President Biden‘s push to end racial and gender disparities in the job market by requiring employers to divulge workers’ salaries could backfire and result in all workers earning less than they did before everyone knew how their pay stacked up, several recent studies have found.

Mr. Biden has proposed forcing federal contractors and subcontractors to reveal what a job pays when posting an open position. The rule, which could go into effect in April, would also bar federal contractors from asking job applicants for their salary history.

It would apply to all personnel and positions performing work on or “in connection with” a federal contract.

If enacted, the rule would likely apply to 89,822 federal contractors who handle about $694 billion in federal contracts, according to data from the Government Accountability Office. Some of the biggest contractors who would be affected by the rule are Pfizer, Bloomberg, Raytheon, and Lockheed Martin.

Mr. Biden has also pushed private companies to make their salaries transparent, making it a staple of several speeches when he came into office.

Administration officials say the rule is necessary to shrink the pay gap between women/minorities and White men. They say that when salaries are determined in secret, it is easier for bias and discrimination to factor into pay decisions.

By making pay ranges open and more accessible, women and minorities can tell if they are being underpaid, Mr. Biden has argued.

“These new actions adopt common-sense policies that will help pay millions of workers fairly, close gender and racial wage gaps and yield tangible benefits for the federal government and federal contractors,” Mr. Biden said in a statement announcing the proposal.

On average, a Black man earns 87 cents for every dollar earned by a White man, with Hispanic men earning 91 cents for every dollar earned by their White counterparts, according to data from PayScale, a compensation data firm. PayScale also found that women earned 82 cents for every dollar a male earned.

So far 22 states and several municipalities, including New York City, have some form of a pay transparency law, and several more are on the horizon. In June, employers in Washington, D.C. will be required to post projected salaries on all job listings.

Researchers say those laws actually decrease wages because they reduce an employee’s bargaining power. An August 2022 study by the National Bureau of Economic Research revealed that pay transparency laws have caused wages to decline by roughly 2%.

The decrease comes as wages, overall, have grown by roughly 20% since the pandemic, according to Labor Department data.

The laws not only give detailed salary information to workers but to other employers in the same industry. Companies then use that information to match the wages set by the lowest-paying employer in that sector, thus depressing wages across the board.

And because the information is available without any coordination among the employers, it essentially gives them the power of collusion without actually colluding.

“If all workers get the same and cannot negotiate this wage upward, then the firm gets the power to set the wage. To maximize its profit, the firm acts like a monopolist and sets a relatively low wage. Thus transparency increases the bargaining power of the employer, becoming the enforcement mechanism for a low wage,” researchers wrote in the NBER study.

Additional research supports NBER’s conclusions. A University of Chicago study recorded a 7% drop in pay for city managers in California following a 2010 law making their salaries public. Researchers at the University of Utah studied the salary history of 100,000 U.S. academics between 1997 and 2017. The study found that those at universities with pay transparency were all roughly paid the same wage.

It is also somewhat confusing because the push for salary transparency comes at the same time the Biden administration has stepped up its efforts against employers sharing wage and benefit information with each other.

In 2022, the Biden Justice Department took action against agriculture giant Cargill and two poultry processing companies, accusing them of sharing wage data in a scheme to keep payroll costs down. The case was settled with Cargill and the two processors paying an $85 million settlement.

Both the Biden Justice Department and Federal Trade Commission have launched a series of aggressive enforcement actions to prosecute wage-fixing agreements. The Justice Department has five pending criminal cases against companies for participating in wage-fixing agreements.

Studies have also shown that workers are less likely to push for higher wages when there is pay transparency.

The reasons for the timidity are twofold, the studies found. One is that workers are afraid that their own higher salaries would be visible to co-workers, sparking jealousy and resentment.

Studies also found that pay secrecy makes workers more skeptical of employer claims that they can’t afford to increase salary and bargain more aggressively. But pay transparency results in workers seemingly understanding that if they ask for more money, their colleagues will too, thus putting a strain on an employer who can’t afford to raise so many salaries.

“Employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others under transparency. In situations where workers do not have individual bargaining power … greater transparency has a muted impact on average wages,” researchers wrote in the NBER study.