Negotiating the Gender Wage Gap

• Date: 01 April 2019
• DOI: http://doi.org/10.1111/irel.12228
• Author: Katrien Stevens,Stephen Whelan
• Published date: 01 April 2019

Negotiating the Gender Wage Gap*

KATRIEN STEVENS and STEPHEN WHELAN

There is some evidence that gender differences exist in the propensity to negotiate

and outcomes from negotiation. We examine the propensity to negotiate over pay

with the employer, the wage outcomes resulting from negotiation, and the impact

on the gender wage gap. We find evidence that females are less likely to have the

opportunity to negotiate over pay. However, conditional on the opportunity to

negotiate, they are no less likely to actually negotiate. The analysis does not pro-

vide strong evidence that women fare worse than men if negotiation occurs.

Introduction

There is a significant literature dating from the 1970s investigating the role

of gender in negotiation and bargaining (Small et al. 2007). More recently,

research in sociology and psychology highlights potential gender differences in

attitudes toward negotiation and the outcomes achieved from negotiation. In

particular there is some anecdotal evidence that women are less likely to initi-

ate negotiations and in the event that they do negotiate, ask for and receive

less compared to men (Babcock and Laschever 2003).

Gender differences in the propensity to negotiate and the outcomes achieved

are likely to have important implications across a range of dimensions includ-

ing the labor market. If men and women differ in the propensity to negotiate

and the outcomes achieved from negotiation, wage-setting arrangements in

which negotiation plays an important role have the potential to influence the

male–female wage differential (Blau and Kahn 2017). While Babcock and

Laschever (2003: 1) note that men are up to eight times more likely to negoti-

ate salary offers than women, in general there is only a small literature that

directly relates the gender wage gap to the wage-setting regime (Antonczyk,

Fitzenberger, and Sommerfeld 2010).

Our objective in this paper is to contribute to the literature around gender,

the propensity to negotiate over pay, and the resulting relationship to the

male–female wage gap. The analysis contributes to the existing literature in a

number of ways. The longitudinal nature of the data used allows us to

*The author’saffiliation are, respectively, University of Sydney, Sydney, Australia. E-mail: Katrien.stevens@-

sydney.edu.au; and University of Sydney, Sydney, Australia. Email: stephen.whelan@sydney.edu.au.

JEL: J31, J16.

INDUSTRIAL RELATIONS, DOI: 10.1111/irel.12228. Vol. 58, No. 2 (April 2019). ©2019 The Regents of

the Univers ity of Califo rnia Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148,

USA, and 9600 Garsington Road, Oxford, OX4 2DQ, UK.

141

consider negotiation not simply at the start of a new job, but also after

employers and employees have information about the nature of the job match.

In turn, it is possible to consider how negotiation varies over time for a given

individual. Further, unlike earlier studies that have considered the effect of

negotiation in a wage-setting context, the analysis provides insight into the set

of individuals who had the opportunity to negotiate but chose not to do so. In

addition, we use a large representative dataset that arguably provides more

insight into the relationship of interest. Many studies that have considered the

importance of negotiation on remuneration outcomes for men and women have

focussed on a specific set of employees (Gerhart and Rynes 1991) or relied on

data from laboratory or field experiments (Dittrich, Knabe and Leipold, 2014;

Leibbrandt and List 2015). Finally, the longitudinal nature of the data provides

an opportunity to control for unobserved heterogeneity in a robust manner

when wages are determined by individual negotiation.

The analysis in this paper considers the behaviors and outcomes experienced

by Australian workers. The study is pertinent given changes in the industrial

relations landscape in Australia that have altered the role of collective bargain-

ing vis-

a-vis individual bargaining in the employment relationship. We begin

by examining differences in the propensity of men and women to negotiate

over wages with their employer and the implications of negotiation for wage

outcomes. Then we consider the importance of negotiation for the gender wage

gap. In particular, we seek to provide some insight into patterns of negotiation

by considering if female employees are less likely to undertake negotiation

given they have the opportunity to do so. In the event they do negotiate, we

examine if women experience lower wage outcomes relative to men. We then

consider the role of negotiation on the overall gender wage gap using a decom-

position methodology that explicitly takes into account differences in the gen-

der wage gap within and across jobs in which negotiation over pay occurs.

Literature Survey

This section first discusses relevant literature focusing on the role of gender

in negotiation and bargaining situations. It then provides insights into aspects

of wage setting and the gender wage gap in the Australian context.

Negotiation and negotiated outcomes—the role of gender. The literature on

the impact of gender on negotiated outcomes encompasses a wide range of dis-

ciplines including economics (Artz, Goodall, and Oswald 2018; Dittrich, Knabe,

and Leipold 2014), sociology (Babcock and Laschever 2003), management

(Faes, Swinnen, and Snellix 2010; Kulik and Olekalns 2012), and psychology

142 / KATRIEN STEVENS AND STEPHEN WHELAN

(Bowles, Babcock, and McGinn 2005; Gerhart and Rynes 1991). The literature

suggests that gender may be important for negotiation and negotiated outcomes

for a variety of reasons. These include the rules and context in which negotia-

tion occurs, gender differences in perceptions about negotiation, contrasting

negotiating styles, and differences in the way that men and women communi-

cate in negotiation settings (Bertrand 2011; Faes, Swinnen, and Snellinx 2010).

Differences in negotiation and negotiated outcomes experienced by men and

women may also reflect structural explanations such as external constraints

around care-taking responsibilities in the domestic setting (Bowles and McGinn

2008). Negotiated outcomes are also likely to be affected by real or perceived

stereotypes around what is the appropriate role for men and women, and, the

negotiator’s own characteristics other than gender (Bowles and Babcock 2009;

Kulik and Olekalns 2012). For example, Bowles, Babcock, and Lai (2007) find

that women tend to be treated more harshly than men who initiate negotiations,

and observe greater reticence on the part of women to initiate negotiations. This

finding is attributed, at least in part, to the social costs experienced by females

who take a more “masculine”approach to bargaining over compensation. Others

argue that self-perceptions and societal gender norms may also be important in

the negotiation context (Eckel, de Oliveira, and Grossman 2008; Hogue,

DuBois, and Fox-Cardamone 2010).

Existing literature provides some evidence that women have a lower propensity

to negotiate relative to men and in the event of negotiation, to be less aggressive.

One explanation offered is that females on average are more cooperative and less

assertive than men in a bargaining setting (Croson and Gneezy 2009; Faes, Swin-

nen, and Snellinx 2010). In the employment context for example there is evidence

that women begin with lower pay expectations relative to similarly qualified men,

negotiate less forcefully, and ultimately accept lower outcomes than men (Bowles

and McGinn 2008; Hogue, DuBois, and Fox-Cardamone 2010).

In general, there is limited evidence from real-world data about the implica-

tions of negotiation and bargaining situations, especially in the employment set-

ting. Gerhart and Rynes (1991) analyzed the experience of recent MBA

graduates and found no evidence that women are less likely to negotiate com-

pared to men. While women obtain lower monetary returns from negotiation

compared to men it appears that structural factors, such as low initial offers and

the availability of alternative offers, play a larger role in the differential out-

comes rather than gender per se. Bowles, Babcock, and McGinn (2005) also

used the experience of MBA graduates and found evidence that women receive

approximately 5 percent lower starting salaries compared to their male counter-

parts. This appears to reflect outcomes in negotiating contexts where there is

high “structural ambiguity,”with outcomes for females less advantageous when

parties are uncertain about what is attainable from the negotiation process.

Negotiating the Gender Wage Gap / 143