Promotions, pay

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Promotions, pay gender discrimination

• 1. Background
• 2. Theory
• Tournaments
• Glass ceilings sticky floors
• 3. Empirical evidence
• Promotion
• Pay

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1. Background

• International evidence on gender pay gaps (table
  1)
• Males largest share of the workforce (Finland)
• Variations between public private sectors
• Wide variation in the mean gender gaps
• Pooled Britain 25 versus Italy 6
• Public sector lower than private sector
• Variation in gender pay gap across the pay
  distribution
• E.g. 10th percentile (low pay) versus 90th
  percentile (high pay)
• Glass ceilings?

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Company level (Wal Mart)Source Wal Mart and
the Glass Ceiling, Feb 2004)
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Women in Management at Wal-Mart and Competitors
(Source See above)
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Gender pay gaps, 2001 (Average annual earnings
Source See above)
Job of Women in Job Male Salaries () Female Salaries () Difference in Salaries ()
Regional Vice Pres. 10 419,400 279,800 139,600
District Manager 10 239,500 177,100 62,400
Store Manager 14 105,700 89,300 16,400
Assistant Manager 36 39,800 37,300 2,500
Management Trainee 41 23,200 22,400 800
Department Head 78 23,500 21,700 1,800
Sales Associate 68 16,500 15,100 1,400
Cashier 93 14,500 13,800 700
Note Full time staff, includes bonuses, Data
from Richard Drogin (2003) Statistical analysis
of gender patterns in Wal Mart workforce.
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2. Theory

• A) Tournaments
• Who gets promoted?
• ILM promotion ladders
• Slots predetermined pay (prize)
• Relative performance
• The larger the spread between current position
  promoted position greater the effort
• Luck (or noise)
• Offsets effort
• Larger spread

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2. Theory

• Tournament winner (promoted) W1 and loser W2
• Two workers j and k
• Output
• qj mj ej (1a)
• qk mk ek (1b)
• Each workers behaviour
• Max W1P W2 (1 - P) C(m) (2) (for given
  effort)
• (W1 W2) dP/dm C(m) (3)

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2. Theory

• Probability that j wins
• P Prob(mj ej gt mk ek)
• Prob(mj mk gt ek - ej)
• G(mj mk)
• G is the distribution function, we want g the
  density function
• Equilibrium
• (W1 W2)g(0) C(m)
• See Lazear for firms problem max expected
  profit

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3. Evidence

• Glass ceilings sticky floors
• (i) Glass ceilings
• Why are gender pay gaps larger at the upper end
  of the distribution?
• (ii) Sticky floors
• Why are gender pay gaps smaller at the lower end
  of the distribution?

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3. Empirical evidence

• Causes of differences in gender gaps
• Gender-specific policies cross sectional
• a) Parental leave state provision of child care
• b) Pay-bargaining institutions
• c) Other factors
• Appointments promotions

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3. Empirical evidence

• Gender promotion single company
• glass ceiling v. other causes
• Financial services
• 4,379 employees - closed ILM
• port low level clerical
• pay f(grade)
• Determinants of allocation to each grade?
• Education, tenure, age on entry
• simulate distribution of females if treated as
  males

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(i) cont.

• Little change in distribution
• Officer grades rise 14 to 19
• Managers rise 1 to 3
• Women have different LM characteristics
• e.g. lower tenure
• No glass ceiling

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Conclusions

• Promotion is an incentive mechanism in ILMs
• Understood via tournament theory
• Promotion pay are linked
• Gender differences in pay
• Differences in promotion rates - discrimination
• Or other factors?
• Evidence is mixed