The gender wage gap declined substantially from 1980 to 2010. What factors contributed to this decline, and how do we account for the gap that remains? This week’s WAPPP seminar featured Francine Blau, Frances Perkins Professor of Industrial and Labor Relations and Professor of Economics at Cornell University. Professor Blau presented new empirical evidence on the extent, trends, and sources of the gender wage gap and used this new evidence as a springboard to review the existing literature on the gender wage gap.
In 1980, women on average earned 62.1% of what men earned, a wage gap of roughly 38%. By 1989, the ratio of women’s to men’s earning had increased to 74%, to 77.2% in 1998, and to 79.3% in 2010. This stark change is impressive, but it’s also important to not how much of the increase occurred in the 1980s. Since then, progress in decreasing the gender wage gap has been slower and less consistent.
Professor Blau incorporated two major specifications into her regression analyses. The first, a human capital specification, controls for education and experience. The other controls for variables like occupation, industry, and unionism. The first category includes differences most often affected by choices individuals make about their own lives, whereas the second category can be heavily influenced by the employer.
Using these two specifications, we can examine the gender wage gap to see how much these factors explain the variation in earnings between men and women. For example, in 1980 the unadjusted ratio of women’s earning to men’s was 62.1%, but controlling for the human capital specification, the ratio was 71.1%. This tells us that experience and education accounted for a great deal of the gap. Adding in the second specification, the ratio climbs to 79.4%. While this analysis demonstrates that all of these control variables play an important role in the gender wage gap, there is still a large portion that remains unexplained. In the data from 1980, women with the same characteristics as men nevertheless earned 20% less.
In 2010, the unadjusted gender wage ratio of 79.4% rises to 82.1% controlling for human capital variables and to 91.6% with the full specification. Experience still accounts for a large portion of the gender wage gap in the 2010 data, but interestingly education now detracts from the explanation. Women are now better educated than men, on average, but education appears to be doing less “work” for them in terms of reducing the gender wage gap. Women’s more frequent workforce interruptions and subsequent fewer years of work experience are now contributing more to the continuation of the wage gap.
Interestingly, it appears that the gender wage gap is closing more slowly at the top of the wage distribution. Professor Blau compared women to men in the 10th percentile, 50th percentile, and the 90th percentile of the wage distribution. In 1980, the ratio of women’s wages to men’s was roughly the same across each of these percentile groups – approximately 60%. In 2010, the wage ratio of women to men in the 10th percentile was 82%, 81% in the 50th percentile, and yet only 73.8% for the 90th percentile. Can this discrepancy be explained by differences in characteristics between women and men in the 90th percentile? Examining the descriptive statistics, there aren’t any significant differences that would account for a gap of this size. Understanding why women at the top are faring particularly poorly, and why this development is occurring now, is an important area for future research.
What accounts for the overall decrease in the gender wage gap? One particularly important answer is that women worked hard for what they got! Women improved their skills, both in terms of their educational attainment – women now receive 57% of Bachelor’s degrees – and their labor force attachment and years of experience. The gender gap in full-time experience fell from 6.8 years to 1.4 years between 1980 and 2010. The change in this gap mostly reflects female gains, but has also been impacted by worse outcomes for men, particularly an increase in unemployment during the recession. Women also moved out of traditionally female clerical and service jobs into higher-paying and traditionally male managerial and professional occupations.
Traditional explanations for the gender wage gap tend to focus on discrimination and differences in human capital. While human capital factors account for less than they did in the past, they remain very important. According to Professor Blau, the economics literature is now incorporating newer explanations for the gender wage gap, such as non-cognitive skills and psychological attributes. For example, women tend to be less comfortable negotiating and tend to shy away from competitively-based compensation schemes, which can negatively affect their wages. In addition, gender norms may play a significant role in the remaining gender wage gap. One paper investigated the norm that a wife should not earn more than her husband and found that if a wife is predicted to earn more than her husband, she is less likely to participate in the labor market or, if she does, her income is lower than would be predicted based on her other attributes. These newer insights about gender differences in non-cognitive skills and the relevance of social norms pertaining to gender may help to illuminate still-unexplained aspects of the gender wage gap, but are not a silver bullet.
Showing posts with label pay gap. Show all posts
Showing posts with label pay gap. Show all posts
Tuesday, March 28, 2017
Friday, March 13, 2015
Negotiating Across Gender: A Workshop
If you’ve ever found yourself in need of a better salary, a title that reflects your skill set, or a bigger staff to get the job done, then this week’s WAPPP seminar applies to you. Harvard Kennedy School Senior Lecturer in Public Policy and WAPPP Research Director Hannah Riley Bowles used the workshop to guide attendees through a research-based negotiations toolkit she recently created. Bowles argued that these main takeaways can help anyone - not just women - succeed in their professional negotiations.
