The Changing Job Application
Demands from younger applicants for pay transparency grow
The young people are restless. And as is generally the case with the rhythms and tides of generational turnover, the world is trying to figure out how to adapt as the usual ways of doing things change. This has become increasingly evident in the labor market, which has been marked by low unemployment and tight hiring for much of the past decade. The pandemic in retrospect was a blip (a particularly large one, mind you) in the story of an evolving job market, which continues to marked by changing expectations from would-be employees before, during, and after the hiring process. What has happened, and where are we going from here? Let’s dig in.
Pay Transparency
I spoke to a 20’s-something family friend this past week who is passively in the market for a new job. She works as a waitress and is interested in taking a new professional step, but is making decent money (especially in the summer here in Maine) and doesn’t necessarily need to make an immediate jump. She told me she will not even consider applying for a job unless the salary is included in the job description, and that most of her friends are the same way. When I asked her why, she said, “Why waste everyone’s time?” In other words, she did not want to apply, get vetted, have an interview, perhaps be further vetted or have a second interview, just to get to the finish line and find out the hourly pay is less than what she expects or needs it to be.
Sure, she could ask the job screener about the pay in the very first conversation about the position, but even that requires her to submit an application with a resume and cover letter, and for a lot of young people that is too many extra steps. It also requires a direct question from applicant to interviewer, and many applicants especially the Gen Z’ers out there and beyond, don’t relish that type of direct communication; it’s easier to just move onto the next job posting, which is especially easy to do when job postings abound.
Is she wrong? People applying for jobs today have a lot of leverage because of how tight the labor market still is. A study by Indeed.com in 2022 found that 75% of applicants said they were more likely to apply for a job if the salary information was listed in the job description. A study by LinkedIn found that 82% of applicants said that seeing a salary range would give them a more favorable view of the company that posted the position. These are decisive numbers, and job applicants are not irrational for not wanting to waste their time and that of others including the company or organization doing the hiring.
I give the younger generation credit for valuing (and expecting) trust and transparency in relationships. There are a lot of knocks on young people today for shorter attention spans, unrealistic expectations of career advancement in a very short period of time, and for their challenges in interacting with others face-to-face or over the phone in a professional capacity. Some of this is exaggerated or based on stereotypes, but not all of it; Gen Z moves to the beat of a different drum, for sure. But I give younger people credit for expectations of transparency and also in having little patience for the dances we so often do around questions of compensation. In a job market where they have all of the leverage (i.e. employers need workers more than workers typically need to find jobs), applicants can afford to be choosey. I spoke to another person just getting started out in their career this week, and he told me that “of course pay is going to be the biggest variable right now, look how expensive it is to go to the grocery store!”
How are employers adapting? An increasing number of job descriptions do actually include either a specific salary or salary range for the position. As is evident in the data from the surveys noted above, employers probably see a competitive advantage in doing so. Not only are they more likely to attract applicants, but the quality of applicants is likely to be higher as they are self-selecting into a job posting with a salary that is within their range of expectations. People with unrealistic salary expectations might simply not apply, which actually saves the hiring manager time in not having to vet applications that are not likely to work out due to a mismatch in expectations around compensation.
Moreover, if the surveys above are correct, the employers are also attracting a stickier employee who respects the transparency and trust that is evident from an employer that is clear about its compensation. So right from their first step of interaction (i.e. the initial application), there is a better connection. I suspect younger applicants, who often have less regard for traditional institutions and common ways of doing things, do not like the power asymmetry between a company and an applicant around questions of compensation. If a company is withholding information about how much they are going to pay, that instinctively feels wrong to a lot of young people.
One concern for employers is that posting salary information may cause consternation among their existing employee base. An employee that was hired in a less competitive environment might actually be getting paid less than what is posted for a new comparable position even factoring in any pay bumps they have received since they began. Employees might not also like knowing what their coworkers and friends are getting paid, and this could introduce a complicated dynamic to a workplace.
