Whatever your thoughts on California’s new pay transparency law, it’s undeniably going to affect employers all over the nation. For any employer not immediately affected, view this moment as a crystal ball looking into your future. As I’ve mentioned, there are other states that have enacted transparency laws prior to California, and now there are sure to be more that follow.

We’ve already talked about the details of the law and the ways you can get ready. Now I want to take a moment to get into the pros and cons of the law. While the inevitable is coming, we can still reflect on how this is going to play out, what our role can be in the process, and how we can prepare for the future or maybe even shape the outcome.

Pro: Pay Transparency Uncovers Pay Inequities and Gaps

This is, after all, the intent at the root of the law. Once you document all your job titles and pay ranges, as well as each employee and their base pay, you may start to see some problems. You may notice people falling outside of the pay range associated with their title. You may notice pay discrepancies within and across categories like gender, race, and ethnicity. This is why pay transparency is required. So we can identify these problems and resolve them.

Pro: Potentially Improves Retention as Employees have a Clear Career Path to Follow

Pay is a huge motivator for people, and if your employees have a clear understanding of what their potential is within their current role or even moving up to the next rung of the ladder in your organization, they are potentially more likely to choose to stay. Change is difficult, and it’s plausible that employees may even choose a lesser compensation at a place where they are comfortable and on a path of certainty rather than risk moving somewhere else.

Pro: Can Increase Trust and Productivity

Think about a vault that holds knowledge. The organization is the keeper of that vault and all of that knowledge. And it only doles out small pieces of knowledge to its employees. How easy do you think it is for an employee to trust the organization? Knowledge counters a lot of things like fear and insecurity. When people know exactly how the compensation structure works and what their pay range expectations are, it can set the groundwork for organizational trust. With that first step of visibility, confidence can be built, and stresses can be reduced so the organization can ultimately have a more productive environment.

Con: Takes Away Negotiating Power

Both employer and prospective employee lose negotiating power through this legislation. This can hurt your organization’s ability to be competitive. It can also hurt the ambition of current employees—why go above and beyond if there’s a clearer cap on what you can achieve? It can also make attracting employees a challenge if you’re unable to present a pay range that is as competitive as other organizations in your industry.

Con: Can Devalue Talent Differentiation

When the range of achievement (because that’s what pay ultimately symbolizes) is fixed, it will be difficult to motivate your top talent to continue being top talent, especially if their exceptional work is maxing out at the same pay as someone else’s “meets expectations” work.

Con: Long-term Homogenization of Pay Levels Across Jobs

While this isn’t an inevitable effect of pay transparency, there is a strong possibility that we’ll see a gradual uniformity of pay ranges across jobs. That may not be a huge problem within a state, but when considering the country as a whole with the large variations in costs based on geography alone, this could pose some unique challenges.

We have to take into account that there are a lot of unforeseen possibilities inherent in the fallout from this law and others like it. Sometimes the best intentions of the people in power result in surprise outcomes that no one saw coming. There will be benefits, but there will also be consequences and course corrections.

Regardless, we can prepare and adapt and do our parts to shape the future of our organizations within the boundaries of these new requirements.

In case you missed it, check out Part 1 of my Pay Transparency series, outlining the details of what’s inside California’s new law and how it affects you. And Part 2 gets into how to prepare for the new requirements.