With the ever-growing spotlight on gender pay differences and many companies implementing plans to address perceived issues, a timely study in the US examined the approach of men and women to salary negotiations in an attempt to determine if it was a significant determinant of gender pay differences. The study results indicated that, when applying for a job, men were more likely to negotiate for higher pay under certain conditions, while women were more likely to accept a lower wage.
Key Topics: Pay equity; Gender; Pay negotiation; Gender pay gap
Title of Reviewed Article: Do Women Avoid Salary Negotiations? Evidence from a Large-Scale Natural Field Experiment
Researchers: Andreas Leibbrandt (Monash University) and John A. List (University of Chicago).
Publication: Management Science, 2015, Vol. 61 No. 9, pp. 2016–2024.
Setting the Scene
Both anecdotal and empirical evidence is consistent globally in the finding that men occupy more senior positions than women and are also often compensated higher (e.g., Bertrand, 2010; Blau et al., 2010). There has been much debate as to why this situation has arisen and persisted, with various explanations being put forward such as discrimination against women (Goldin & Rouse, 2000; Weichselbaumer & Winter-Ebmer, 2007); gender differences in human capital (Blau & Kahn, 2000); gender differences in preferences (Croson & Gneezy, 2009), and competitiveness differences (Flory et al., 2015).
One gender research area that has received recent interest is the difference of negotiation behaviour and preferences between the sexes. Research suggests that men are much more likely to initiate and engage in salary negotiations, and are also generally better than women at these negotiations (e.g. Greig, 2008; Hall & Krueger, 2012). A study by Small et al. (2007) found men to be nine times more likely to ask for higher compensation than women, while Babcock et al. (2006) similarly found men to be eight times more likely to engage in salary negotiation than women.
In this study, the researchers sought to examine how the presence or absence of explicit direction on the negotiability of salary in job ads affects the likelihood of men and women applying for jobs and affects their salary negotiation behaviour.
How the research was conducted
As part of this study real job ads were posted in nine major US cities on Internet job boards between 2011-2012. 2,422 job seekers expressed an interest in a job posting, approximately two thirds of which were women.
To assess gender differences in job-entry salary negotiation decisions the researchers posted different types of job posting based on negotiability of salary (one which made it explicitly clear that salary was negotiable and the other where the negotiability of the salary was left ambiguous) and type of employment (a fund raising administration assistant position vs a sports related administration assistant position).
As part of the application process job seekers were required to fill out a brief interview questionnaire which collected information in relation to whether they were willing to work for less than the advertised salary, for the advertised salary, or signalled that they wanted to negotiate a higher salary.
Key Research Findings
When job postings did not explicitly state that salary was negotiable women were more likely than men to be willing to work for a lower salary and also they were less likely to initiate negotiations for a higher salary. Men, in such situations, were found to be more likely to negotiate a higher salary.
When job postings did explicitly state that salary was negotiable no gender differences were found in negotiating behaviour for those who applied, although women were found to be less likely to apply for such jobs than men.
The results showed that the nature of the job significantly impacted the balance of men and women interested in them. For the job ads with a gender neutral orientation, 79% of applicants were women, while for the masculine orientated (sports related) job 55% of applicants were women.
The results suggest that women are less likely to apply for jobs where the negotiability of salary is ambiguous and when women apply for such roles they are likely to have less positive negotiation outcome in comparison to men. The results suggest that women are more likely to try to negotiate a higher salary when they perceive that they are ‘allowed’ to. These results are broadly consistent with prior research which indicated that men perform better than women in situations where negotiations are ambiguous (e.g. Small et al., 2007).
The results further indicate that women react more strongly to compensation descriptions than men. Through minor changes to job ads to note that salary was negotiable there was a considerable change in the behaviour of women, with women more likely to apply for jobs and more likely to be willing to try to negotiate positive salary outcomes for themselves.
Organizational and Reward Implications
Given that the results of this study indicate that decisions of women to apply for jobs and negotiate salary is significantly affected by the nature of the negotiability of salary, there are important implications for companies. The results highlight the potential importance of the recruitment environment in exacerbating the gender pay gap.
Those companies supporting gender pay equality and related diversity and inclusion initiatives should note the importance of being explicit about salary negotiability in advertising jobs to attract female talent as this study indicates that relatively simple changes to the salary description can significantly affect gender pay gap outcomes. It is worth noting however that while such description changes are simple from a process perspective, companies may need to reconcile such changes with their reward philosophy and their position on reward transparency. Companies should also consider the implications of ‘assisting’ potential employees in negotiating a higher salary.
This study helps to develop our understanding of the gender differences in salary negotiation preferences and the potential impact on gender pay issues. This study provides much food for thought and further research in this area is encouraged in order to develop the ideas and outcomes of this study further.
Source Article: Leibbrandt, A., & List, J. A. (2015). Do Women Avoid Salary Negotiations? Evidence from a Large-Scale Natural Field Experiment. Management Science, 61(9), 2016-2024.
Published by: Institute for Operations Research and the Management Sciences
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