But, in my opinion, the costs of transparency (i.e. that the employer might have to bump up swaths of its existing workforce to match or surpass the salary of newly hired people for similar positions) would be far outweighed by a stronger applicant pool not to mention a more loyal existing base of employees who might be happier and more productive upon seeing their salaries get bumped up (or at least knowing they are being paid competitively). That same Indeed.com report also found that 84% of employees are happier and more productive if they feel they are being paid fairly, and pay transparency can help engender this.
The Legislative Nudge
Employers may, in fact, be required to do this eventually. In several places including New York City, employers must disclose salary information on job descriptions. In Jersey City, New Jersey, for example, all employers with five or more employees whether those be direct employees or independent contractors must disclose salary and benefit information on all job postings. The penalty for non-compliance is $2,000. In California, a 2023 rule mandates that employers with less than 15 employees must provide salary information upon request, and employers with 15 or more employees must provide salary ranges in all job postings and must not ask job candidates their job history.
What does it look like? Out of curiosity, I looked up a job posting for an entry level position with the San Francisco Federal Reserve. The job posting starts off in an aspirational manner, saying, “We are the Federal Reserve Bank of San Francisco—public servants with a mission to advance the nation’s monetary, financial, and payment systems to build a stronger economy for all Americans.” Further down the page, it says:
Base Salary Range: Min: $48,000 - Mid: $62,400 - Max: $76, 600 (Location: San Francisco)
Final salary and offer will be determined by the applicant’s background, experience, skills, internal equity, and alignment with geographic and other market data.
We offer a wonderful benefits package including: Medical, Dental, Vision, Pre-tax Flexible Spending Account, Backup Child Care Program, Pre-Tax Day Care Flexible Spending Account, Paid Family Care Leave, Vacation Days, Sick Days, Paid Holidays, Pet Insurance, Matching 401(k), and Retirement/Pension.
I would be very interested to see if there is data across multiple branches of the Federal Reserve as to whether including the salary range helps to attract a broader and more qualified pool of applicants.
What Comes Next
Setting aside the question about whether it is a good idea for employers to do this or whether employers should be required to do this, the change is happening. Ten states either have existing pay transparency laws or have new rules in development. There is a pay transparency bill in development here in Maine, for example, versions of which have already passed the Maine House and Senate and are now awaiting final agreement that will require all employers with ten or more employees to include salary ranges in job descriptions and require employees to disclose salaries for comparable positions to any existing employee who requests them.
There are no specific pay transparency laws at the federal level at the moment, although there is an executive order on the books prohibiting employers from taking adverse action against applications or existing employees for asking about salary information. In Congress, a pay transparency bill was brought up in 2023, but was subsequently referred to the Committee on Education and the Workforce for consideration. The bill is H.R. 1599, and it has not seen the light of day since being referred to the committee. The odds of eventual passage by Congress are not clear, and perhaps not likely at least at the current time.
For now, employers in states (and some municipalities, as is the case with Jersey City) must abide by the rules that have been established in their own jurisdictions. In other places, the question comes back to whether it makes sense competitively and culturally within an organization to self-adopt pay transparency guidelines. As would-be employers get to know Gen-Z (and Gen-Alpha behind them, which is the name for those born from 2010-2024), I think many will find they have to be more transparent if they hope to attract a high quality applicant pool. Whether by legislative decree or not, pay transparency is likely to become the norm in the coming years.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.
Weekly Round-Up
Here are a few things that caught my eye this week.
The pictures of Evan Gershkovich and his fellow prisoners returning to the United States to see their family are something to behold. Hamish McKenzie, co-founder of Substack, shared some additional thoughts. I’m glad they are home!
Stocks got pounded this week. A Friday jobs report shows unemployment up to 4.3% with many fewer jobs created than expected. In some areas, though, bad news is good news, as mortgage rates dropped to 6.4%, which is the lowest they have been in over a year. This week’s decline in rates from 6.81% to 6.4% was one of the largest weekly declines ever. The likelihood of interest rate cuts by the Federal Reserve is much higher now thanks to the softening jobs market.
On the lighter side, you can read Jason Katz’s overview of a Bigfoot convention in Florida here in The Paris Review. Happy searching, people.
Have a great week, everybody!