1. Apply negotiations skills broadly. Bowles encouraged attendees to think about negotiation skills broadly, since academics and the media tend to focus too closely on salary negotiations. Through negotiation, employees can enhance their recognition and rewards (i.e. securing a new title or getting their name on research), seize opportunities to expand their authority (i.e. budget or who reports to them), overcome barriers, since more powerful employees are more prone to action, and make their work more personally meaningful.
The research: A recent Simmons CGO Survey of 364 female executives revealed that 80% of participants reported recent career negotiations. The most commonly cited opportunity that involved negotiations was seeking a new position or leadership opportunity, demonstrating that negotiating is about more than just salary.
2. Avoid ambiguity. Bowles encouraged attendees to consider the importance of ambiguity in negotiations. Research shows that ambiguity can lead to a heightened potential for gender-specific attributions, especially if the employees are operating in a gendered environment. There are two types of ambiguity at play here: norm ambiguity, or the degree of clarity about norms for appropriate negotiating behavior, and structural ambiguity, or the degree of clarity about zone of possible agreement and appropriate standards for agreement. When you provide employees with these standards, however, the gender gap disappears.
The research: A study that Bowles conducted on MBA graduate job market outcomes highlighted the power of ambiguity. Controlling for 30 variables that might otherwise explain the difference in income, Bowles found an overall gender gap of $5,000 (on an average salary of $100,000). In low ambiguity situations, such as investment banking and consulting, which comprised 70% of the sample, there was no gender gap difference. However, in high ambiguity situations, Bowles observed a 10% salary gap, leading to an average gender gap of $11,000 a year.
3. Be conscious of where you get your information. Bowles cautioned to make sure that our information search itself isn’t gendered, as we are likely to compare ourselves to those who are similar to us, therefore creating a self-perpetuating cycle. Since informal networks enhance access to information and advocacy channels, it’s important to reach outside of convenience networks to get information.
4. Watch out for stereotypes – both others’ and your own. There are several kinds of stereotypes in negotiation. Explicit and implicit biases might be more familiar to us; the former is easier to recognize and therefore avoid or correct, while the latter is harder to detect. There is also descriptive stereotyping (assumptions about what an individual will do) and prescriptive stereotyping (assumptions about what an individual should do). Bowles explained that self-advocacy violates society’s prescriptive stereotypes of feminine behavior, which in turn limits willingness to work with or hire the woman who violated that norm.
The research: Using a study of a fake resumes with a gender-neutral name, Bowles found that women who advocate for themselves are perceived much more negatively than women who advocate for others.
5. Enhance negotiations through relationships, and enhance relationships through negotiations. Bowles argued that explaining why what you’re asking for is legitimate in your employer's eyes will enhance your chances of getting what you’re asking for. In addition, signaling concern for your organizational relationships can mitigate the social cost of such negotiations. While some question whether teaching organizations to reward women who act relationally and don’t reward the women who don’t is helpful for women's professional prospects, Bowles asserted that the skills she encourages women to use are good practice for any employee facing a negotiation situation.
1. Apply negotiations skills broadly. Bowles encouraged attendees to think about negotiation skills broadly, since academics and the media tend to focus too closely on salary negotiations. Through negotiation, employees can enhance their recognition and rewards (i.e. securing a new title or getting their name on research), seize opportunities to expand their authority (i.e. budget or who reports to them), overcome barriers, since more powerful employees are more prone to action, and make their work more personally meaningful.
The research: A recent Simmons CGO Survey of 364 female executives revealed that 80% of participants reported recent career negotiations. The most commonly cited opportunity that involved negotiations was seeking a new position or leadership opportunity, demonstrating that negotiating is about more than just salary.
2. Avoid ambiguity. Bowles encouraged attendees to consider the importance of ambiguity in negotiations. Research shows that ambiguity can lead to a heightened potential for gender-specific attributions, especially if the employees are operating in a gendered environment. There are two types of ambiguity at play here: norm ambiguity, or the degree of clarity about norms for appropriate negotiating behavior, and structural ambiguity, or the degree of clarity about zone of possible agreement and appropriate standards for agreement. When you provide employees with these standards, however, the gender gap disappears.
The research: A study that Bowles conducted on MBA graduate job market outcomes highlighted the power of ambiguity. Controlling for 30 variables that might otherwise explain the difference in income, Bowles found an overall gender gap of $5,000 (on an average salary of $100,000). In low ambiguity situations, such as investment banking and consulting, which comprised 70% of the sample, there was no gender gap difference. However, in high ambiguity situations, Bowles observed a 10% salary gap, leading to an average gender gap of $11,000 a year.3. Be conscious of where you get your information. Bowles cautioned to make sure that our information search itself isn’t gendered, as we are likely to compare ourselves to those who are similar to us, therefore creating a self-perpetuating cycle. Since informal networks enhance access to information and advocacy channels, it’s important to reach outside of convenience networks to get information.
4. Watch out for stereotypes – both others’ and your own. There are several kinds of stereotypes in negotiation. Explicit and implicit biases might be more familiar to us; the former is easier to recognize and therefore avoid or correct, while the latter is harder to detect. There is also descriptive stereotyping (assumptions about what an individual will do) and prescriptive stereotyping (assumptions about what an individual should do). Bowles explained that self-advocacy violates society’s prescriptive stereotypes of feminine behavior, which in turn limits willingness to work with or hire the woman who violated that norm.
