A Hard Bargain: Race and Salary Negotiations

If you want to increase your salary, negotiating is non-negotiable. Right? 

But if you are black, negotiating could actually get you a significantly lower starting salary than your white counterparts. 

That’s because hiring managers who are racially biased may see black job seekers as less deserving of higher monetary awards than white job seekers and take issue when black candidates ask for more money. 

Mind the Gap

Research from Darden Professor Morela Hernandez and colleagues found that racial bias likely contributes to what is described as the “ethnic pay gap.” College-educated black men earn 20 percent less than college-educated white men, and the gap is 8 percent for college-educated women. The gap exists even though diversity can boost financial returns (for companies, that is) — let alone a moral imperative. 

The impact of ethnicity on salary has become a topic of global interest and debate. In the U.K., for example, the government is under pressure to require that large firms report their ethnic pay gaps, after research showed that black, Asian, and other ethnic minority employees have substantially lower salaries when compared to white peers doing the same jobs — to the tune of 3.2 billion pounds a year. 

So far, there has been little in the way of academic research on racial bias in salary negotiations. This mirrors the secrecy that shrouds such negotiations, which is part of the problem. Pay transparency is one of the many things companies can do to counter racial bias in the hiring process to, ultimately, build more diverse organizations. 

Bargaining While Black

In the research “Bargaining While Black: The Role of Race in Salary Negotiations,” participants — playing the part of hiring managers — looked at resumes and headshots of candidates. They were then asked to estimate the likelihood that the candidates would negotiate their salaries. The research found that participants who were racially biased expected black job seekers to be less likely to negotiate as compared to their white counterparts. Hernandez and her colleagues suggest that this result may be due to hiring managers expecting black job seekers to be less qualified or motivated, based on negative racial stereotypes shown in previous research.

The research also details how in a subsequent study, participants were randomly assigned as hiring managers or job candidates and negotiated for an $82,000–$90,000 salary. Race had no impact on how hard the job candidates negotiated, but, when high on racial bias, the hiring managers consistently overestimated the number of offers and counteroffers that black job seekers had made. 

As a result, job evaluators were less willing to make concessions and, therefore, assigned black candidates significantly lower starting salaries than white candidates. Every time a black candidate was perceived to have made an offer or counteroffer, it corresponded with a smaller salary by $300 or more. 

What Can We Do About It?

Hernandez suggests several methods to mitigate the impact of these racial biases. 

• Awareness: Companies should train hiring managers to raise awareness of the potential barriers to fair salary negotiations practices.
• Consistent application of explicit, objective criteria: Establishing metrics a priori by which to judge salary negotiations and using those metrics consistently can help curb racial bias.
• Cross-candidate comparisons: Hiring managers should compare the negotiated salary outcomes of candidates across similar job roles and titles to ensure equitable salaries before finalizing new employee pay. Doing so can facilitate efforts to increase pay transparency. 

In addition to the issues of morality and equality, there are bottom-line benefits for companies that address racial bias in salary negotiations. A multitude of research has taught us that companies that are highly diverse by ethnicity or gender are more likely to produce financial returns that exceed their industries’ national averages. 

There are many motivations for companies to address racial inequality. It is up to executives to act, with the hiring process a crucial but often overlooked place to start. 

Morela Hernandez co-authored “Bargaining While Black: The Role of Race in Salary Negotiations,” which appeared in the Journal of Applied Psychology, with Derek R. Avery of Wake Forest University School of Business, Sabrina D. Volpone of the University of Colorado Leeds School of Business and Cheryl R. Kaiser of the University of Washington.