Performance, seniority, and wages: formal salary systems and individual earnings profiles

This paper replicates studies by Medoff and Abraham [Quart. J. Eco. 95 1980 703; J. Hum. Res. 16 1981 186] and Flabbi and Ichino [Lab. Eco. 8 2001 359] using personnel data from the Dutch national aircraft manufacturer Fokker. It shows how a formal salary system, as is widely used by large firms, brings about that seniority-wage profiles are largely independent of controls for reported performance in cross-sectional wage regressions even though supervisors' evaluations shape life-cycle earnings profiles. Performance ratings determine how fast a worker climbs the firm's career and wage ladder. The paper also reveals that real wage growth depends on the employer's prosperity, and it demonstrates that formal salary systems cause serial correlation in wage growth and “Green Card” effects.     

The role of interpersonal affect in performance appraisal: evidence from two samples – the US and India

The interpersonal affect, a li ke–dislike relationship between a supervisor and his/her subordinate, has traditionally been conceptualized as a source of bias in performance appraisals. However, some researchers have argued that the interpersonal affect may not be a bias, especially where it develops as a result of past performance. In this field study, using data from 190 supervisors in the US, and 113 supervisors in India, we delineate the relationship between interpersonal affect and performance ratings. In both samples, interpersonal affect and performance level were found to have significant effects on performance ratings. Results from the US sample indicated that raters are able to separate their liking for a subordinate from actual performance when a ssigning performance ratings, suggesting that the interpersonal affect does not operate as a bias in the appraisal process. Results from the Indian sample, however, suggest that supervisors inflate ratings of low performers, suggesting that local cultural norms may be operating as a moderator.     

Behind closed doors: Sex bias at professional and managerial levels

U.S. companies have made important strides in combating sex discrimination in the workplace over the last two decades, but more subtle forms of sex bias still exist, often in decisions and behaviors that occur behind closed doors. This paper focuses on sex bias at professional and managerial levels. It explores sources of sex bias in the informal culture, selection and recruitment, task assignment, performance appraisal, promotion, and salary allocation, and then suggests action steps to help reduce sex bias in each of these areas.     

Evidence of Sex Discrimination: In Similar Populations, Men Are Paid Better Than Women

A bstract . Nationally women earn only 60 percent of the salary income earned by men. Numerous uncontrolled factors, however, might cause such sex-related differences in salary. In this study, certain factors usually uncontrolled are controlled with the choice of sample populations and by using multidimensional contingency table analysis. The samples consisted of male graduates of University of Hawaii College of Business (n = 311) and female graduates of that college (n = 94). In this comparison, women earned 81 percent of the salary earned by men, although, by the usual measures their backgrounds were similar. Factors of ethnicity, type of job taken, participation rate , and college major did not explain the salary differences between men and women. From this it is inferred that the difference arises from sex discrimination.     

Gender gaps across the earnings distribution for full-time employees in Britain: Allowing for sample selection

This paper investigates gender differences across the log wage distributions of British employees working full-time in 2005. The raw gender wage gap shows a tendency to increase across the distribution with a glass ceiling effect indicated. A strong relationship between high skilled, white-collar occupations and carrying out managerial duties with the glass ceiling effect is indicated in the data. After allowing for positive selection into full-time employment by British women, a substantially larger gender earning gap is found: the selection corrected gender wage gap is close to twice the raw gap across most of the earnings distribution. This selection corrected gap is found to be predominantly related to women receiving lower rewards for their characteristics than men. Indeed, the results suggest the gender earnings gap would all but disappear across the earnings distribution if women working full-time received the same returns to their characteristics as men working full-time in Britain do.     

Urban effects on participation and wages: Are there gender differences?

This paper estimates participation and wage equations using panel data from the United Kingdom to explore gender differences in urban wage and participation premiums. The results suggest a small but economically significant urban participation premium for women but none for men. Results from the wage estimations suggest that after controlling for sample selectivity, observed and unobserved heterogeneity, the urban premium is larger for women. This wage premium is also larger for married or cohabiting women relative to others. There is also evidence of higher urban returns to experience for men and lower urban wage depreciation for both men and women.     

