WomenLead Power Networking event. Courtesy photo
Remember the days when men and women were equally compensated for their education and job title? No? Oh yeah, that’s because it hasn’t happened yet. According to a study published today (January 18), the gender gap in salary remains. New year, same problem.
Universum, a market insights research firm, asked more than half a million business and STEM (science, technology, engineering, and mathematics) students at universities from 29 countries, including the U.S., a simple question: What salary do you expect to earn in your first job after graduation? Across all countries and both categories of major areas, women, on average, expected to make less in their first jobs after graduation than men. In the U.S., male business majors expected to make around $60,000 before taxes and without any added bonuses. U.S. women expected around $55,000.
The gap in the U.S. was greater than in the other three Western Hemisphere countries included in the study, Canada, Brazil, and Mexico. Business majors from Malaysia, Sweden, and Canada had the smallest gaps and business majors from Russia, India, and Spain had the highest. (See the Cost of Talent 2017 Report here.)
“They are exactly what I thought,” Carolyn Goerner, a clinical professor of management and entrepreneurship at Indiana University’s Kelley School of Business, says of the results. “They are consistent with the fairly recent research coming out about gender differences and negotiation.”
PAY GAP HAS BEEN PERSISTENT SINCE 1960s
Kellie McElhaney, an adjunct associate professor and faculty director at the Institute for Business and Social Impact at the University of California-Berkeley’s Haas School of Business, echoed Goerner on a separate phone call. “No surprise at all,” McElhaney says. “The data supports this. There is a gender pay gap, period.”
The gender pay gap has been slowly closing since first being tracked in the 1960s, but it’s very much still there. According to the most recent available data from Payscale, in 2016 women in the U.S. earned 76 cents for every dollar a man earned in an “uncontrolled gender pay gap.” In a “controlled gender pay gap,” where men and women in similar jobs and education were categorized, the gap shrinks to 98 cents for every dollar.
The caveat, McElhaney says, is that the majority of stats available — Payscale’s included — are not parsed by race. So if you are an underrepresented minority, it’s tough to know if any of these studies hold much relevance. But it’s hard to imagine companies — still largely owned by white men — are paying equally all around.
A LOSE-LOSE SITUATION FOR WOMEN
Goerner, who is also co-director of the Kelley Women’s Initiative at Indiana University, says the relatively new idea of a “social cost” of negotiations is likely present in these findings and others. “There is an interesting phenomenon at play that happens when men and women go into negotiate salary,” Goerner explains on a phone call with Poets&Quants. “And it is something that doesn’t have that big of effect for men, but really silences women when they are feeling out the environment to see if it is going to be an issue.”
The premise, Goerner says, is due to deeply ingrained gender roles and norms. And that negotiation, in general, is “inherently” an aggressive act. “Somebody tells you they want to give you something and you say, ‘no, I want more,'” Goerner says. “If a guy does that, it’s just not that big of deal. It’s OK for men to be more aggressive, we see it as part of that gender role, it’s fine. However, if a woman takes that same step, there is almost a psychological backlash.”
According to a study published five years ago in Organizational Behavior & Human Decision Processes, “assertive, self-advocating women suffer a social backlash” when negotiating. “Decreased likability” is an example the study references as social backlash. However, “non-assertive, other-advocating women” also suffer a backlash, except this one is a “leadership backlash.” According to this study, it’s kind of a lose-lose situation. If a woman negotiates, she isn’t socially appropriate. Yet if she doesn’t show assertiveness, she has “lower presumed competency,” the research says.
Meanwhile, “male negotiators do not suffer any backlash consequences despite being characterized in a fashion similar to that of the females in each condition,” the study concludes.
DATA SHOWS WOMEN ARE NOT WORSE NEGOTIATORS THAN MEN
What continually saves women from the potential backlash, Goerner says, is also a gender role stereotype. Women are more intuitive and are able to read situations to avoid the potentially thorny interactions, she points out. “We’re just now getting to the point where we can help women overcome that,” Goerner continues. “There are some great communication strategies they can use. But we just sort of figured this out as researchers.”
