Economics

Negotiation and the gender pay gap

Image Credit: Victor1558 (Flickr) (CC BY 2.0)

Image Credit: Victor1558 (Flickr) (CC BY 2.0)

We’ve all heard the statistic that women get paid only 77 cents for every dollar that men earn. Those who cite this figure typically use it as evidence that employers discriminate against women – why else would women get paid less than men?

Economists get frustrated with this line of argument because it merely compares average pay for full-time, full-year male and female workers (see page 12 of this Census report). But men and women make different choices on many dimensions – including their education, occupation, and time out of the labor force. Christina Hoff Sommers nicely summarizes this issue in a recent Huffington Post piece. It turns out that if you control for education, experience, occupation, and other relevant factors, the gender gap in pay shrinks to only a few cents per dollar. And it’s still not clear how much of the remaining gap can be attributed to employer discrimination. There are many other potential explanations, one being that women may be less willing than men to negotiate with employers for higher pay.

A recent study by Andreas Leibbrandt of Monash University and John A. List of the University of Chicago sheds some light on the issue of gender differences in negotiating (hat tip: Marginal Revolution). These economists performed an experiment: They posted actual job ads, for administrative assistant positions, in nine different cities. After applicants expressed initial interest, they were provided with additional information about the job and given an opportunity to apply. At this point, some (randomly chosen) applicants were explicitly told that the wage was negotiable, while others were not. For the latter group, the possibility of pay negotiation was left ambiguous.

The researchers found that ambiguity about pay negotiation was more likely to deter women from applying than men. That is, when the researchers told applicants that pay was negotiable, the gender difference in job application rates fell. Also, when the researchers left the possibility of negotiation ambiguous, women were less likely to negotiate than men. But when they explicitly told applicants that pay was negotiable, women were at least as likely to negotiate as men.

These findings suggest that, while it’s not a simple issue of men being more willing to negotiate, there are clear gender differences in preferences for negotiation under certain circumstances. In particular, men appear to be more willing to apply for jobs and negotiate pay when the rules of the game are ambiguous. But more research is needed to determine how these gender differences translate into labor market outcomes for men and women.

If we want to formulate sensible policies on issues relating to work and gender, we need to have a rational conversation about them. Research like this contributes to that conversation. These results are very useful for policy makers who truly want to understand gender differences in work and pay.

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