Photo: iStockPhoto
Photo: iStockPhoto

Wage disparity: is there a solution?

Women suffer from wage inequality due to in-built biases at the time of hiring, which means they start out at a lower salary than men

Wage disparity between men and women has been well-documented. Inherent biases about women’s ability and productivity, among other reasons, lead to the difference in pay. What if there is a way to correct this?

Hiring women on a short-term basis or having a trial employment before offering them a full-time job increases their initial salary as this period gives employers an accurate picture of an employee’s productivity and nullifies any biases the employer might have about women, say researchers Adina D. Sterling, assistant professor of strategy at Olin Business School, Washington University, and Roberto M. Fernandez, professor of organization studies at MIT Sloan School of Management, in the paper Gender, Trial Employment, and Initial Salaries.

Women suffer from wage inequality due to in-built biases at the time of hiring, which means they start out at a lower salary than men. This paper suggests a practical way for organizations to correct this.

Growth patterns at a company remain the same for men and women after joining, so the starting pay becomes important. In trial employment, the starting salary is set after the period of completion, unlike in probationary employment, which is more popular in organizations.

There are two reasons for the starting wage gap between men and women. One is that employers believe there is an actual productivity difference between men and women, and women are offered lower salaries to compensate for this. Another reason is that employers do not have enough information about their prospective hires and stereotypes about gender that women are not as efficient, etc., are used to determine the salary.

In this paper, published in June 2014, the researchers assumed that there is no significant productivity difference between men and women, and analysed the salary data of about 350 people before, during and after an MBA programme (where the students graduated in 2009 and 2010) at an elite US university.

The men and women respondents had an average maximum salary offer of $113,147 and $106,023, respectively, and a 711 GMAT score on average, and a 4.61 GPA (on a five-point scale.)

After getting an MBA degree, women in the main sample receive a maximum offer that is 93.7% of the maximum offer than men receive. Before the MBA degree, this percentage is 91, and increases to 95 after trial employment.

For the respondents who reported their salaries after trial employment, men received an initial salary offer of $108,196 and women received a salary offer of $108,600, which meant that women did slightly better than men (although the difference is not statistically significant.) The paper says that for men, the starting salary reduces a bit after trial employment as positive-biases towards them are reduced.

The paper, which says it is the first to look at the explicit influence of trial employment on wage inequality, has important practical implications as it suggests that the hiring phase need not be the focus of inequality in professional careers. Organizations can use this method to correct information asymmetry about prospective employees and improve the salary outcomes for disadvantaged demographic groups.

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