McElhaney sees it the same way. “Women are more heavily penalized than men,” McElhaney says of the unconscious bias involved in salary negotiations. Or to put it more bluntly, McElhaney says for men aggressive negotiation comes off as good and for women it comes of as being selfish and not looking out for the company.
“The data shows women aren’t worse negotiators than men — not by any stretch,” McElhaney says. “And if you see a woman negotiate for her child, you’ll see phenomenal negotiation skills. It’s that women choose to negotiate more often for other people, like their teammates, than themselves.”
Indiana University’s Kelley School of Business students. Courtesy photo
HOW TO BATTLE THE GENDER GAP
To move the needle on a deeper basis, it will take a systemic shift of employers becoming aware of the unconscious biases existing for both men and women. But until we get to that point, Goerner says, it’s “incumbent” on women to figure out the quick strategies they can do to even the playing field. Universum researchers agree.
“There is no clear-cut explanation as to why male talent have continued to demand and negotiate higher salaries,” the report reads. “If female talent do not demand higher wages during negotiations, the gap will not be narrowed unless employers are proactive and voluntarily provide higher wages to women without being asked for them.”
Goerner, who teaches an MBA negotiations class at Indiana University, suggests women call attention to the fact that they are negotiating for a reason and that she brings awareness to the understanding it is a potentially uncomfortable conversation for both sides. “It reinforces that she cares about the relationship,” Goerner explains. “It helps to communicate this is potentially treading on delicate ground and it’s not going to be like this all the time.”
Carolyn Goerner of Indiana Kelley. Indiana University photo
MOVEMENT IS HAPPENING, ALBEIT SLOWLY
Of course, the responsibility to close the gap also falls on employers.
“From an employer branding perspective, taking the initiative to address this pay gap issue head-on could provide a unique advantage for your employer brand,” the Universum report says. “Employers who are willing to take this approach will more than likely not only attract more top female candidates but increase in attractiveness among their female demographic since they are taking initiative to address the gender pay gap issue.”
McElhaney agreed a 0% pay gap could — and should — become a competitive advantage for companies. “I’d like to see equal pay be a competitive advantage from a recruitment perspective,” says McElhaney, piggy-backing off the report’s conclusion. “Gap, Inc. has a 0% pay gap. I’d like to see people want to work at Gap, Inc. instead of H&M because they have a 0% pay gap.”
Just earlier this year, Iceland had a law come into effect that makes it illegal for companies with 25 or more employees to pay men more. Under the legislation, companies must prove they have equal pay or will be forced to pay $500 a day in fines until they do so. McElhaney says she’d like to see similar legislation within the U.S., or at least a requirement for companies to disclose salary data before being listed as a publicly-traded company. Earlier this week, Citibank became the first financial institution to disclose salary averages based on gender and race. The details were vague, but Citibank essentially found that women earn 1% less than men and that ethnic minorities earn 99 cents to every dollar a white person makes. Salesforce became the first large company to do such a study in 2015 and spent $3 million to retroactively cover significant pay differences. Last fall, Salesforce redid the process and spent another $3 million.
A CALL FOR MACRO- AND MICRO-LEVEL TRANSPARENCY
Kellie McElhaney. Berkeley-Haas photo
Both McElhaney and Goerner believe those types of disclosures is a step in the right direction. Universities like Indiana University already track that data in first jobs after graduation, Goerner says. If student-reported first jobs salaries are significantly different among men and women, they let the companies know they’re watching. Interestingly, Goerner notes that last year women graduating from Kelley made on average about $300 more than men.
“I can’t emphasize enough how important it is that students report to the universities their starting salaries,” Goerner says. “The placement offices can really help out.”
For now, at least, that kind of transparency — both on a macro and microlevel — might be the most promising areas to move the pay gap needle in a more equitable direction.
“I don’t believe companies will ever voluntarily pay women more,” McElhaney says. “But I do believe they can be more transparent and crunch their data to see what they are paying.”
DON’T MISS: THIS CLASS IS A GAME CHANGER FOR WOMEN or MEN STILL GETTING MORE OFFERS THAN WOMEN
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