.
“If you think about the macroenvironment from 2008 compared to now, the labor market is extremely tight,” Sam Kuhn, a Denver-based senior economist with Recruitonomics who has studied Colorado’s new pay-transparency law, told BizWest. “It’s a great environment to be looking for a job. It’s easier to find a job, and that gives more power to people looking for jobs.”
The swing in power toward workers empowered politicians to support Equal Pay for Equal Work and sidelined business-interest groups that otherwise likely would have opposed such a measure.
The upper hand
“The thing that’s facilitating this is the macroeconomic environment. Because it’s such a tight labor market, jobseekers have the upper hand,” Appcast lead labor economist Andrew Flowers said. “To lay an extra layer of friction onto employers, this was a time when politicians thought it would go over well. If there are plenty of job offers available, why not make employers be upfront about the recruiting process?”
With their newfound power, workers are demanding equity and transparency from their employers.
“Having this law makes it easier [for jobseekers] in the job-search process, from going to an interview to being hired [is easier] because you have all of the information from the starting point,” Kuhn said.
Kuhn and Flowers noted that Equal Work for Equal Pay is popular among workers, but less so among hiring managers.
“Employers are not always happy with this” because they are being forced to cede some bargaining power that they’ve historically held in the hiring and pay negotiation process, Flowers said.
“When I talk to employers, they complain that when you set a [pay] range, people always ask for the highest point on the range and are disappointed when they’re told no,” he said
The law has created some new hurdles for recruiters.
“In spirit, the law makes sense,” said Kimberly Lucas, a recruiter with Goldstone Partners Inc. who works with startups in Boulder and around the Denver metro area. “The application [of the law] that the state of Colorado has taken goes too far.”
Higher wages for employees, of course, aren’t inherently bad, but Lucas said the result can be increased prices passed down to consumers.
“It has a systemic impact.”
Because large companies can more easily absorb the cost of hiring an employee at a higher rate, “it makes it really difficult for small businesses to attract the right people,” Lucas said.
In the past, when salary ranges weren’t required to be included on job postings, “startups sounded way more exciting,” and recruiters and hiring managers were at least able to get candidates on the phone and sell them on the job and its benefits, such as faster career trajectories, smaller teams or stock options, she said.
“There were all of these other ways that [startups can] make up for the fact that they can’t pay Google’s salaries and at least [recruiters representing smaller firms can get] in a conversation” with jobseekers, Lucas said.
Today, she said, jobseekers are more apt to dismiss a post outright if there are other similar-sounding roles posted that pay a higher wage.
This is especially true among younger workers, she said.
“Generation Z is very comfortable talking about salaries. That’s always been taboo for every other generation,” Lucas said. “Equal Pay for Equal Work has probably increased the importance — in their minds — of salary as a measuring stick.”
In the past, Lucas said, workers were more likely to embrace qualitative factors to compare jobs, such as “having an impact, doing good in the world or having fun at work.”
Hiring managers and recruiters, like everyone else, must adapt to shifts in the economic environment and to new laws such as Equal Pay for Equal Work, which doesn’t appear at risk of being rolled back.
“Recruiters have lost the muscle memory about what it takes to recruit workers in a tight labor market,” Flowers said. “They’re used to having an avalanche of applicants from which they can choose a unicorn candidate and pay them whatever [the hiring company] want[s].
Criticism of Equal Pay for Equal Work isn’t only about additional headaches for recruiters or higher costs for employers. The law, during debate over its passage in 2019, became a battle in the broader culture war, with conservative politicians and commenters pillioring it as an attempt for left-leaning politicos to score points at the expense of people who have traditionally held more power in the business world — namely, white men.
In 2019, Vicki Marble, then a Republican Colorado senator representing Larimer County, made headlines when she declared her opposition to the concept of Equal Pay for Equal Work saying, “It’s just not a given that anybody is going to be making the same — it doesn’t matter that you’re a white man or a purple man.”
She added: “I can’t take part in something that is so focused against a white man, because frankly, I feel white men have done a lot for this country.”
“Increased jobseeker activity”
A better-informed workforce is a pickier workforce. But, it turns out, it’s also a more-engaged workforce, economists say.
Kuhn said his research indicates that Colorado has seen “increased jobseeker activity” since the Equal Pay for Equal Work provisions were launched last year.
