I’m not sure how many women realize the importance of their very first paycheck.
I’m not talking about paychecks from summer jobs or baby-sitting (although we could - there’s research that shows that the gender pay gap starts with those early jobs - even allowances).
The paycheck I’m talking about is the first paycheck that marks the the start of whatever career, profession or occupation will dominate their adult life.
I figured out the importance of that number with my first salary increase. I laugh now when I think about it - I was so naive. It was a 10% increase - I should have been over the moon. But I could do the math - 10% of $10,000 was still $1,000. If that was how increases worked, it was going to take me years to reach a salary that seemed like a decent living to me.
Every paycheck you receive during your career, with a few exceptions, will build on that first paycheck. Every salary increase. Every bonus. Even matching retirement contributions. Since most employers use percentages to calculate all of the above, that first paycheck can be the start of something big. Except for women, it’s usually the start of something less.
Sometimes it’s a lot less. One frequently cited study found a gender pay gap of nearly $5,000 among recent male and female MBA graduates. That may not sound like much, but when you compound that difference over a 35-year career, it’s close to half a million dollars in lost earnings for women. Throw in the effect of two maternity leaves, and the difference is close to $1 million.* And that’s before taking into account any bonuses or the accumulated differences in retirement contributions.
The detrimental impact that first paycheck can have is one of the reasons that there are initiatives in some states and cities to ban questions about a person’s salary history during the employment process. Without that information, employers must base their compensation packages on job-related factors - skills, educational requirements, training, and experience - instead of previous salaries, which for women, in all likelihood, already reflect a gender pay gap.
There’s early evidence that the salary history bans are having an effect. Two researchers found an increase in women’s earnings relative to men’s in California, where there is a statewide ban on salary history questions since 2018. But it's really too soon to tell what the positive and negative consequences may be.
And it may all be for naught. Salary history bans have been challenged in courts with varied impacts. At this point, the Supreme Court has been asked (again) to rule on on one of the court cases to provide clarity to employers. Women have generally applauded the bans. Employers oppose it.
Bottom line - it may be up to you as to whether or not you reveal your salary history to a prospective employer. If you prefer not to, be ready to redirect the question to one that focuses on what you bring to the table and the value of the role to the company. Possibilities include: "my current salary may not be a valid indication of the skills/experience I can bring to this position," or "you would have a better handle on what this role is worth to your organization." (See additional suggestions here.)
I don't hold out hope for support from the Supreme Court but women don't have to let their salary history "condemn [them] to a lifetime of inequality," says Letitia James, a public advocate involved in the passage of New York City's salary history ban.
The first step is understanding the impact of that very first paycheck.
*With a starting salary of $90,000 for a man and $85,000 for a woman (MBA grads), taking into account two maternity leaves but equivalent increases otherwise, the man will accumulate $8.6 million dollars in lifetime earnings over a 36-year career (age 25 to 61). The woman will accumulate $7.7 million. (Link to spreadsheet).