Gender and the Wage “Tournament”
Women have come a long way. Indeed, women have done so well that journalists have hailed “The End of Men” and celebrated “The Richer Sex.” Yet, a more in depth look at the persistent gender gap in wages tells a different story. Yes, the wage gap overall between men and women’s wages has narrowed over the last half century. Since 1990, however, continued progress has come primarily from the decline in blue collar male wages. For college graduates as a whole, the gendered wage gap increased since 1990, with particularly large increases, even controlling for factors such as occupation and education, above the 90th percentile. This growing gender gap demonstrates not just that the glass ceiling persists in the most lucrative parts of the economy but that women have lost power in society more generally. A small group of white and occasionally Asian men has disproportionately benefited to the exclusion of everyone else. The question is why and what we can do about it?
The conventional answer – that increased competition places greater emphasis on the willingness to work long hours that conflict with family obligations – rings hollow as a complete explanation, though it is certainly part of the story. Instead, a full discussion requires consideration of the nature of competition itself. The areas of the economy where pay has increased most dramatically in the last quarter century – the upper management ranks, finance, and the top of the professions – have also seen increased competition among those who aspire to those ranks. Indeed, the competition has become sufficiently artificial and intense that some have labeled it “the tournament.”
And these winner-take-all competitions, where yearly pay depends heavily on annual bonuses, have deeply pernicious effects on women and people of color.
First, the competition itself often takes the form of longer hours, enhancing the pay offs to those who can put the job ahead of everything else in their lives. In 1960, white and blue collar men worked about the same number of hours; today, the top earning American men and women work dramatically longer hours than blue collar workers – hours at least as long as those of top earners anywhere else in the world.
Second, the increasingly competitive nature changes the selection process. Law professor Larry Ribstein explained that:
These executives are hyper-motivated survivors of a highly competitive tournament . . . . At least some of the new breed appear to be Machiavellian, narcissistic, prevaricating, pathologically optimistic, free from self-doubt and moral distractions, willing to take great risk as the company moves up and to lie when things turn bad.
A growing management literature concludes that these highly competitive environments make it more likely that those who rise to the top in these tournaments will have the characteristics associated with narcissism, including optimism, the ability to inspire, the inclination to cut corners, and the willingness to run roughshod over others to achieve their objectives. Men are more likely than women to be narcissistic (and although some believe the gap is closing), and to be perceived as having the leadership qualities associated with narcissism. Moreover, corporate cultures that use rankings to justify large disparities in compensation tend to produce greater emphasis on self-interest, higher levels of distrust that undermine teamwork, greater homogeneity in the selection of corporate management, less managerial accountability, and more politicized decision-making. The result tends to create a “young boys’ club” that makes it harder for women and minorities.
Third, the selection for narcissistic leaders reinforces deeply gendered dynamics.
Even among narcissists, men and women are likely to differ in ways that affect the selection process for executive leadership. Both male and female narcissists like to be the center of attention. But researchers found that male narcissists were more likely than women to desire power and to be attracted to positions that promised money, status, and authority. Moreover, the single largest gender difference was the willingness of the male narcissists to demand greater rewards for themselves and to use greater status to exploit others. A study of tech firms indicated that the more narcissistic CEOs—rated in accordance with an employee evaluation of personality traits—received “more total direct compensation (salary, bonus, and stock options), have more money in their total shareholdings, and have larger discrepancies between their own (higher) compensation and the other members of their team;” in short, the qualities that also correlate with gender differences among narcissists also correlate with differences in male and female compensation.
Fourth, this selection process reinforces the classic “double bind” for women. Greater competition, particularly when tied to short term, reductionist measures, tends to increase the payoffs to the self-interested that can bend the rules and get away with it – and tournament-like environments have been associated with greater levels of fraud and misconduct. Yet, studies of financial advisors, where misconduct findings are rife and gender gaps are among the highest in the economy, show that women are less likely to engage in misconduct, more likely to be punished when they do, and less likely to be rehired, even though the losses their misconduct cause are lower than those of the men.
Taken together these processes produce a triple, not just a double, bind for women.
Greater competition makes it more likely that narcissists will thrive, and that such leaders will valorize further competition that enhances executive power and compensation. These tournament-like environments undermine trust and cooperation and increase distrust of outsiders. Women are less likely than to men to thrive in such environments, less likely to be seen as having the competitive juices necessary to do what it takes, and more likely to be cashiered if they try to compete on the same terms as the men. Women in turn accurately see such competitive environments as hostile ones, and therefore they become less likely to apply, increasing the male domination of such workplaces. Since the late nineties, the number of women on Wall Street and in venture capital firms has fallen and it should hardly come as a surprise.
Is there a role for public policy in addressing this toxic tournament environment that results in unequal pay, but also negative externalities for individual companies and the economy as a whole? In addition to a decrease in the gender pay gap, efforts to reduce tournament style pay schemes could also enhance the incentives for corporate responsibility and reduce fraud and corruption.
A large body of research suggests that linked transparency and accountability schemes hold promise.
In that vein, amendments to equal pay laws that explicitly address bonus pay and processes have potential, as do efforts to make corporate data about compensation levels and practices public. On the international front, Iceland’s newly adopted equal pay law requires proof of compliance, oversight of pay practices and consequences in the form of fines. The UK has also moved forward with a bold transparency policy, requiring most employers to collect data on pay gaps and publish it on their own and on government websites where it can be used to rank employers and provide critically valuable information to employees that may want to pursue their rights under traditional Equal Pay laws. In the U.S., President Obama and Governor Deval Patrick both used the power of their offices to create Equal Pay pledge processes that deploy “good press” and “added brand value” as levers for improved corporate practice. Federal, state (Minnesota) and local governments (Albuquerque) have also pioneered the use of government contracting as a tool to drive better corporate and business pay practices. These and other possible approaches must recognize and explicitly address the turn toward high stakes tournaments that reward narcissism to be successful.