A Unified Theory of Why Women Earn Less

John List and Uri Gneezy have appeared on our blog many times. This guest post is part a series adapted from their new book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List appeared in our recent podcast How to Raise Money Without Killing a Kitten.”

craigslist gender graphWhen it comes to the year 1991, history books will undoubtedly focus on the first Gulf War and the dissolution of the Soviet Union, but at least domestically, the biggest change was one you probably never heard about: 1991 was the first year that women overtook men in college attainment, a trend that has only gained steam since. Today 37.2% of women between the ages of 25 to 29 have a four-year college degree or higher versus just 29.8% for men.

Yet for all the academic achievement by women, men still earn a higher wage for equivalent jobs and continue to dominate the highest ranks of society. Senior management positions? Only one in five are held by women. Fortune 500 CEOs? Just 4% and fewer than 17% of the seats in Congress are held by women. 

Scholars have long theorized about the reasons why women haven’t made faster progress in breaking through the glass ceiling. Personally, we think that much of it boils down to this: men and women have different preferences for competitiveness, and at least part of the wage gaps we see are a result of men and women responding differently to incentives.

Being experimentalists, we understood that without actual evidence, this was just a conjecture. Determined to test our idea in the field we launched a large-scale field experiment on Craigslist where we posted ads for an administrative assistant gig we needed to fill. The experiment was conducted with Jeff Flory and Andreas Leibbrandt as coauthors.  We received responses from nearly 7,000 interested job seekers from cities all over the U.S. 

After a job seeker touched base with us, we gave them more details on the way they’d be compensated. Then we asked them to provide some basic information if they wanted to be considered for the position. Half the job seekers were told that the job paid a flat $15 per hour. The other half were told they would be paid $12 an hour but they would compete with a co-worker for a $6 per hour bonus (so that both ads would pay workers an average of $15 per hour).

What’d we find? Women were 70% less likely than men to go after the job if it had the competitive pay scale. This result accords with the broader insights from laboratory experiments that others—Muriel Niederle, Lise Vesterlund, Aldo Rustichini, etc.—have found.  Of course, this estimate doesn’t apply to every type of job and every type of person in the country, but it does underscore the fact that, when it comes to competition at a potential job, women aren’t always interested in leaning in.  

If you want to explore our world further, take the Why Axis Challenge: visit www.thewhyaxischallenge.com, post a photo of your copy of The Why Axis, and be entered to win prizes, including a meeting with Uri, John and Freakonomics author Steven Levitt! Be sure to stay tuned for more posts to come, which will give a glimpse into more ‘undiscovered economics.’


Lorraine gaines

I wonder, if it had to do with being a single parent. They would need the stability and assurance of the $15. Did you account for any other demographic parameters? Were the women on average younger or olderthan the men who applied, etc.

Pussyfoot

That's a good point. Ordinarily it would be illegal to ask a candidates marital status, but I suppose they couldn't sue over a fake job offering. (Or could they?)

guest

"Women were 70% less likely than men to go after the job if it had the competitive pay scale"

Perhaps because they assumed (with very good reasons to do so) that an almost-certainly-male boss would automatically give the bonus to her male competitors. And if her co-competitor were female, whichever one went after the bonus without constant apologizing would inevitably be labelled every gendered slur imaginable.

The disincentives are staggering.

MRB

That's awfully hypothetical to the point of being unimportant to the conversation. Maybe the boss was male, and maybe the boss would prefer to give the bonus to the male - if and only if the woman is confident that she'd be the better employee?

There are "disincentives" to be sure, but this looks like one that [you] are building for yourself.

Guest

When a demographic wants to feel persecuted and use that as an excuse for the problems in their life, they will come up with far-flung hypotheticals that strike them as perfectly reasonable to explain away much more reasonable evidence that is contradictory of their persecuted world view.

Eric M. Jones

Okay, so you studied the differences between men and women in a job situation that has been structured by men so that men perform well. You might argue that the job experiment was sex neutral, but you didn't prove it first.

Let's look at the jobs where women ARE paid the same as men and see what makes them different.

I absolutely agree that people should be paid equally for equal work. But I also hold fast to the notion that men and women have fundamental differences that might reflect on this distribution in many cases (upper body strength, etc.).

Remember: Autism, psychopathy, sociopathy, genius, violence and insanity are on balance, male characteristics. Men crowd our prisons and mental hospitals. But the beneficial side effects of these testosterone-poisoned male brains do great things too. There is a good reason why farmers castrate all their male animals.

Jon Schickedanz

I don't think you're wrong, but anyone vying for an admin job is usually VERY concerned about hourly, steady pay. Just consider who holds these jobs: single moms, older single women, some single men (no kids). Security
is most important, not opportunity.
What would be more telling is a similar survey of management level jobs, particularly of women under 50. That will give you a more comprehensive result.

wes

A couple of decades ago a study of this topic revealed that women gynecologists only made 2/3rds as much as male gynecologists. Turned out women only saw 2/3rds as many patients.

Shane L

It's interesting as usual. There remains the question as to why men and women's behaviours would differ on average; back to nurture or nature again.

