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Ellen K. Nyhus Empar Pons University of Agder University Valencia

Non-cognitive traits and the gender wage gap. Ellen K. Nyhus Empar Pons University of Agder University Valencia. INTRODUCTION AND MOTIVATION. Research Question. Evidence shows that women receive lower wages than men.

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Ellen K. Nyhus Empar Pons University of Agder University Valencia

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  1. Non-cognitive traits and the gender wage gap Ellen K. Nyhus Empar PonsUniversity of Agder University Valencia

  2. INTRODUCTION AND MOTIVATION Research Question Evidence shows that women receive lower wages than men Do non-cognitive traits contribute towards explaining the gender wage gap? • Evaluate which part of the gender wage gap is due to gender differences in characteristics (explained part) and which part is due to gender differences in returns to these characteristics (unexplained part) • Observe how the explained and the unexplained part change with the inclusion of the non-cognitive traits in the analysis - Oaxaca-Blinder decomposition of the wage gap Ellen K. Nyhus / Empar Pons

  3. INTRODUCTION AND MOTIVATION INTRODUCTION AND MOTIVATION We analyse the effects of some non-cognitive traits Locus of Control We expect internals to have higher wages than externals since they would be more motivated and they would be rewarded for this Consideration of Future Consequences (CFC) We expect a positive relationship between CFC and wages. CFC will be incentive enhancing since it will increase the individual’s valuation of keeping a job and therefore make them avoid behaviour that may result in its termination. Employers reward them for this The Big-5 Personality Traits Extraversion; Emotional Stability; Agreeableness; Conscientiousness and Openness to Experience (Intellect) Ellen K. Nyhus / Empar Pons

  4. INTRODUCTION AND MOTIVATION The Big-5 Personality Traits Based on previous findings regarding productivity and use of hierarchy negotiation tactics we expect to find: • Positive relationships with wages Emotional stability Conscientiousness Intellect Negative relationship with wages Agreeableness • Ambiguous relationship with wages Extraversion Ellen K. Nyhus / Empar Pons

  5. INTRODUCTION AND MOTIVATION Gender differences • Gender differences in non-cognitive scores: Schmitt et al (2008): 55 countries. Women report higher levels of neuroticism, extraversion, agreeableness and conscientiousness Semykina & Linz (2007): men are more likely to exhibit an internal locus of control and need for challenge. Women are more likely to exhibit an external locus of control and need for affiliation Lund et al (2007): Women are more likely to use social display/networking tactics for getting ahead in the labour market. Men are more likely to use Deception/Manipulation and Industriousness/knowledge tactics • Gender differences in returns to non-cognitive traits: Nyhus and Pons (2005): agreeableness is associated with lower wages for women Mueller and Plug (2006): contrary to Nyhus and Pons, men are those punished for agreeableness in the labour market Semykina & Linz (2007):returns to internal locus of control and need for affiliation are higher for women We expect to find similar gender differences Ellen K. Nyhus / Empar Pons

  6. INTRODUCTION AND MOTIVATION Gender wage gap and the non-cognitive traits • Semykina and Linz (2007) for Russia: variation in the scores of locus of control and need for affiliation/challenge explains as much as 8% of the gender wage gap • Mueller and Plug (2006) for US: 3-4% of the gender gap is explained by differences in the Big-Five personality traits, including differences in traits and trait returns Our objective is to evaluate the role of locus of control, time preference and the Big-Five personality traits in explaining the gender wage, using Dutch data Ellen K. Nyhus / Empar Pons

  7. DATA AND MEASUREMENT Data • DNB Household Survey 2006 • Panel of 2000 households representative of the Dutch population with respect to socio-economic variables • Data collected through the Internet panel of CentERdata • Questionnaires that may be answered in 30 minutes or less are transmitted to the households on a weekly basis • The DNB-HS includes detailed information about respondents’ labour market details, family situation as well as items designed to tap various psychological concepts • Due to 1) panel attrition, 2) missing data due to respondents not filling in all relevant questionnaires, and 3) exclusion of respondents who do not work (housewife, retired), the sample size was reduced to 252 women, 370 men Ellen K. Nyhus / Empar Pons

