How Cockiness and Risk Tolerance Add To The Gender Wage Gap
Men, notoriously, outearn women in similar jobs, with multiple inequalities leaving women in Greater Boston earning 70 cents to every dollar earned by male counterparts.
Although many people are working hard to close that wage gap, it has remained stubbornly wide. In the new research, Boston University labor economist Patricia Cortes has found less-than-obvious factors that may sometimes cause it to widen or narrow: risk aversion in women and overconfidence in men.
In a paper for the National Bureau of Economic Research, Cortes and her coauthors found that “intuitively, higher levels of risk aversion for women lead them… to accept jobs earlier.” Men, more cocky, hold out longer for a better offer. But that can be their downfall: waiting doesn’t always lead to better pay. The longer they wait, the lower the offers they tend to get, bringing their pay closer to that of their female peers.
“On average, more risk-tolerant students tend to accept jobs later, and there is a strong positive relationship between risk tolerance and accepted offer wages,” according to the paper.
Surveying 2,000 Boston University Questrom School of Business alumni and undergraduates from 2013 to 2019, Cortes and her colleagues found that women and men who accepted job offers later had a narrower pay gap than peers who accepted jobs earlier. That’s because men increasingly accepted lower-paying jobs over the search period.
Specifically, women who accepted job offers in August of their senior year were paid, on average, 17% less than men who took jobs that month. But among graduates who accepted job offers by the following October, the average pay difference between genders narrowed to 10%.
“In my view, 10% is [still] very high,” says Cortes, a Questrom associate professor of markets, public policy, and law, as well as an associate director of the Human Capital Initiative at Boston University’s Global Development Policy Center. “We’re comparing the outcomes of men and women who are in exactly the same program.” Cortes plans to share the findings with Questrom’s administration and students to better inform their job searches.
Here, Cortes explains the research behind risk tolerance and what it means for closing the wage gap:
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