Pay Equity for Lower Ranks Only

We’ve been focusing, along with the rest of the media, on gender pay equity and wage gaps for some time now. (Witness searches on  this HRE Daily site and our magazine website, HREOnline.com, alone.)

But this latest study from the Academy of Management that’s going into the February issue of the Academy of Management Journal shows something we’ve never reported on: the fact that women managers foster pay equity between the genders, but only for low-ranking employees.

The study, based on actual manager-subordinate reporting relationships in 120 branches of a large U.S. bank, takes into account two different approaches to combatting pay inequity. One consists of pay formalization, which seeks to minimize personal biases by mandating the use of detailed written rules to determine compensation. The other, less formalized approach, looks to the increasing number of female managers in the workforce, and the power they wield to set pay.

According to an email I received on the study:

“… both formalized and less formalized approaches to pay equity come into play in each locale, with employee annual bonuses being awarded on a highly formalized basis but branch managers, almost half of them women, having considerable leeway in determining employees’ base salaries. Thus, [researchers had] a rare opportunity to compare the efficacy of formalized and less formalized approaches in achieving pay equity between men and women workers — specifically, how this is affected by manager gender.

“Unsurprisingly, the paper finds little or no gender gap in the formalized segment of pay — that is, in the amount of annual bonuses, standards for which are spelled out in detail by the company. In contrast, there was significant gender inequality in the less formalized component of pay, base salaries, which constituted the lion’s share of compensation, with greater imbalance occurring on average under male managers than under women.”

Yet, in the words of the study,

“Concluding that female managers redress inequality is incomplete because once organizational level is taken into account, it becomes evident that female managers only reduce inequality for employees at the lowest-level organizational position of teller.”

So … as the study paints it, controlling for a host of relevant factors, female tellers in branches headed by women had base salaries that were about the same as those of male tellers; yet, female tellers in branches headed by men had base salaries about 7.5 percent less than male tellers.

In sharp contrast, women’s wages for all other positions ranged from 4 percent to 13 percent less than those of men holding the same job, regardless of whether the branch was headed by a man or a woman.

What accounts for the fact that women branch managers eliminated the gender pay gap for female tellers but not for higher-status female employees? Does this confirm the “queen bee” effect, which contends that women who have been successful in male-dominated contexts try to keep other women from getting ahead? Mabel Abraham of the Columbia University Business School, the study’s researcher and author, answered this for me:

“Any suggestion that this is a queen-bee phenomenon would be purely speculative. It just as likely is a matter of women showing an extra measurer of concern for lower-income workers. The value of the research lies elsewhere — in highlighting a nuanced approach for organizations in striving for gender pay equity.”

What are employers and their HR leaders supposed to do with this new information? In Abraham’s opinion:

“In order to develop appropriate strategies for reducing gender pay inequality, organizations must concurrently consider the potential role of both female managers and the level of the employee they oversee.”