How Women?s Dislike of Competition Affects Gender Pay Gap

Gender gapWomen?s aversion to competition explains about a 10th of the gender pay gap among high-ability professionals, a recent study of young MBAs found, not only because women opt for less-aggressive fields but because men may do better when negotiating bonuses.

While prior studies have shown that women have less of a taste for competition than men, this report ? a working paper from researchers at the University of Chicago Booth School of Business, Northwestern University?s Kellogg School of Management and Columbia Business School ? overlaid that data with job choice, earnings and career progression among a high-performing group of men and women with similar smarts.

Closing the pay gap (women?s annual earnings are 79.5 cents per each dollar for men) has been a regular rallying point on the Democratic campaign trail and an initiative among tech companies eager to show they are serious about diversity.

Apple last month announced the results of a pay study that found women at the company earned 99.6 cents for each $1 that men did in similar roles and said the company was taking measures to eliminate the difference.

The gender gap is prominent at the top of the U.S. corporate ladder, where women represented 6.5 percent of the best-paid CEOs in 2014 and were paid 10 percent less than their male counterparts.

Another study released last month by Georgetown University?s McDonough School of Business spotlighted the meager advancement of women in corporate boardrooms and said an unconscious tendency to gender-match ? only appoint a woman to a corporate board when another woman departs ? may be thwarting efforts to diversify the boardroom, which can have trickle-down effects on company policies.

The study of competition, gender and pay attempts to further the conversation about what is holding high-ability women back from parity.

The researchers used a well-established experiment to measure taste for competition among MBA students at Chicago Booth and then looked at those students? first jobs and earnings upon graduation, and also where their careers took them seven years down the line.

In the experiment, participants were given the choice of playing a timed solo math game in which they could earn $4 for each correct answer or of competing in a tournament against three other participants and earning $16 per correct answer if they got the highest score.

Men were twice as likely as women to choose the tournament, and after controlling for math ability and beliefs about performance, the researchers concluded that about half of that decision could be attributed to a taste for competition.

On average, those who chose the tournament ended up earning $21,000 more at their first jobs after graduating; controlling for other variables, a taste for competition accounted for earnings of $15,000, or 9 percent, more than less-competitive classmates.

When looking at pay by gender, male MBAs earned $175,000 on average in their first year after graduation, while female MBAs earned $149,000.

Part of that disparity is due to industry selection. Women were far less likely than men to go into finance, which tends to pay most. Women who do start in finance are significantly more likely than men to move to other industries seven years down the line.

Women are 8 percent more likely than men to work in lower-paying industries at graduation from business school and 12 percent more likely to do so seven years later.

But even controlling for industry, women?s first job pay on average was 13 percent less than men.

Study co-author Luigi Zingales, a professor of entrepreneurship and finance at Booth, believes that?s because first-year pay is based largely on the guaranteed bonuses that new hires negotiate, and men may be more aggressive in negotiating bonuses.

As for why women tend to leave finance over the years, Zingales said it could be an aversion to a cutthroat atmosphere or to a sexist environment.

?I think the dropping out of women in finance is because they feel uncomfortable in a very male-dominated environment,? he said.

Taste for competition accounts for about 10 percent of the pay gap, the study found. Other studies have identified that career interruptions and differences in weekly hours, often as a result of having children, contribute to women earning less.

(Source: TCA)