Gender has become a highly contentious issue in economics and economic policy. The gender pay gap in advanced economies is still embarrassingly wide, and women almost never make it to top management positions in major companies. According to the DIW Berlin (German link), in 2010 the 200 biggest publicly listed companies in Germany were employing 906 directors. 877 of them (96.8 percent) were male.
What’s the reason for this? As I will explain below, Economists have found a number of different interplaying factors.
One important issue is the biased view our society has about the strengths and weaknesses of males and females. We seldom publicly discuss the appearance of male managers. However, with regard to females, this is prevalent. For example, Deutsche Bank CEO Josef Ackermann recently caused a stir when he said appointing more women to the company’s board would make it “prettier and more colourful”.
Another outrageous example of how the ability of females is downplayed by stressing their appearance is a recent ad by the German car company Mercedes Benz. Mercedes is an important sponsor of the German Football Association (German link).
Since the Fifa Women’s World Cup is taking place in Germany this year Mercedes currently runs a campaign showing players of both the male and the female national team.
A nice idea, you might think. However, the way Mercedes is doing it is hair-raising. In the current edition of “11 Freunde”, a rather upmarket monthly magazine on football, on page 23 there is a large ad about the campaign: “Mercedes-Benz and the female national football team: Jointly going for the title”.
Bayern Munich’s midfielder Sebastian Schweinsteiger is shown in a track suit in front of an expensive Mercedes car. And what about the girls? Well, they care about their beauty, you know.
A female player (embarrassingly, I have no idea who she is and the photo does not have any caption. At least the two female players named in the ad – Linda Bresonik and Fatmire Bajramaj - and the manager Silvia Neid look different than the girl in the photo to me) is shown as her make up is being applied.
(Update: The player shown in the Mercedes ad is Kim Kulig, a forward and mitfielder with HSV and – according to Fifa – “one of the brightest young stars in German women’s football”. She’s already won two international titles: the U-20 World Cup in 2010 as well as the Euro Championship in 2009. - Many thanks to my German colleague Mark Renner as well as the blog “Mädchenmannschaft” for pointing this out to me.)
Of course “Schweini” (as well as all the other male players) were using makeup for the photo shootings as well. Strangely enough, however, Mercedes decided to use a photo with Kim Kulig.
From my point of view, the implicit message of this ad is clearly: “Men – great ability (track suit) – success (expensive car)”, “Women – we don’t care about her abilities on the pitch (no reference to football), but, hey, she’s a looker, isn’t she?
This is utterly unbelievable. But Mercedes is in good company. In 2004 Fifa president Sepp Blatter has urged women footballers to wear skimpier kits to increase the popularity of the women’s game. He said:
“Let the women play in more feminine clothes like they do in volleyball. They could, for example, have tighter shorts. Female players are pretty, if you excuse me for saying so, and they already have some different rules to men – such as playing with a lighter ball.”
Here in the UK Andy Gray and Andy Burton, two popular TV commentators, have recently been recorded quipping about the beauty and (presumed) inability of female assistant referee Sian Massey (off-air). Burton described her as “a bit of a looker”, and both agreed that she was not up to the job.
On a different occasion, Gray was recorded saying:
“Can you believe that? A female linesman. Women don’t know the offside rule.”
Sky sacked Gray and Burton after their remarks had been made public.
What do have economists have to say with regard to all of this? Well, this is how economist Peter Riach summarises Gary Becker’s theory on discrimination in a survey article entitled “Discrimination in the Labour Market”:
employers, their customers and/or “mainstream” employees may have a distaste for interaction with some pariah group and are prepared to make an economic sacrifice to avoid them. For example a situation could arise where women with equivalent productivity were available at a lower wage than men, but were rejected because of the employers’ distaste for female employees.
Additionally, empirical papers show that the lack of female role models and the lack of mentoring are partly to blame. Hence, the mindset behind the Mercedes ad is undoubtedly one reason for the persistent gender pay and achievement gap.
However, outright discrimination is not the only reason for this. There are several other factors:
Different attitudes with regard to competition
In a very famous paper „Do Women Shy Away From Competition? Do Men Compete Too Much?“ Muriel Niederle and Lise Vesterlund have shown that men and women of the same ability differ in their selection into a competitive environment. Niederle and Vesterlund set up a laboratory experiment. Participants were asked to add up numbers and could choose how they were paid. They could either opt for a noncompetitive piece rate or for a competitive tournament incentive scheme. The results of the experiments were staggering:
“Although there are no gender differences in performance, men select the tournament twice as much as women when choosing their compensation scheme for the next performance. While 73 percent of the men select the tournament, only 35 percent of the women make this choice. This gender gap in tournament entry is not explained by performance, and factors such as risk and feedback aversion only play a negligible role. Instead, the tournament entry gap is driven by men being more overconﬁdent and by gender differences in preferences for performing in a competition. The result is that women shy away from competition and men embrace it.”
