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Early Job Acceptance Contributes to Gender Pay Gap

Gender symbols and the US currency

[Image: Getty Images / designer491]

Globally, women earn on average about 20% less than men, according to the International Labour Organization. In STEM occupations in the United States, this gap is even wider—a Pew Research Center report from 2021 showed that women earn 26% less than men in STEM roles. Now a study that surveyed recent business school graduates suggests a possible reason for the gender pay gap: women tend to accept job offers earlier than men (Q. J. Econ., doi: 10.1093/qje/qjad017).

“Our study shows that differences in the way men and women search for jobs matter for gender pay gaps in early career,” said the lead author Patricia Cort├ęs, Boston University, USA. “Gender differences in risk preferences and overconfidence about future job offers result in women having lower reservation earnings [the lowest wage a person would accept for work], which translates into earlier acceptance of lower-paying job offers.”

Surveying job hunters

Because looking for a job involves significant uncertainty, economists believe that people’s risk-related preferences and beliefs about their relative ability result in differences in their behaviors during a job search. This holds particularly true for fresh college graduates, who often have to handle multiple offers simultaneously with relatively quick decision deadlines.

However, little is known about how these behavioral differences contribute to the early-career gender pay gap. Information about the behaviors and beliefs of people in the job market and the offers they receive is often limited—and even when it is available, the focus is not on gender.

However, little is known about how these behavioral differences contribute to the early-career gender pay gap.

For the latest study, an international group of researchers surveyed the 2013–2019 undergraduate classes of Boston University’s business school. The group asked the participants about the details of the offers they got—such as the proposed salary, the characteristics of the work and the timing of the offer—and when they accepted one. The authors also surveyed the 2018 and 2019 graduates before their job hunt started about their earnings and offer expectations and intended job search behavior.

Risk tolerance and overconfidence

Using the survey data, the researchers found that, on average, women accepted their first job after graduation about one month earlier than men. In addition, 60% of the female students said yes to an offer before graduation—compared with 52% of their male counterparts.

When the authors plotted the cumulative average of the male and female graduates’ accepted salaries against time, they saw that the difference between men’s and women’s mean salaries started at around 16% but gradually decreased to about 10% eight months postgraduation.

On average, women accepted their first job after graduation about one month earlier than men.

The differences the authors found could be explained in part by the unequal risk-tolerance and overconfidence levels between men and women—based on the survey responses, men have greater risk tolerance and higher overconfidence in their salary potential. The researchers concluded that the gender differences in these traits may explain as much as 30% of the difference between men’s and women’s earnings in their first jobs.

Furthermore, the team discovered systemic patterns between the two traits and job search outcomes. For example, the amount of salary that risk-averse people were willing to accept was lower than for risk-takers, and the risk-averse people said yes to job offers sooner than the risk-takers.

Policies for students

While overconfidence leads to, on average, higher accepted offers for men, the researchers found that men are more likely to reject a job that offered a higher wage than the one they end up accepting. Men are also less satisfied with the overall job searching process and tend to regret parts of their job search.

The authors write that policies such as allowing students to hold onto job offers for longer could mitigate the role that risk preferences play in the gender wage gap.

The authors write that, based on their findings, policies such as allowing students to hold onto job offers for longer could mitigate the role that risk preferences play in the gender wage gap. They also argue that providing more guidance on job search and acceptance timing could benefit students. “By correcting biased beliefs and helping to resolve uncertainty, these policies could help men and women make better decisions during the job search process,” they note.

Publish Date: 19 May 2023

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