  8. DATA AND MEASUREMENT Non-Cognitive Measures • Strathman et al’s (1994), “Consideration of Future Consequences” scale, a measure of the extent to which people consider distant versus immediate consequences of possible behaviours. • Furnham’s (1986), “Economic Locus of Control” scale (ELOC), a measure of locus of control specific to financial behaviours. 2 dimensions - Internal scale - Believing in Chance scale Computed average score for the 10 items comprising each of the factors • A 50-item scale drawn from the International Personality Item Pool intended to assess the “Big-Five Personality Traits”, Goldberg (1999) Ellen K. Nyhus / Empar Pons

  9. METHODOLOGY 1) Obtain the mean scores for men and women 2) OLS estimates of wage equations by gender LnWnatural log of the hourly wage. Annual gross salary divided by the number of working weeks and then by the number of hours worked each week. Employees with more than one employer excluded X includes - Human capital • Highest level of education completed (high, middle and low) • Experience in the labour market • Tenure - OtherControls • Family structure and other socio-economic information • Workplace characteristics - Non-cognitive traits Ellen K. Nyhus / Empar Pons

  10. METHODOLOGY 3) Gender wage gap decomposition How much of the wage gap is due to differences in characteristics and how much is due to different returns to these characteristics? + Observed wage gap Effects due to differences in characteristics: tthe explained part Effects due to differences in coefficients: unexplained part Often considered as reflecting discrimination but variables omission problems Ellen K. Nyhus / Empar Pons

  11. METHODOLOGY 3) Gender wage gap decomposition Neumark (1988): the non-discriminatory wage is a vector of rates of return obtained by estimating earnings functions based on thepooled sampleof the two demographic groups, pool Explained part Unexplained part Ellen K. Nyhus / Empar Pons

  12. RESULTS Main statistics Men rate themselves as more emotional stable, with more intellect and a higher tendency to believe in chance than women do, while women rate themselves as more agreeable and conscientious than men do

  13. RESULTS Wage equation including human capital and additional controls Significant difference in Believing in Chance

  14. RESULTS Calculating differences in characteristics and cofficients from the main statistics and the regresion results just presented, we can obtain the gender wage gap decomposition Raw differential 0.2457 100% Unexplained part Due coefficients (diff. in returns) 0.1540 62.7% Explained part Due endowments (diff. in characteristics) 0.0916 37.3% Ellen K. Nyhus / Empar Pons

  15. RESULTS Gender wage gap decomposition: How much the non-cognitive traits explain 11.5% are due to differences in non-cognitive traits (Agreeableness and Intellect) and less than 0.5% to differences in returns

  16. RESULTS Why men earn more than women? Regarding the main non-cognitive traits effects, • Women score higher for agreeableness than men do but this trait is punished….so women earn less than men do • Men score higher intellect than women do and this trait is rewarded ……so men earn more than women do Ellen K. Nyhus / Empar Pons

  17. RESULTS Gender wage gap decomposition: The non-cognitive traits role • The inclusion of non-cognitive traits in the wage model reduces the unexplained gender wage gap in 12.5 points

  18. CONCLUSIONS • Around 12% of the gender wage gap are due to differences in non-cognitive traits (scores and returns) • Inclusion of the non-cognitive traits allows for a reduction of the unexplained part of the gender wage gap • A part of the unexplained term in the traditional human capital analysis may not be due to discrimination but rather caused by the omission of important variables as, for example, the non-cognitive traits Ellen K. Nyhus / Empar Pons

  19. Thank you for your attention Non-cognitive traits and the gender wage gap Ellen K. Nyhus Empar PonsUniversity of Agder University Valencia

  20. INTRODUCTION AND MOTIVATION Background • Bowles, Gintis & Osborne (2001)argue that some non-cognitive traits may beincentive-enhancingin the employer-employee relationship, and the employer will reward them 1) Personal self-efficacy (locus of control) 2) Time preference 3)Utility from work • Previous studies have found relationships between with theBig-Five personality traitsand earnings through 1) Productivity 2) Use of Hierarchy Negotiations tactics Ellen K. Nyhus / Empar Pons

