Ariel Hao
Is Our Networking Approach Fuelling the Gender Pay Gap?
The gender pay gap remains a pressing issue, but could the way we network unintentionally worsen this problem? Insights from behavioural economics suggest that our networking preferences may have a more significant impact than we realize. Let's dive into the concept of "homophily in networking." This term describes our tendency to form social connections with those who are like us, sharing similar characteristics. While this may sound like a harmless approach, could this common tendency yield unexpected consequences for gender wage equality?
Homophilic Networks Contribute to Women's Lower Salary Expectations
To better understand this, let's discuss the concept of reference points in behavioural economics. These are the benchmark values we use to assess gains and losses. In the context of salary negotiations, your current income and salary expectations serve as your reference points. If a new job offer comes in at a higher salary, it's seen as a gain; if it's lower, it's considered a loss. This is where Prospect Theory, a framework developed by Daniel Kahneman and Amos Tversky, comes into play. People make decisions based on potential gains and losses relative to these reference points.
In a society where gender wage disparities still exist, homophilic networks can unintentionally contribute to these inequalities, especially in salary negotiations. When women primarily interact with similarly positioned women (who often earn less than men), it skews the reference point for salary expectations towards the lower end.
Conventional economic theory might suggest that accepting a job offer above or equal to one's reference point maximizes utility. However, these 'rational' decisions stem from a skewed reference point where women persist in accepting lower salary offers compared to men. This perpetuates gender wage inequality, resulting in lower salary expectations and ultimately reduced earnings for women.
The Similarity and Proximity Effect on Driving Same-Sex Comparisons
This tendency for same-sex comparisons can be explained by two factors. First, the proximity effect, where people compare themselves to those who are both similar and physically nearby, such as co-workers at a similar level in the workplace. For instance, a study by Crosby found that women in high-prestige, male-dominated jobs were more likely to compare their salaries to men's, influenced by proximity and structural factors.
The similarity effect occurs when people make same-sex comparisons because they believe that those of the same gender share similar pay-related characteristics. In terms of pay expectations, women view other women's pay as a more 'accurate' indicator of industry pay due to the shared similarity in pay-related attributes.
A study by Major on university graduates found that both men and women tended to check the earnings of people from the same gender and job category when given the choice, even if they had access to information about earnings across genders. Despite having equally accessible information, individuals still tend to make comparisons within their own gender, choosing to focus on ingroup comparisons.
These studies reveal the significant impact of same-sex comparisons on our expectations, particularly in the context of wage expectations.
Using Nudges to Promote Diverse Networking
So, what does this mean for policy? To promote greater equality, diverse networking needs to be encouraged in the workplace. Lessons can be drawn from behavioural economics by the concept of nudges. A nudge, popularized by behavioural economists Richard Thaler and Cass Sunstein, involves gentle, subtle prompts that influence how choices are presented. Think of it like when a cafeteria places healthier fruits at eye level, making them more noticeable and easier to choose, while less healthy snacks are a bit harder to reach. These small adjustments are nudges that guide you toward healthier options without forcing your decision.
Let’s take mentorship programs designed to support women in male-dominated fields like economics as an example. While the goal remains encouraging young women to enter these fields and providing early-career mentoring, a nudge can be applied by making diverse pairings the default choice. This simple change empowers mentees to be matched with any mentor, not exclusively women, promoting diversity and expanding networks. This nudge simplifies the process of building a diverse network, creating a more inclusive networking environment where mentees have the flexibility to connect with mentors from various backgrounds.
Networks based on familiarity have their merits but also come with hidden challenges. Encouraging diverse networks, especially for women, is crucial in promoting more equitable workplace outcomes. These networks significantly shape an individual's pay expectations, often influenced by comparisons with similar peers.
To reduce the gender, pay gap and create a fairer future, it's important to understand the role of these comparisons and actively encourage more diverse networks, connecting with people from different genders and backgrounds. Perhaps diversifying networking opportunities for women is key to breaking the cycle of gender wage inequality.