A Worker’s Past Pay Shouldn’t Dictate Future Earnings
States need to ban employers from asking about salary history, a practice that tends to harm Black job seekers.
Don’t ask, don’t tell.
Photographer: Mark Makela/Getty Images North AmericaSuppose you’re on a trip overseas and you need to buy a shirt, but you don’t know any of the brands. You see two shirts in a store that both look pretty good, but one costs twice as much as the other. You might assume that the more expensive shirt somehow is superior — that it’s better made or that the locals will see it as more stylish. You might decide it’s worth the price and spend the extra money.
This isn't how economics is supposed to work. Econ 101 teaches us that demand curves slope down; when something is more expensive, buyers are supposed to want less of it, not more. But when it’s hard to find information about the quality of what you’re buying, people may use the price as a signal of value and pay more for things just because they cost more. This can lead to all sorts of inefficient outcomes, including herd behavior — for example, bubbles in financial markets, when traders mistakenly assume that a rise in asset prices must reflect some underlying increase in fundamental value.