  21. INTRODUCTION AND MOTIVATION Locus of Control LC (Rotter, 1966) reflects a generalised belief an individual has regarding who controls important events in his/her live. Internals: individuals who believe that the outcomes they experience are consequence of their own behaviour. Externals:individuals who believe that the outcomes they experience are consequence of fate • Goldsmith, Veum & Darity (2000):Internals are typically more motivated to perform than externals, since they perceive themselves to be able to produce desired outcomes • Groves (2005); Heckman, Stixrud & Urzua(2006); Semykina &Linz (2007): Internals tend to have more success in the labour market in terms of having higher earnings We expect internals to have higher wages than externals Ellen K. Nyhus / Empar Pons

  22. INTRODUCTION AND MOTIVATION FutureOrientation Consideration of future consequences (CFC)is intended to describe differences in the extent to which a person is likely to consider distant outcomes when choosing his/her present behaviour CFC will be incentive enhancing since it will raise the individual’s valuation of keeping a job in the future and therefore make them avoid behaviour that may result in its termination, Bowles, Gintis & Osborne (2001) We expect a positive relationship between CFC and wages Ellen K. Nyhus / Empar Pons

  23. INTRODUCTION AND MOTIVATION The Big-5 Personality traits • Extraversion: encompasses preference for human contact and attention and the wish to inspire others • Emotional stability: degree to which an individual may be described as tense, insecure, anxious, depressed and emotional rather than calm • Agreeableness:degree to which an individual is co-operative, warm and agreeable versus cold, disagreeable and antagonistic • Conscientiousness: Degree to which an individual is hardworking and organized and tends to follow rules and keep engagements • Openness to experience: person’s propensity to make independent decisions and their degree of initiative and control. Intellect: aspects such as perceptive, reflective, being imaginative, curious and broad-minded. The Intellect is nota measure of intelligence (small positive correlations with IQ), John & Srivastava (1999) Ellen K. Nyhus / Empar Pons

  24. INTRODUCTION AND MOTIVATION The Big-5 Personality Traits AND Productivity • Salgado (1997): Meta-study showed relationship between the big-5 personality traits and productivity. Conscientiousness and emotional stability are positively associated with productivity across occupations • Employers’ behaviour making significant investments in testing the personality of potential employees and using the results in the screening process Ellen K. Nyhus / Empar Pons

  25. INTRODUCTION AND MOTIVATION The Big-5 Personality Traits AND Hierarchy Negotiations Tactics • The means by which the individual tries to achieve his or her goals in a social environment • A mediating construct between personality traits and outcomes related to the goal of ”getting ahead” Ellen K. Nyhus / Empar Pons

  26. The Big-5 Personality traits AND INTRODUCTION AND MOTIVATION Hierarchy Negotiations tactics • Deception/Manipulation:Use deceptive self-promotion, derogate others, boast, aggress, use sex, exclude others, ingratiate self with superiors • Social Display/Networking:help others, cultivate friendship, attract opposite sex, enhance appearance, social participation, enhance appearance, display positive social characteristics • Industriousness/Knowledge:display knowledge, work hard, advance professionally, obtain education or knowledge, organize, strategize, assume leadership Kul-Heku & Buss (1996); Lund et al (2007) Ellen K. Nyhus / Empar Pons

  27. INTRODUCTION AND MOTIVATION Kul-Heku & Buss (1996); Lund et al (2007) WAGES + NS - Industriousness Knowledge Social Display Networking Deception Manipulation + Extraverted + Emotional stability +Openness/Intellect - Agreeableness + Conscientiousness + Extraverted +Openness/Intellect +/- Agreeableness + Conscientiousness + Extraverted - Emotional stability - Agreeableness - Conscientiousness Ellen K. Nyhus / Empar Pons

  28. DATA AND MEASUREMENT Non-Cognitive Measures: stability and endogeneity • Age effects: regressing the non-cognitive traits variables against age (as well as the second and third order term of age) and keeping the predicted residuals as measures of the non-cognitive traits. • Labour/life experience effects: We lack the necessary information to control for the fact that labour specific characteristics may affect the non-cognitive variables We have to be cautious in any causal interpretation of results Ellen K. Nyhus / Empar Pons

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