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.’


James

Seems to me that the experiment is measuring something different than what the experimenters intended: not a difference between men and women, but a difference between competitive and non-competitive PEOPLE. I'm male, but I wouldn't take a job offer like that, because the possibility* of extra money just wouldn't be worth the angst it would create.

*Even if, as others point out, I was naive enough to believe that it would be awarded fairly.

phillip

What about just supply and demand? If there is a particular job that women avoid, then men get a virtual monopoly over those jobs and that drives up wages. Case in point: the trades, oil riggers. But jobs that don't involve much heavy lifting women have flocked to and that's created a lot of competition between women and more cerebral men, driving down wages. Case in point: lawyers, admin, HR, teaching, business. Wages for technical fields remain high, but dropped for legal jobs. Why? Women don't flock to technical fields so there's less competition. In this case, administrative assistants, which is a synonym for secretary, employers like to hire women, so any man who applies is clearly more desperate for the job and willing to take anything. You should have considered that.

James

Your example could, I think, be explained as well simply by the operation of market forces. There is arguably an oversupply of lawyers & legal support workers, so wages fall. There is likewise an undersupply of qualified workers in most technical fields, so wages stay high.

kevin

That's pretty much what he said.

Julien Couvreur

But doesn't the ball and bucket experiment (previously recent freakonomics post by same authors [1]) suggest that culture can affect the relative level of competitivity of men and women?

Then, assuming that cultural expectations are an important factor, the question is how does culture evolve?
Is culture self-reinforcing (Schelling Points or grooves that are hard to move out of), is it driven by rational factors in the long-term (physical strength differences between genders are less relevant when machines can assist the heavy lifting), or can it be influenced by a few?

[1] http://freakonomics.com/2013/10/09/what-can-a-ball-and-a-bucket-teach-us-about-why-women-earn-less-than-men/

Spinks

I would ask myself, "What kind of a work environment would you get if you were openly competing with colleagues on an hour by hour basis for bonuses?" It doesn't sound as though it would be co-operative or supportive.

derper

Women don't want the 12+6 because they don't want to work hard which would be required to compete for the bonus.

Christopher Endswell

Dynise Basore

How many of the men who responded to the initial Craigslist advertisment were black? And what percentage of these subsequently presupposed racism and were thus put off? Factoring in for these and any other minority groups who may have had reason to expect unfair treatment would show a more realistic picture of gender differences in risk-averseness, if any exists.

That said factoring in for this and the other valid objections to the study in a real-world environment would be no easy task and poses an interesting challenge for the authors and all others exploring the subject.

Daniel

These female traits (this is not the only study on this) are not exclusive to women. I am a male with the same problems but I don't complain about how the world is discriminatory to my personality, its the way the world works, and I am working on overcoming my passive traits. This pay difference isn't fuelled by sexism (although I am sure it exists) and it marginalizes people like me when they act like it is a man verse woman debate.