Urban effects on participation and wages: Are there gender differences?

This paper estimates participation and wage equations using panel data from the United Kingdom to explore gender differences in urban wage and participation premiums. The results suggest a small but economically significant urban participation premium for women but none for men. Results from the wage estimations suggest that after controlling for sample selectivity, observed and unobserved heterogeneity, the urban premium is larger for women. This wage premium is also larger for married or cohabiting women relative to others. There is also evidence of higher urban returns to experience for men and lower urban wage depreciation for both men and women.     

The Gender Wage Gap in Europe: Job Preferences,Gender Convergence and Distributional Effects

The gender wage gap has declined over time. However, most of the remaining gap is unexplained, partly because of gender convergence in wage‐determining characteristics. In this paper, we show the degree of convergence differs substantially across Europe. In some countries, predominantly in Eastern Europe, the gender wage gap is entirely unexplained. However, in other countries, differences between the characteristics of men and women explain a relatively large proportion of the wage gap. Gender differences in job preferences contribute 10% to the wage gap, which is more than job tenure, previous employment status or field of study. The role of job preferences is particularly strong at the top of the wage distribution.     

The transformation of the wage and performance appraisal system in a Japanese firm

This paper analyses how performance appraisal has affected the wages of employees in a unionized Japanese firm over time, using firm-level wage and performance appraisal data. Data show that the wage and performance-appraisal systems have been shifting to a performance basis, and away from the heavy reliance on age and seniority characteristic of the old systems. In the process, wage differentials among employees are becoming wider, particularly among those 37 to 41 years old and those 49 to 55 years old. Management introduced the new wage system through a process of concessionary bargaining. Surprisingly, employees, rather than the enterprise union, were able to convince management to modify their initial plans during bargaining over the new wage system.     

The Impact of Same‐Sex LMX Dyads on Performance Evaluations

Numerous studies have found that supervisors rate women lower than men for similar levels of performance, suggesting that for female employees, performance alone may not be able to guarantee fair ratings. What is not clear is whether this disparity is a function of the gender composition of the supervisor–subordinate dyad or simply a case of male supervisor rating behavior. Based on data from supervisor–subordinate dyads in four organizations, we found that after controlling for performance, both male and female supervisors exhibit a positive bias toward subordinates of the same sex and rate members of the same gender higher. © 2001 John Wiley & Sons, Inc.     

Monopsonistic discrimination, worker turnover, and the gender wage gap

Motivated by models of worker flows, we argue in this paper that monopsonistic discrimination may be a substantial factor behind the overall gender wage gap. Using matched employer–employee data from Norway, we estimate establishment-specific wage premiums separately for men and women, conditioning on fixed individual effects. Regressions of worker turnover on the wage premium identify less wage elastic labour supply facing each establishment of women than that of men. Workforce gender composition is strongly related to employers' wage policies. The results suggest that 70–90% of the gender wage gap for low-educated workers may be attributed to differences in labour market frictions between men and women, while the similar figures for high-educated workers ranges from 20 to 70%.     

Czech female managers and their wages

This paper examines gender gaps in employment and wages among top- and lower-level managerial employees in the Czech Republic at the time of its accession to the EU. Using both least-squares and matching-based decomposition techniques, we find the wage gap among comparable men and women to be sizeable, but quite similar across firm hierarchy levels. The key reason why the average relative wage position of female top managers is worse compared to lower-ranking female employees is that women tend not to be at the helm of the highest-paying companies. Overall, the representation of women at the top of Czech firms as well as the structure of the gender wage gap there appears quite similar to those in the US.     

The Wage Penalty for Married Women of Career Interruptions: Evidence from the 1970s and the 1990s

The goal of this paper is to assess how the wage penalty for career interruptions by married women changed between the 1970s and the 1990s. We estimate the wage penalty for career interruptions using the work-history model and PSID data. We use several approaches to control for various forms of endogeneity and selection bias. Our empirical results suggest that (i) the wage penalty for married women's career interruptions increased from 40.4% to 73.7% over the period, (ii) the ratio of the wage penalty for married women to that of married men also increased, from 1.33 to 2.43, (iii) Blinder–Oaxaca decompositions show that changes in education- or occupation-specific wage penalties account for most of the wage penalty increase.     