This different attitude towards competition is potentially very relevant since promotion decisions in companies resemble highly competitive tournaments where a number of people are competing to chase very few top positions and only one person can win.
Evren Örs, Frédéric Palomino und Eloic Peyrache have found some very interesting empirical evidence for this hypothesis. They’ve taken the competitive entrance exam for admission to the Master of Science in Management at HEC School of Management in Paris as an example.
This top-ranked French business school accepts about 250 students each year. The school picks their students in a complex selection process which includes written and oral exams on a wide variety of subjects. Among other things, the candidates are being tested in mathematics and general culture, history and geography as well as two foreign languages. The results of the paper “Performance Gender-Gap: Does Competition Matter?” are quite spectacular as well:
“We find that men perform better than women in this competitive exam despite the fact that, in the same cohort of candidates, the females performed significantly better at an earlier pass/fail type of national exam (the baccalauréat) and, once admitted, during the first-year of their studies (composed of a series of pass/fail courses).”
Even in advanced economies, women are still primarily responsible for child care and housework duties. Francine Blau with Cornell University, who has been awarded the prestigious IZA Price in Labour Economics in 2011, has gathered empirical evidence that this lowers labour market attachment and limits employment opportunities.
Labour market institutions
There also is a close link between gender inequality in pay and labour market institutions, as Francine Blau and Lawrence Kahn have shown. This is how the IZA award committee describes this work:
“A comparative analysis for several OECD countries reveals that in about half of the countries studied, the gender pay gap is smaller than in the United States. According to Professor Blau, gender-specific factors, such as female qualification levels, labour market participation and occupational segregation by gender, could not explain why the U.S. does not perform better in an international comparison, since these factors are often more favourable than in other countries. Instead, her evaluation shows that country differences in gender pay gaps are intimately linked to the level of wage dispersion in a country (American Economic Review, 1992 [“The Gender Earnings Gap: Learning from International Comparisons”). In a later co-authored paper in the Journal of Political Economy (1996) [“International Differences in Male Wage Inequality: Institutions versus Market Forces”], Francine Blau investigates how the relationship between gender wage gaps and the degree of wage dispersion in a country can be explained by differences in labour market institutions. Compared to other countries, union coverage and the minimum wage are rather low in the U.S. Both centralised pay-setting institutions tend to reduce wage variation across firms and industries. The lack of such institutions in the U.S., where wages are more likely to be determined at a decentralised level, creates a much larger wage penalty for those with lower qualifications. “
Unfortunately, bashing Mercedes and sacking sexist sports commentators won’t be sufficient to achieve real gender equality.
Update: If you’re wondering how many women are on the Board of Directors and the Supervisory Board of Daimler AG, the answer is here. 19 of the 20 members of th Supervisory Board are male. The sole exeption is Sari Baldauf, who has been a member of the Supervisory Board since 2008. With regards to the Board of Management, until February 16th 2011 all six memebers were are male. The a revolutionary thing happend: 128 years after Daimlers first predecessor company Benz & Cie., Rheinische Gasmotoren-Fabrik was founded by Carl Benz in Mannheim-Waldhof, a woman was appointed to Daimler’s Board of Management: Christine Hohmann-Dennhardt. She is responsible for Integrity and Legal Affairs. Given the fact that Hohmann-Dennhardt has been a judge of the First Senate of the Federal Constitutional Court for 12 years, that’s quite an appointment.
(I wonder if it took so long because they had to refurbish the top-excecutive floor in the companies headquarter before. Have there been women’s toilets before?) The next whammy came in March: A a second woman, Petraea Heynike, has been nominated for the supervisory board. In a few months time 12 % of the 26 board members wil be female. That’s still quite poor, but compared to most other large German corporations, that’s way above average. The times, they are a-chaning. Let’s hope the ads will follow suit.
Another remark on the Mercedes ad: It’s really unbelieveable how Mercedes-Benz has bungled their ad regarding their Fifa Women’s World Cup campaign. As I learn from the text, the campaign will mainly be distributed on the internet. Social media’s great, you know. Unfortunately, however, they forgot to mention any URL. Bloody amateurs! I’m really glat that I’m not a Mercedes shareholder. Otherwise I would be really upset how those guys are squandering my money.