Early Gender Pay Differences Evident in Job Search, Study Shows

new paper in quarterly journal of economics, Published by Oxford University Press, it notes that an important part of the pay gap between men and women has to do with how job searches are conducted, with women more likely to accept job offers early while men tend to hold out for higher pay.

Women in the United States earn 84% of what men earn, as of 2020. This disparity is well documented, and economists and the general public have known about the earnings difference for decades. The reasons for this phenomenon are the subject of much debate.

Initial conditions in the labor market are long-term. Young workers who started their careers during a recession face lower wages for at least 10 years than those who entered during better economic times. Because workers typically change jobs several times over the course of their lives, it is likely that personal characteristics important in job searches early in their careers (eg, risk aversion and biased beliefs about earning potential) will likely be important to later job searches.

Since job searching is a complex process with great uncertainty, differences in preferences and beliefs by gender are likely to lead to different job search behavior and outcomes. However, less is known by economists about how these traits contribute to gender differences in the early-career gender pay gaps.

A possible reason for this is that researchers usually have limited information about job-seeking behavior throughout the job search process, the offers people receive, and measures of risk aversion and biased beliefs. Even where such information is available, the focus is usually on the unemployed in general rather than on the gender dimension.

But the evidence here comes from surveys of job offers and admissions from recent graduates of Boston University’s business school, where one of the study’s authors teaches. The researchers asked graduates of the 2013-2019 graduating classes about the details of the job search process that led to their first job after graduation, such as the characteristics of their accepted and rejected offers, including salary components, job characteristics, timing of the job offer, and when the offer was accepted or not.

In addition, for the 2018 and 2019 Fujis, the researchers also surveyed students before starting the job search process and collected data on students’ personal beliefs regarding number of offers, wage offers, etc.

The study authors found that, on average, women accepted positions about one month earlier than their male counterparts (60% of women accepted a job before graduation, compared to 52% of males). There was a significant and clear gender gap in accepted offers, and the gap narrowed in favor of women over the course of the job search. The average gender gap (i.e., the difference between males and females) across all accepted offers started at about 16% in August of the first year and decreased to about 10% eight months after graduation.

The researchers here believe that this gender difference may be explained in part by men’s increased risk tolerance and overconfidence in their pay potential. Indeed, they found systematic patterns between these traits and research results. For example, more risk averse individuals reported lower booking fees and accepted offers earlier.

The results reflect a similar observation in the field where, for women, men are more likely to decline a higher offer than the one they end up accepting, are less satisfied with the job search process, and regret some aspects of that offer. Job search.

Taken together, risk tolerance and salary expectations may explain a large proportion of the observed differences in income between the sexes. Overall, risk preferences account for about 20% of the gender gap in job search timing. Empirically, the net effect of wages and timing of research results in a positive association between risk tolerance/overconfidence and timing of job acceptance. Gender differences in risk preferences and salary over-optimism account for a non-trivial proportion (about 30%) of the acceptable earnings gap.

“Our study shows that differences in the way men and women search for jobs matter for gender pay gaps early in their careers,” said lead research author Patricia Curtis.

“Gender differences in risk preferences and overconfidence about future job offers lead to women having lower booking earnings, which translates to earlier acceptance of lower-paying job offers. Gender differences in these traits may explain up to 30% of the difference Between men and women. Women’s gains in their first jobs.”