REALITY BITES

REALITY BITES - Companies might do better to employ more women because, being both cheap and cheerful, they are better value than money-grabbing men.

by Richard Reeves, a consultant and business writer
Last Updated: 31 Aug 2010

Companies might do better to employ more women because, being both cheap and cheerful, they are better value than money-grabbing men.

Like the poor, the pay gap between men and women seems always to be with us. After a period following the Equal Pay Act in which women's paypackets got heavier, progress towards a balancing of the wage scales has stalled. The hope that time would heal the divide is fading - even younger, well-educated women are earning less than their male peers. At the same time, there seems little appetite in the Government for radical action on this score.

Small wonder that equal pay campaigners are so glum. But - City lawsuits aside - women themselves are not. They consistently report higher levels of job satisfaction than men, and are even happy with their pay levels, despite the fact that the full-time earnings of women are stuck at 80% of male wages.

The explanation for this paradox is that women are less motivated by money than men. A woman is less likely to be thrown into a downwards spiral of misery because her salary hasn't topped pounds 50k. But it also means that her salary is less likely to top pounds 50k, because she, like most women, is not obsessed with the size of the number in the bottom right-hand corner of her payslip.

These differences between men and women in the weight they place on material success are becoming important factors in explaining the pay gap. Two papers presented at this year's Royal Economic Society annual conference threw much-needed new light on this age-old problem. Alan Manning, a professor at the LSE, has subjected the wage distribution to an exhausting set of economic tests in an effort to find out why the pay gap has stopped closing.

He showed that although women and men now start their careers at absolute pay parity, within a few years men are pulling ahead - and they stay ahead throughout the life-cycle.

Why? Lots of the traditional explanations don't hold water. Manning's analysis suggests that childrearing is now less of a drag on female wages, and that skills, training, mobility and promotion chances explain none of the differential. He concludes that the main driver of inequality is 'within-job wage increases': in other words, men are more likely than women to get more money for staying in the same job. After an hour-long tour de force of the economics of inequality, Manning speculated that perhaps men were 'more bolshie' than women about their salaries.

Anecdotal evidence supports this claim; men seem to ask for more money much more often than women. The American writer John O'Hara once sent a letter to the editor of the New Yorker (for whom he worked) in which he repeated: 'I want more money. I want more money. I want more money.' But why should this be so? Why are men so much more grasping? Again, the evidence is that because women are pretty content with their lot, they feel less need to bang petulantly on the boss's door every other week.

The second Economic Society paper, presented by Maureen Paul of Warwick University, showed that women are significantly more likely than men to feel they are paid 'fairly'. One of the implications of this research, she said, was that companies would do better to hire more women because - being both cheap and cheerful - they were better value for money than money-grabbing, miserable men.

The sources of women's job satisfaction are not principally financial.

Women rank social interaction, meaningful work and friendship more highly than men, who cite financial factors. So the pay gap is now - to use Manning's technical terminology - about the relative levels of bolshiness of men and women when it comes to money. Money is more important to men, so they end up with more of it.

But who are the real losers? Men may have more money but they are less happy. Beyond a certain modest income threshold, there is clear evidence that money does little or nothing to make people feel better. Once you are financially comfortable, friendship, family life and meaningful work become much more important to your happiness.

Women seem to have rumbled this a bit sooner than men. Given that the UK is an affluent society, a 10% pay rise will do little for most people's happiness; once they are used to the new salary, they'll need another 10%. So why expend all your energy on an objective that yields so little return?

Everyone knows Maslow's hierarchy of needs. As a society, it is obvious that we should have shifted beyond the stages of material acquisition and be moving up to what he dubbed 'self-actualisation'. It seems as if half the population is moving up, while the other half is stuck. Women, putting non-material values higher up their list, now gaze down at men on their perch lower in the hierarchy.

The pay gap can now be seen as a sign of women's success in rejecting a flawed materialistic philosophy. And the truly progressive way to close it is not to encourage women to be as short-sighted as men; it is to encourage men to abandon their obsolescent faith in the power of money. It is men who need to catch up with women.

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