Nick

This is perhaps less a theory of "why women earn less" and more "a mechanism through which patriarchy ensures women earn less." That is, women are told to be less competitive, and so they are less likely to pursue competitive job atmospheres, even if that means sacrificing income.

a different guest

Because people always do what they are told.

Voice of Reason

It's completely apples and oranges trying to say "this group of people goes to college at a high level so that should translate into mass occupation of the highest level of industry." The main reason that men go to college less than women these days is that poorer men go to work immediately to support themselves or the family in physically demanding jobs, while the same women would go to school to meet a rich husband or try to get a job as a teacher, secretary, or government worker (not trying to be harsh when I say this).

When we're talking about high level executives, 95% of them or more came from wealthy families, or had enough intellectual prowess for an education to be a great investment, so for them, college was a foregone conclusion.

This post is in no way trying to attempt to suggest a solution to the problem, just pointing out why more females with four year degree will do nothing to help the ratios in high level executive positions.

Read more...

Brad

Did the paper factor in the different risk / return structures here? The expected value of the two payment structures is only the same ($15) if you are risk neutral.

Perhaps the paper just shows that women are more risk averse than men on average.

Wesley

I wonder how much of this is actually a cultural effect. Given that we live in a patriarchal society, would these results be the same for a matriarchal society? Or would they be reversed?

Kate W.

It's not just about the preferences of the employee. I had the opportunity to see the incoming pay rates of 20 of my peers, all hired right out of graduate school, all with MBAs. TO A PERSON, the men were paid more than the women. This was 20 people all from good schools, all with a couple years of experience between their undergrads and their MBAs, all moving to the same city in Ohio. I can only conjecture as to why - men need more money to "raise a family?" The men asked for more money? The men were seen as long term employees while the women might leave to "have babies?" Who knows? But you can't tell me that in my one little data set it was about the preferences of the employee. I would have loved to have been paid what my male counterparts were earning.

Julie

I've always found this a very hard area to tease apart the "real" reason because there are so many confounding factors to why women make less than men, overall. Just a few:

- Women tend to choose, on average, lower-paying jobs/careers than men.
- When women have children, they often leave the workforce for a significant period of time, putting them behind counterparts who do not leave the field. Men do not generally leave the workforce when they have children.
- For better or worse, childcare tasks tend to fall to women. So when there's a sick child, it's often the mother who will pick them up from school and stay home with them.
- Ditto for sick parents who need a caregiver.
- Because of both the above factors, men tend to work more hours a week than women.
- Women tend to be less willing to negotiate for higher salaries. Over the course of a career, even one without lost time for children, this can add up to significant monetary loss compared to men, who are generally more willing to negotiate.
- There are societal pressures that prevent women from entering higher-paid STEM fields or attaining the upper level of those fields.
- Women and men acting in a similar way are often perceived differently. (Pushy men are seen as "assertive," pushy women are seen as "bitches.") This is particularly important when managers are vying for higher-level positions.

Like I said, just a few of the many reasons why it's very hard to compare women's and men's salaries. I'm pretty sure no company has a policy that says, "If a man applies for this position, we'll offer him $60,000, but if a woman applies, we'll only offer her $45,000." However, they might be comparing a man who, on average, has more years of experience, works more hours a week, takes fewer days off to deal with sick children or parents, and has applied for a higher-prestige position than an equivalent woman. Moreover, the man might push for a higher salary while the woman might simply accept what's offered to her.

I'd love to see a study of, say, 35-year-old men and 35-year-old childless, unmarried women in the same jobs and see if the wage gap is as big as the national average (77 cents to the dollar). It's only at that point that we can start seeing what's systemic and what's inherent to the genders (like a lack of desire for competitiveness).

Read more...

steve cebalt

Hi Woman in Charge. If you responded "without even reading this," why should I read and give weight to your comment? That which can be asserted without evidence can be dismissed without evidence.

Nancy M.

I also want to suggest another possible conclusion from the data:

Perhaps women have found that when they DO compete, they're regarded even worse than men. There are some built-in biases against women acting competitive and aggressive which are qualities men get rewarded for.

So better to get the guaranteed rate than trying to compete, getting labeled with nasty implicit biases, and getting less.

Women are different from men and that difference doesn't mean they're less valuable. Until the workplace learns to value that a woman's approach is often different and just as valuable, we'll continue to see this inequality.

Dynise Basore-Ranfagni

I have two trains of thought. One agrees with Lorraine Gaines, in that the security of a consistent wage is important to many women both single parents or not. The other is that in a competitive environment the presupposition that a male would likely favor another male (not always, of course) wins out over knowing I may do a better job.

I have worked in restaurants (fine dining) for decades and can categorically state that sexism runs rampant in this industry so that may color my opinions on other industries as well. But, I believe many women know other women this has happened to and it does not look as if that was factored in.

If you had stated that you had separate groupings...statistics that showed across the board men communicating to men the pay structure, women to women and mix to mix then I would accept the conclusion. Since you did not I am going to go with the majority of women presupposed sexism and chose to avoid it.

Read more...