The research: Using a study of a fake resumes with a gender-neutral name, Bowles found that women who advocate for themselves are perceived much more negatively than women who advocate for others.
5. Enhance negotiations through relationships, and enhance relationships through negotiations. Bowles argued that explaining why what you’re asking for is legitimate in your employer's eyes will enhance your chances of getting what you’re asking for. In addition, signaling concern for your organizational relationships can mitigate the social cost of such negotiations. While some question whether teaching organizations to reward women who act relationally and don’t reward the women who don’t is helpful for women's professional prospects, Bowles asserted that the skills she encourages women to use are good practice for any employee facing a negotiation situation.
Friday, October 24, 2014
The Three E's to Reach Equality: Education, Employment and Entrepreneurship
At this week’s WAPPP seminar, Monika Queisser, the Head of the Social Policy Division at the OECD's Directorate of Employment, Labour and Social Affairs, made the economic case for gender equality. Her presentation "Progress and Policies to Achieve Gender Equality in Education, Employment and Entrepreneurship," was based off of the OECD 2012 report of a similar name. The report focuses on what Queisser calls “the three E’s” – Education, Employment and Entrepreneurship.
Education is a top focus of the report because it’s the pathway to employment across the world. The OECD reports that more girls are attending school than ever before. Every one-year increase in a population’s average education level accounts for a 9% increase in GDP per capita. But not all education is created equal. Women are severely underrepresented in STEM, where graduates have the most potential for future earnings and career development. Currently, 70% of engineering graduates are men. This contributes to the persistent global pay gap. Women earn an average of 16% less than men, and this gap rises to 21% among top wage earners.
Queisser argued that gender equality strengthens the labor force and boosts the economy for everyone in turn. The aging population and falling fertility rate in most OECD countries currently leads to a shrinking labor force. To remedy this, there is a need for more migration and/or for women to participate at higher rates. We must break down the economic barriers that are holding women back from full participation, Queisser argued. More women need to work, and those that want to should be able to work full-time.
The report found that when a couple has their first child, women tend to start reducing their paid work hours, while men start increasing them. Women make up for this loss in paid hours by increasing their unpaid work. Though policies could and should help change this, a cultural shift is also necessary. Even in countries with progressive maternity leave policies and strong social welfare, such as the Netherlands, there is still a cultural norm for women to work part-time.
In the report, the OECD laid out recommendations to achieve gender equality in these three areas. Gender equality in education attainment and choices should be promoted, though Queisser admitted that it's hard to alter the choices that children make because of deep-seated biases in our culture. Increasing the number of women in decision-making positions, instituting paid maternity leave, actively reduce the wage gap and implementing family friendly policies for women who are self-employed are all crucial for achieving gender equality in these areas. In addition, countries are encouraged to produce gender-specific data and monitor progress on this issue.
In closing, Queisser said her central question is always how the countries that are doing well got to where they are today. She used a popular example for how policy can dramatically change culture. Iceland, which created a positive tax credit for second earners who are women in the 1960s, consistently tops the World Economic Forum's Global Gender Gap Index. Queisser, a self-described optimist, argued that a combination of improved policy and shifts in our cultural norms could bring us closer to gender equality in this century.
Photo Source: OECD
Education is a top focus of the report because it’s the pathway to employment across the world. The OECD reports that more girls are attending school than ever before. Every one-year increase in a population’s average education level accounts for a 9% increase in GDP per capita. But not all education is created equal. Women are severely underrepresented in STEM, where graduates have the most potential for future earnings and career development. Currently, 70% of engineering graduates are men. This contributes to the persistent global pay gap. Women earn an average of 16% less than men, and this gap rises to 21% among top wage earners.
Queisser argued that gender equality strengthens the labor force and boosts the economy for everyone in turn. The aging population and falling fertility rate in most OECD countries currently leads to a shrinking labor force. To remedy this, there is a need for more migration and/or for women to participate at higher rates. We must break down the economic barriers that are holding women back from full participation, Queisser argued. More women need to work, and those that want to should be able to work full-time.The report found that when a couple has their first child, women tend to start reducing their paid work hours, while men start increasing them. Women make up for this loss in paid hours by increasing their unpaid work. Though policies could and should help change this, a cultural shift is also necessary. Even in countries with progressive maternity leave policies and strong social welfare, such as the Netherlands, there is still a cultural norm for women to work part-time.
In closing, Queisser said her central question is always how the countries that are doing well got to where they are today. She used a popular example for how policy can dramatically change culture. Iceland, which created a positive tax credit for second earners who are women in the 1960s, consistently tops the World Economic Forum's Global Gender Gap Index. Queisser, a self-described optimist, argued that a combination of improved policy and shifts in our cultural norms could bring us closer to gender equality in this century.
Photo Source: OECD
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