We work less when we’re paid less because of our gender

When women and men are paid different rates for the same work, how does that affect their work performance? And what happens when the inequality is explicitly linked to gender? 

Three researchers from Aarhus BSS at Aarhus University in Denmark and Maastricht University in the Netherlands have just published a new article that advances our understanding of the link between labour supply and discrimination. The team conducted five different studies designed to measure the effect of discrimination on labour supply. And their findings are quite striking.

When the studies compare workers who worked for a given wage in the studies, the presence of negative gender-discriminatory wage inequality resulted in a 10% decrease in the total amount of work that workers were willing to complete relative to workers who faced the same wage inequality but not due to their gender. 

This is the pure effect of negative gender discrimination: how much simply changing the nature of wage inequality reduces labour supply.  

When gender discrimination is compared to a state where workers face wage equality instead, the decrease in labour supplied is a substantial 14%.

In our studies workers cannot punish their employer by changing their labour supply, so they work less even though they end up financially hurting themselves

^{Assistent Professor, Nickolas Gagnon, Department of Economics and Business Economics,  Aarhus BSS}

Four categories of workers 

“Our studies show that gender discrimination leads workers to reduce how much work we supply, and the design of our studies enables us to rule out other possible causes. So what we see here is the pure effect,” explains Assistant Professor Nickolas Gagnon from Department of Economics and Business Economics at Aarhus BSS. He is one of the co-authors of the article, which has been published in the Journal of Political Economy. The other authors are Associate Professor Kristof Bosmans and Professor Arno Riedl of Maastricht University.  

For their three main studies, the research team ‘hired’ approximately 4,000 UK-based participants (workers) on the Oxford-based online platform Prolific. The real-effort task they were hired to perform consisted of entering lines of characters, which mimics basic clerical work. The sequences of characters became increasingly longer as they worked. 

Workers were paid on a piece-rate basis for each correctly entered line and were paid either £0,03 or £0,06 per line. 

The workers were paired off, and each pair was assigned to one of four categories: 

1. Same low piece-rate wage 
2. Same high piece-rate wage 
3. Different piece-rate wages with no explanation provided 
4. Different piece-rate wages explained by gender difference 

The workers in each pair were told how much their counterpart was paid. Pairs in the third category were not given any explanation for the difference in their wages, while workers in the fourth category were explicitly told that the difference in their wages was due to their gender. Men received the high piece-rate wage in half of all worker pairs in the fourth category, and women received high wages in the other half.

Women reacted more negatively than men 

“And the pattern we see is quite interesting and differs by gender. As for the lowest-paid workers, women react much more negatively to being discriminated against in category four compared with the lowest-paid workers in category three. Women’s labour supply goes down by 20% compared to wage equality in category one, but there is no difference between working under inequality in category three and equality in category one. In contrast, men do not react specifically to negative gender discrimination (category four vs. three), but we find some evidence that they reduce their labour supply relative to facing equal wages (category one),” Gagnon explains. 

Among the highest-paid workers, men react negatively to facing positive discrimination; for women, the effect of positive discrimination is not statistically significant (and if anything, the effect’s sign is positive). 

The article shows evidence that demotivation is the driving factor behind the decrease in labour supply caused by discrimination. 

In one of its studies, the article also shows that confirming the presence of negative gender discrimination is not necessary: increasing the probability that there is gender discrimination is enough to decrease labour supply. 

“There is a psychological effect here that might be overlooked. A major factor accounting for the fact that women earn less than men is that they work less due to reduced hours, maternity leave and so on, but our findings indicate that this may partly be a vicious cycle that needs to be broken,” said Gagnon. 

“Of course, what’s interesting in the controlled environment of our studies is that workers cannot punish their employer by changing their labour supply, so they work less even though they end up financially hurting themselves and no one else by doing so,” he says. 

What are the costs at the level of society? 

While the article shows that gender discrimination has a negative effect on the labour supply of individuals, it doesn’t address the extent to which the gender wage gap might explain the reduction in labour supply at the society level. This would be a fruitful avenue for future research, the researchers behind the study conclude. 

Using a survey of 401 women in the UK who stated that they had experienced moderate to extensive gender discrimination on the labour market, the researchers have identified some important indicators: 

Eighty-six per cent of respondents indicated that discrimination had affected their motivation; 61% indicated that their productivity had decreased; and 29% indicated that they had quit their job within around a year because of discrimination. 

“It could also be interesting for future research to look at how large the wage gap has to be before it begins to affect the labour supply,” Gagnon says.

We strive to comply with Universities Denmark’s principles for good research communication. For this reason, we provide the following information as a supplement to this article: