Tuesday, July 31, 2007

Baselines and Social Constructs

The first job out of college seldom is exciting, innovative, autonomous, fulfilling, challenging, lucrative, educational, and permanent. Most people will be lucky if they can truthfully attach half of those adjectives to their first position as that first position is still primarily a learning experience in how to work, how to fit in and how to prepare for one's future. It is also important because that first job begins to form the internal and external salary anchoring point for the rest of an individual's career.

If a young person is earning a low wage of X at their first position and after two years moves on to another position their willingness to ask for 1.7X is muted even if other candidates for that job are asking for and receiving 1.7X. Instead they may ask for 1.3X or 1.5X where they are still receiving a massive 30% or 50% raise. Combine this psychological barrier to asking for a significant raise with the normal secretiveness and social opprobrium people attach to discussing their salaries, and this can be a long term trend of lower wages even if an individual is receiving the same percentage changes in salary and compensation.

I've been thinking about these issues since I saw this report from the American Association for University Women. This report was stunning in its analysis of the pay-gap between men and women.

New research released today by the American Association of University Women Educational Foundation shows that just one year out of college, women working full time already earn less than their male colleagues, even when they work in the same field. Ten years after graduation, the pay gap widens.

In the report, Behind the Pay Gap, the AAUW Educational Foundation found that just one year after college graduation, women earn only 80 percent of what their male counterparts earn. Ten years after graduation, women fall further behind, earning only 69 percent of what men earn. Even after controlling for hours, occupation, parenthood, and other factors known to affect earnings, the research indicates that one-quarter of the pay gap remains unexplained and is likely due to sex discrimination. Over time, the unexplained portion of the pay gap grows.

The initial five percent non-explained variance in initial first year earnings is a mystery. However, Linda Babcock of the Heinz School (Go Tartans!) and Hannah Riley Bowles of the Kennedy School may have found a pretty interesting explanation for most of the unexplained 5% differential in starting salaries --- high and gender specific social costs of negotiation that are borne by women. The following excerpts are from the Washington Post:

Although it may well be true that women often hurt themselves by not trying to negotiate, this study found that women's reluctance was based on an entirely reasonable and accurate view of how they were likely to be treated if they did. Both men and women were more likely to subtly penalize women who asked for more -- the perception was that women who asked for more were "less nice".

"What we found across all the studies is men were always less willing to work with a woman who had attempted to negotiate than with a woman who did not," Bowles said. "They always preferred to work with a woman who stayed mum. But it made no difference to the men whether a guy had chosen to negotiate or not....."

"It is not that women always act one way and men act another way; it tends to be moderated by situational factors," Bowles said. "The point of this paper is: Yes, there is an economic rationale to negotiate, but you have to weigh that against social risks of negotiating. What we show is those risks are higher for women than for men."

Most professional jobs today need the support of a varied cast of characters, contracors, co-workers, clients and managers to be successful. There are lone-wolf positions available where pure technical skill is all that is needed for a successful career, but these are isolated and highly competitive within a very narrow labor pool. Since interpersonal relationships are vital, the cost of not being perceived as a 'bitch' may be one that is paid by many women in order to continue to have a chance at advance. Men seldom face the same social and internalized prohibition against being seen as an aggressive 'bastard' or an effective 'asshole.'

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