Recruitonomics, a research hub for recruiters and human-resources professionals, compared Colorado’s workforce to that of Utah, which has similar characteristics and a similar post-Great Recession participation-rate trajectory, but does not have a similar pay-transparency law.
The takeaway: Since Colorado’s law was passed, posting activity from the Centennial State on the online job board Indeed “declined comparatively more than in Utah by a margin of 8.2%,” according to Recruitonomics’ study. At the same time “there was a 1.5% increase in Colorado’s [labor-force participation rate, or LFPR] relative to Utah’s LFPR.”
Extrapolating from that data, Kuhn hypothesized, “More people are actively searching for work in Colorado now that they have information pay — that’s possible. We can’t say that this is a causal issue, but there is some correlation.”
There’s reason to believe that when “employers decide that we’re going [to be more transparent with pay,] it might be uncomfortable for a little bit, but we’re going to have long-term benefits,” he said.
If the goal of a hiring manager is to find the right person who will be most successful in the job, increased transparency might help that cause.
“When you’re hiring in a pay-transparency market, you typically have fewer applicants because people self-sort” based on salary expectations, Flowers said. “But as a recruiter, your efficiency is higher because a higher fraction [of those self-sorted candidates] are going to be hireable. They’re going to be higher-quality candidates, if fewer.”
Early data seems to indicate that transparency results in fewer total applicants, but a higher overall hire rate, he said. “Even if your cost per application goes up, your cost per hire can go down because higher-quality candidates convert to hires at a higher rate.”
It’s hard to say for certain whether Equal Pay has made strides toward closing the wage gap between men and women, and particularly women of color, as specific data on the matter from 2021 and beyond is scant.
That said, Coloradans on the whole are earning more than were in the past, and more on average than their peers around the country.
Over the last year, Coloradans’ average hourly wage has grown from $31.92 to $34.60, according to July data from the Colorado Department of Labor and Employment. The nationwide average is $32.37.
“Compliance rather quickly”
Fears over the potentially onerous nature of the new transparency requirements resulting in a slew of fines for companies appear to be without much merit.
Only a small handful of companies have been fined for violations, and none have appealed, CLDE division of labor standards and statistics director Scott Moss told BizWest.
Last year, when Equal Pay went into effect, CDLE, which has about two dozen investigators to look into potential labor-law violations, was mostly focused on outreach to inform employers about the new rules of the road, rather than aggressive enforcement.
Typically, the agency sends out letters to potential violators, and if the company comes into compliance, no fine is issued.
“Colorado’s larger companies came into compliance rather quickly, and we were pleased and heartened by that,” Moss said.
More than 90% of employers who have been contacted about potential violations have voluntarily fixed the offending job post, he said.
One issue that’s caught the attention of many local jobseekers is postings that specifically request that Coloradans not apply. Hiring managers often wrongly believe that such language can serve as a workaround to complying with Colorado’s new transparency rules.
That’s not usually the case, however.
“Exclusions are absolutely a problem,” Moss said, and the state hired a temporary worker last year to scan job boards for exclusionary postings.
“Labor laws aren’t focused on where [a company’s] headquarters is, it’s about where they have people,” he said. “If a company based in Vermont has staff in Colorado, they have to comply with Colorado wage law, Colorado discrimination law and Colorado pay-posting laws.”
This applies both to employees that work in a Colorado office or factory and to employees that work remotely from their Colorado homes.
For small companies with only a few remote employees in Colorado, state enforcement personnel recognize the higher likelihood that human-resources staff may be unaware of Colorado-specific labor laws, Moss said. “That’s not the type of company that we’re using our scarce resources to police as a priority.”
Moss also noted that companies without any worker presence in Colorado need not comply with the state’s pay-transparency requirements. Even still, “it’s not really a fruitful endeavor” for such firms to exclude Colorado workers from applying.
Companies have also tried to skirt Colorado’s law by posting salary ranges that are extremely wide.
“A company that posts a ridiculous pay range loses on the legal doctrine of ‘give me a break,’” Moss said. “But seriously, the binding rule says that the range must be from the lowest to the highest that the company might reasonably offer.”
Employers are “certainly not within the definition of the rule if they post [a pay range of] $1 to infinity,” he said.
A posted range of $60,000 and up also does not meet the requirements of the law, Moss said. “It’s not a range if there’s no upper end.”
Despite a small number of bad apples in search of loopholes, Scott said he’s been impressed by industry’s embrace of the Equal Pay provisions.
“The business community has, by and large, done a terrific job.”