Experiment Shows Context Matters When Women Negotiate Pay

It’s well known that in many occupations, women make less money than men, even when doing the same job. The American Association for University Women, an organization that advocates for women in education and the workplace, found a 20 percent gender pay gap for median full-time employees in 2017. A few traditional arguments for why women make less money include that they miss opportunities in order to have children or care for their families and that they are either not trusted as leaders or too trusting of their superiors when negotiating their salary.

SPIA professor Dr. Andrew Whitford recently published an article that has received a fair amount of press coverage, in which he addresses the latter argument and the idea of trust in the workplace. Dr. Whitford, along with co-author Dr. Holona Ochs from Lehigh University, decided to create an experimental environment that stripped away institutional factors, like workplace culture, in order to better compare men and women’s behavior surrounding trust. The article, “Experimental Tests for Gender Effects in a Principal-Agent Game,” puts to rest a notion that the pay gap between women and men exists because women are unable to negotiate.

In the experiment, Whitford and Ochs put participants in pairs and had them negotiate a labor-wage contract. The results showed no difference between the way women and men negotiate. Whitford explains, “The answer we come to is in some ways a non-finding: women do not negotiate differently. There is a bit of evidence that they are more trustworthy, maybe even a little more trusting, but we don’t see evidence that that changes outcomes for them, in this particular context.”

These findings indicate that unlike stereotypes that portray women as unable to negotiate because of internal characteristics, this experiment shows that failures to negotiate are actually due more to external factors. This conclusion indicates that in order to address the gender pay gap, individuals and organizations need to evaluate the characteristics surrounding a negotiation situation.

Whitford concludes, “We know there are broader based gender differences in terms of outcomes, our argument is we don’t need to be pointing to something that is happening inside the person’s decision framework, but rather we need to be pointing to the context, culture and those kind of factors that can influence a person’s decision.”

Whitford and Ochs will continue to use this data set to examine the role of trust in the workplace.Their next project will look at the effect of trust on teamwork.