The national internal labor market encounters the local labor market: Effects on employee retention

Formal salary systems are commonplace among medium to large-sized firms and within the United States government. However, there is little evidence regarding the costs, if any, of such systems. This study analyzes the effects on retention within the United States Air Force from an inflexible wage system failing to adequately compensate personnel for local compensating wage differentials. Using location-specific Air Force personnel records, I compare the differences between military and civilian wages, by occupation, across locations to determine if local labor markets play a significant role in the stay or leave decisions for personnel. Results show that rigid wage constraints do in fact impose costs on the firm through increased turnover in locations that fail to adequately adjust wages for the cost of living and amenities.     

Measurement equivalence of executives' performance ratings for same‐ and opposite‐gender dyads

The measurement equivalence of performance ratings from different raters is important to establish if researchers and practitioners want to have confidence that raters are using the performance measurement system in the same way. The purpose of the present study was to examine the measurement equivalence of performance ratings from male and female direct reports. Women and men executives from various organizations participated in a multisource assessment process for feedback and development purposes and were rated by both women and men direct reports. The results indicated gender equivalence for direct reports' ratings of men and women executives, meaning that regardless of gender, raters provided ratings using the same psychological metric. The implications and limitations of the study are discussed.     

Justice in the workplace: the centrality of social versus judgmental predictors of performance varies by gender

Men and women are said to perceive justice differently, with women proposed to be more concerned with relational issues and men focused more on material issues. In this study, the potential for differential effects of justice on performance by gender was analyzed across the four contemporary types of justice. Respondents were 265 male and 113 female occupationally diverse employees in a single organization. The results show significant differences in how men and women respond to the four justice types with only one – informational justice – acting similarly by gender. The differential relationships between each of the justice types and the outcomes by gender highlight the utility of the four factor approach to measuring organizational justice. Women were more interested in maintaining social harmony than men. The results appear to strongly support the use of the justice judgment model over the group-value model as a means of explaining the gender differences. Implications for management include the importance of informational justice both generally and within the performance appraisal process.     

The role of organizational justice in multi-source performance appraisal: theory-based applications and directions for research

This paper develops a model of organizational justice to explain the outcomes of multi-source performance appraisal. Central to this explanation is how employee reactions to appraisal cause changes in performance. This paper examines the literature on organizational justice and proposes a model to determine how employees will react to performance appraisal ratings. The model suggests that when performance appraisal ratings are low, employees use procedural justice evaluations to determine the fairness of those ratings. Employees act to improve low ratings that they perceive to be fair. Their performance may decrease on ratings they perceive to be unfair.     

Discrimination Against Women Reconsidered

Sexist earnings differences must not be confused with wage discrimination; wage discrimination against females is only one source of the large sexist earnings gap. The author agrees that his calculations of adjusted earnings ratios do not capture all changes in relative productivity between male and female workers.His present value estimates compared male and female earnings during entire productive lives, from labor market entrance to retirement. Hence they do reflect earnings variations at all age levels and thus the average experience of females with comparable educational attainment.     

Gender and competition

In almost all European Union countries, the gender wage gap is increasing across the wage distribution. In this 2008 presidential lecture I briefly survey some recent studies aiming to explain why apparently identical women and men receive such different returns and focus especially on those incorporating psychological factors as an explanation of the gender gap. Research areas with high potential returns to further analysis are identified. Several examples from my own recent experimental work with Patrick Nolen are also presented. These try to distinguish between the role of nature and nurture in affecting behavioural differences between men and women that might lead to gender wage gaps.     

Consequences of self-employment for women and men in the United States

Many self-employed workers return to the wage and salaried sector of the labor market after some time. It is possible that the self-employment spell will lead to lower earnings or earnings growth upon return, due to depreciation of firm or sector-specific human capital. Using longitudinal data from the National Longitudinal Survey of Young Women (NLS), this paper examines the effects of spells of self-employment on the future wage and salary sector earnings of male and female workers in the United States. The results indicate substantial penalties arise for women, in terms of returns to experience, while there is little or no impact for men.