Arguing over pay can be one of the most stressful parts of a job and can leave workers with lingering doubts. The process also fosters inequality: when employers negotiate wages separately with each newly hired worker – instead of paying similarly productive workers in the same job the same – women get paid less than men.
On average, women earn 5 percent less than men at employers that allow this kind of individual bargaining for wages, according to new research funded by the Upjohn Institute’s Early Career Research Awards program. There is no gender gap at employers who don’t negotiate individually.
The research focuses on Germany, where researchers Sydnee Caldwell, Ingrid Haegele and Jӧrg Heining found that 80 percent of jobs allow some form of individual pay negotiations. They describe their research in a paper and policy brief. Caldwell and Haegele have received Upjohn Institute Dissertation Award honors in 2019 and 2022, respectively.
The researchers surveyed 772 employers and, separately, nearly 10,000 workers, from all sectors across the country and linked them to balance-sheet information and detailed government employment records. They find that employers who negotiate pay individually vary the pay 6 to 12 percent between similar workers. Experienced workers and managers are most likely to be able to bargain for wages.
At employers that use individual negotiations in setting pay, workers who ask for more money usually get it. Although only a third of workers asked their employers to increase their initial offer, 72 percent of those who did were successful.
The researchers inserted a hypothetical scenario in the survey telling people the salary range for a position and then asking them what salary they would ask for. Even with this range provided, women asked for less than men. These gender differences in bargaining also continue later, on the job, where women are 6 percentage points less likely to successfully negotiate a pay raise.
The differences don’t arise from women negotiating for benefits other than wages. “Rather,” the researchers write, “the findings are most consistent with a story in which individual women – most of whom would advise other women to bargain if presented with an outside offer – fail to ask for more because they find it uncomfortable.”
Germany, like many U.S. states, has banned employers from asking workers for their salary histories. However, the researchers find, this doesn’t eliminate gender gaps in hiring – most workers disclose their salary histories, and their salary expectations, voluntarily.