Vennie Encheva

In a recent article "The Gender Wage Gap: Extent, Trends, and Explanations", Cornell University professors Francine D. Blau and Lawrence M. Kahn provided empirical evidence on the extent of and trends in the gender wage gap. Their study of the US gender wage gap shows a substantially decreased but persistent wage gap between men and women.

Decompositions attributed the reduction in the gender pay gap to changes in gender differences in education and experience, as well as occupation and union status. Education is an area which has seen a reversal of the gender differential. Gender differences in occupation and industry, however, remain important in explaining the gender wage gap, despite occupational upgrading of women relative to men.

An unexplained gender wage gap remains and has been roughly stable since the 1980s decline. Blau and Kahn also refer to the existence of a "glass ceiling" as they found that the gender wage gap is currently larger at the top of the wage distribution and has decreased more slowly at the top than at other points in the distribution.

In addition to testing industry differences to explain the wage gap, a recent series of papers attempt to test whether gender differences in personality traits, or noncognitive skills have an impact on compensation. Men are found to place a higher value on money, to have higher self-esteem, to be less risk averse, more competitive, self-confident and disagreeable, and to believe that they control their own fate (an internal, as opposed to external, locus of control) to a greater extent than women. Researchers use reduced form wage regressions, excluding the intermediate factors and including the psychological factors to determine how psychological attributes contribute to the gender pay gap. Assessing behavioral attributes poses a lot of challenges as the labor market may reward the same trait differently for men than for women. For example, a study by Manning and Swafford showed ambitiousness may be seen as a positive trait for men but a negative one for women.

How does Google tackle the gender wage gap problem? The firm makes an effort to avoid an "anchoring bias" or having a number in mind to base your choice on. One of the first studies on anchoring was conducted by professors Amos Tversky at Stanford University and Daniel Kahneman at Princeton. In the experiment people were asked to spin a wheel with numbers on it and then estimate how many African countries were United Nations members. But the scientists secretly controlled where the wheel landed, setting it to hit either 10 or 65. When the wheel came up 10, people guessed that 25 percent of African nations were in the U.N. When it landed on 65, they guessed 45 percent. They had unconsciously anchored on the initial number.

Similarly when making pay decisions, employers often anchor on someone’s current salary instead of what the job is worth - a practice which consistently puts women in a predicament of perpetual catch-up to get to a point of their fair compensation level in the market place.

At Google, recruiters typically ask about salary as a data point, but neither they nor hiring managers make decisions about pay. Instead, offers are determined by the firms “people operations” team which determines a salary consistent with the target salary for the specific position. Additionally, Google tries to look into fair compensation practices not only at times of hire and promotion but as employees develop their career over time.

As women (and men) pursue and accept new opportunities, it is essential for them to consider how they perceive, negotiate, and accept compensation but most importantly whether they are making the right choices in terms of employers.

It is fair to say that organizations which use anchoring bias consistently undermine women's value, and are unworthy settings for women to grow professionally long-term and to aspire into C-level position, especially considering that the remuneration gap is at its most pronounced at the higher echelons of corporate hierarchies.

This article was originally published on Linkedin.

Vennie Muenzen is passionate about contributing to organizations and initiatives focused on unleashing women's full potential. She has been designated an Emerging Global Leader at Womensphere,  a global organization incubating and accelerating women's advancement in leadership, innovation, and entrepreneurship. While at her undergraduate alma mater, Vennie served as Co-Chair of the Lyon’s Network, an organization which spearheads initiatives and provides programs designed to expand the opportunities available to women across different fields. Vennie derives inspiration from creative leaders, mentors, and entrepreneurs such as Analisa Balares, a Chairperson and CEO of Womensphere.

Vennie Encheva Muenzen holds a BA degree in Mathematics, Economics, and Politics from Mount Holyoke College, and an MA in Mathematics of Finance from Columbia University. Her professional experience spans index research and design, product valuation and control, and wholesale loan loss modeling and forecasting.


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