Trading bonuses for base pay boosts men's salaries over women's, a study shows.
Inequity in pay between men and women is one of most heavily researched social issues over the past 20 years, but an assistant professor of business at Kansas University suspected there was more research to be done.
"Most of the previous studies looked at different factors, such as time in the work force, types of education and types of occupation," said Keith Chauvin. "Nobody had looked at the type of pay."
When other factors were eliminated from the compensation calculations, such as the fact that men worked an average 51 hours a week while women worked 48, the data from a survey of college graduates still showed a significant difference that couldn't be explained by the number of hours worked or other factors, Chauvin said.
The men surveyed averaged $12,286 in contingent pay annually, while women averaged only $3,819, the study's data shows.
Trading bonuses, profit-sharing and other contingent pay against a base salary is risky business, and men seem likelier to take the risk than women, Chauvin said.
Chauvin, now in his sixth year at KU's School of Business, specializes in managerial economics and labor economics.
But he had studied at the University of Illinois under Francine Blau, a leader in the area of gender pay discrimination.
Contingency pay has become more common among U.S. corporations seeking to become leaner and more competitive over the past decade, Chauvin said.
"Firms have moved quite a bit toward putting more pay at risk," he said. "More and more are moving to compensation plans, with a smaller base pay and larger bonus pay. The question is, neither men or women like risk, but whether women like risk less."
Chauvin is preparing for a follow-up study to determine why there appears to be a gender difference in the willingness to accept compensation risk. There may be more than one reason, he said.
Blau has already surveyed college students to determine their expectations in salaries once they graduate.
The study found that "men expect far higher pay than women do," he said. "That suggests something is happening before men and women get to the labor market."
Chauvin said men and women differ in negotiating and bargaining skills, and women will need to be equipped to bargain for contingent pay.
Another factor could be that women are choosing or being steered toward jobs with less compensation risk, he said.
The studies are important because they can aid in setting public policy or policies of individual employers, Chauvin said.
"When dealing with inequities in pay, it's important to consider if the cause is before or after a person is in the labor market," he said. "If it's before the labor market, we need different policies to address it, probably in the education process."