California job postings will soon include pay ranges, thanks to a new salary transparency bill signed into law by Gov. Gavin Newsom Tuesday.

The law, which goes into effect Jan. 1, 2023, will require nearly 200,000 companies with 15 or more employees to start disclosing pay ranges on ads for jobs that will be done in the state. The move makes California the largest state where job listings will require salary information by law. It's home to 19 million workers and some of the most influential companies in the world including Apple, Disney, Google and Meta.

Supporters of the legislation say it's a big step forward in helping to close racial and gender wage gaps.

Nationally, the U.S. Census Bureau estimates women earn 82 cents for every dollar earned by a man, and the gap widens for many women of color.

In California, women are paid roughly 88 cents for every dollar paid to a man, with the gap increasing for women of color. Women in the state lose a combined total of $87 billion to the pay gap every year, according to the National Partnership for Women and Families. 

"Women, and especially women of color, are literally being robbed of wages every year," says Jessica Ramey Stender, the policy director and deputy legal director director at Equal Rights Advocates, a legal and advocacy nonprofit that co-sponsored the salary bill.

"That is money that could go to rent, food, diapers, education, retirement savings. So the time has really come for robust pay equity legislation here in California and beyond."

Stender believes the California law will lead other states and cities to follow.

More transparency beyond salary ranges

In addition to requiring salary ranges, the new law says employers of all sizes have to provide the salary range to an employee for the position they hold if they ask for it. This means job-seekers aren't the only ones who'll benefit from greater pay transparency — existing employees can check where their salary falls within their own organization and raise discrepancies in pay to negotiate or call for an adjustment.

Finally, it will also require companies with 100 or more workers who are hired through third-party staffing agencies, who often work time-based assignments as W-2 contractors, to submit pay data reports to the California Civil Rights Agency for those workers, broken down by gender, race and ethnicity. 

Stender says this "growing part of the modern workforce" is often comprised of women and people of color who do the same work as direct-hire employees for less money. Reporting pay data based on job and demographic background can help uncover occupational segregation that employers may not be aware of.

"We believe this data can help companies comply with equal pay and anti-discrimination laws and have a more equitable workplace," Stender says.

For example, say a company finds out through the data that their administrative staff, hired through a staffing agency, is 95% women, while their executive-level employees, hired directly into the company, are 95% men. When required to collect that data, "that should be a big eye-opener that they have a potential discrimination claim on their hands," Stender says.

Previous California law already requires companies with 100 or more direct-hire workers submit job and demographic data for those workers.

Pay data will not be required to be posted publicly, but Stender says the state agency will likely publish aggregate data for public awareness and accountability. The effort also "gives enforcement agencies data with which to better enforce equal pay and anti-discrimination laws" to non-compliant employers, she says.

The impact in California and beyond

Similar laws exist elsewhere in the U.S. and are gaining momentum.

Colorado's Equal Pay for Equal Work act went into effect in January 2021 and requires employers to disclose the salary range on all job ads. Early data suggests the change led more people to find work in the state, despite a drop in employer listings.

Nevada employers must provide the salary range to applicants after an initial interview automatically, even if the applicant hasn't asked for it. Employers in Connecticut must provide the salary range if an applicant asks for it, or if the employer extends an offer. And in Washington, employers must provide the minimum and maximum pay range for a job after they've made an offer and if the candidate asks for it.

New York City passed its own salary transparency law set to go into effect in May, but it was delayed to November due in large part to opposition from business groups.

New York state lawmakers passed a similar bill in June. It now sits with Gov. Kathy Hochul, a Democrat, and could go into effect next year, 270 days after its signing. New York business groups have pushed back on the legislation and urged the governor to amend it to remove a requirement to list employee benefits and carve out exemptions for jobs that can be done remotely, among other changes.

Now that the California bill has been signed into law, Stender doesn't anticipate any changes to its implementation date of Jan. 1.

"If there were to be an effort to do that, it would have to be through new legislation, and that would not occur in the timeline needed" to stop the law from taking effect in January, she says.

And because so many global and national companies are based in California, Stender says the new law already has a big impact beyond state lines.

Companies that have locations throughout the country and internationally will sometimes change their policies across the board when a law like this is enacted, she says, to ensure they're in compliance where it's required, and even in some places where it's not.

Employers are preparing for salary transparency, even if it's not legally required

Already, 17% of companies say they're disclosing pay range information in parts of the U.S. where it's not required by law, according to a Willis Towers Watson survey of 388 business leaders conducted in June and July. And a majority, 62%, of organizations are planning or considering disclosing pay ranges in the future, even when it's not legally required.

Workers today expect a greater level of pay transparency: 66%, of job-seekers expect to see salary in the job description, according to a June Gartner survey of more than 3,600 people.

"Companies have had a lot of warning that this is the direction we're heading," Jamie Kohn, director in the Gartner HR practice, told CNBC Make It in August. "Most of the companies I talk to know that it's going this way and have been trying to figure out the best way to implement it."

Check out:

After Colorado enacted a salary transparency law, job listings dropped—but employment went up

Where employers are required by law to share salary ranges when hiring

6 ways to figure out how much you should be getting paid—before negotiating your salary or a raise

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