Gender pay gap disparity – paying women less than men for comparable work – is widespread and unfair, and much attention is given to how to remove it. Perhaps the most prominent option is to require pay gap disclosure, so that firms paying women less will be revealed and their reputation harmed. The idea is of course that two things will happen – firms will act to improve their reputation through paying women more, and female job applicants are warned and can stay away from these firms until conditions improve.
Failing to find an effect was not a result of data problems;
nor was it inconsequential. The authors were analyzing Glassdoor evaluations,
which are reviews of each firm anonymously posted by its employees. Each evaluation
is accurately timed, so it is easy to match the evaluation with the disclosure
of the pay gap. The evaluations are consequential because many potential job
seekers check Glassdoor reviews, both the numeric evaluations and the written
text.
This is a puzzle, and Sharkey, Pontikes, and Hsu proceeded
to look for explanations. Interestingly, although some explanations could be
excluded, not a single explanation could account for the failure to shame the
firms with a pay gap. Part of the reason is that there are simply too many possible
explanations, and they probably work together to make this happen. Because they
add up to letting firms get away with unfair payment, it is worthwhile listing three
explanations as warnings.
Pay attention! There is some evidence that employees don’t
fully pay attention to the pay gap when assessing their own workplace.
Extending that observation, it is fair to wonder whether potential job
applicants pay enough attention too. Paying attention is the first protection
against walking into a trap.
Interpret information! There is some evidence that employees
react less when the pay gap is obscured by job heterogeneity. That is natural,
but also discouraging, because more deliberate and conscious interpretation
would usually help them understand that they are in a pay disparity trap.
Act on interpretation! There is some evidence of
resignation, with employees not reacting to the pay gap because they have
become used to it. That is exactly how traps work – people do not escape from
them.
The reason to list these warnings is that it is hard to
think of any policy to reduce the pay gap disparity that would be more
effective than disclosure. Organizations constantly need to recruit new
employees, and they always worry about their ability to attract the best. Obviously
so, because there is another pay gap that is much more logical and beneficial
for the organization than the gender pay gap. There are few jobs in which the
pay gap between the most and the least productive employee is so great that the
organization does not care about employee quality. The most productive employee
is usually so much better for so little extra pay that having all the potential
stars apply – male and female – is a great benefit for the organization.
If employees and job applicants pay attention, interpret
information, and act on the interpretation, pay disparity would simply be too
costly for the organization. Perhaps they will gradually learn to do so.
