Women Pay Gap: Salary Negotiations Causing Gender Disparity?

Researchers who looked at career fields found that the women pay gap might be caused by women themselves. Social scientists have theorized that some of the primary causes may be gender differences in human capital, workplace discrimination against women, and gender differences in competitiveness. But now researchers have laboratory and survey evidence suggesting the gender pay gap might partially be explained by women being far less willing to engage in salary negotiations.

In the career field, women earn approximately three-quarter’s the amount of men’s earnings and only 2.5 percent of the five highest-paid positions in US firms are occupied by women. According to USA Today, full-time working women on average earn 82 percent of what their male peers earn, according to a study released by the American Association of University Women. They believe much of this gender salary gap is caused by women being much more likely to enter lower-paying career fields. But, when they compared men and women making the same career choices, they still find that a seven percent pay gap persists.

Andreas Leibbrandt and John A. List have released a paper to the National Bureau of Economic Research entitled Do Women Avoid Salary Negotiations? Evidence From A Large Scale Natural Field Experiment that attempts to explain why the gender pay gap persists. They conducted a “natural field experiment” where they observed the choices of both men and women without their knowledge of being observed.

They claim that evidence suggests that women approach salary negotiations differently from men. Labor survey data suggests that women are eight times less likely to engage in salary negotiations and in lab experiments were nine times less likely to ask for higher compensation compared to men. They believe that this willingness to initiate salary negotiations, or lack thereof, potentially explains a significant fraction of the observed gender differences in wages.

What is more interesting is why they think this occurs:

“We find that when there is no explicit statement that wages are negotiable, men are more likely to negotiate than women. However, when we explicitly mention the possibility that wages are negotiable, this difference disappears, and even tends to reverse. In terms of sorting, we find that men in contrast to women prefer job environments where the ‘rules of wage determination’ are ambiguous. This leads to the gender gap being much more pronounced in jobs that leave negotiation of wage ambiguous.

So even a one-word difference like adding the word “negotiable” to a job description can drastically affect how women approach negotiating their salary. They also find that men’s propensity to negotiate is less pronounced when negotiating is done impersonally, for example, over the internet versus face-to-face. They even found that women not only negotiate less for a higher wage, they even offer to work for a lower wage than advertised, something men rarely do.

Geographic location plays a large role, although that can probably be explained by differences in the localized society. Men were more likely to negotiate in Denver, Los Angeles, Portland, and Washington, D.C., whereas women were more likely to negotiate in Atlanta, Dallas, Houston, San Diego, and San Francisco.

Do you think the women pay gap might largely be explained by salary negotiations or that another factor plays a bigger role?