Do Women Make Less Because They Prefer Fixed Salaries?


There has been plenty of debate over the pay gap between women and men over the years. It definitely exists, but different studies show different levels of disparity. Some studies "prove" that it is the result of bias, while others "prove" that it isn't. The latter typically say that when controlling for education, hours worked, etc., pay is almost identical. I haven't looked at it enough to know what's true, but some new research out of Germany implies that women may make less because they prefer the sure thing.

The fact that on average women earn less than men is not necessarily the result of discrimination: when given a choice between a fixed salary and performance-related pay, women choose the former far more often than men, even if they could earn more by opting for the latter. This is the result of a study carried out by the Institute for the Study of Labor and the University of Bonn.

The researchers had worked out a laboratory experiment involving a total of 119 men and 121 women. They were to multiply pairs of numbers together over a ten-minute period. They were able to choose beforehand how they wanted to be paid. Either they could opt for a fixed sum of seven euros, or they could choose to be paid just under 20 cents for each correct multiplication. Alternatively they could also take part in a kind of tournament, where the opponent was chosen at random. Whoever solved the most tasks won 20 euros, with the opponent getting nothing.

'In our experiment only 44% of all the women taking part chose the performance-related options, although many of them could have earned more if they had,' is how the Bonn economist Professor Armin Falk summarises the results. 'By contrast 68% of the men chose this option.' The results correspond to the statistical data of the socio-economic panel, a survey which the German Institute of Economic Research carries out each year. According to this, 33% of all women work in the public sector, a field in which fixed (though relatively low) pay is the norm. In contrast, only 21% of men are employed in this field.

I can add to that the anecdotal evidence that Mrs. Businesspundit had two offers when we moved to Florida in 2000, and she took the one that paid significantly less, because she liked the people more. Money isn't that important to her compared to other things. Of course, this is all just sidestepping the issue of how compensation should work. Is it a push or a pull model? Shouldn't people be rewarded for not worrying so much about pay, instead of the other way around?

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