When hiring, is it better or worse to know candidate's salary history?

As turns out, everybody wins when salary history is not a part of the hiring equation. Candidates, especially those who are traditionally underpaid, see an increase in their wages. Employers make better hiring decisions.

Many folks jump to the conclusion that not knowing candidate salary history is bad for employers because they end up paying higher salaries to the candidates they hire. After all, they reason, isn't it the goal to pay workers as little as possible?

Well, no. The goal is to get the best person in the job. And the job pays what it pays. The person who is doing the job should get paid what the job pays.

Researchers found that, without the distraction of salary history, employers end up making better hiring decisions because:

1. They ask more questions of candidates about their ability to do the job rather than making decisions based on superficial information (like previous salary history)

2. They interview more candidates rather than screening out those out who are above or below the target salary

This practice is good for candidates, too, especially those who have been traditionally underpaid. According to a study circulated Monday by the National Bureau of Economic Research, "Workers who did not show potential employers their pay history had double-digit jumps in their wages and were able to bargain better wages than workers who revealed their past pay."

Check out a summary of the study in this article, This is what happens when employers can’t ask job applicants about salary history. It describes how researchers at the University of Minnesota and MIT Sloan School of Management devised an experiment where almost 3,000 employers posting job openings on an unidentified online job site could not see the wages previous employers paid an applicant during a two-week period.