Numerous theories claim to explain the gender gaps in pay and promotions. But one of the most compelling is the ‘the old boys’ club’ or perhaps more accurately the “bromance” potential – the supposed advantage men have schmoozing with other, more powerful men. Until now, most of the evidence for this has been anecdotal, but a new Harvard paper, The Old Boys’ Club: Schmoozing and the Gender Gap, by Zoe Cullen and Ricardo Perez-Truglia finds quantitative support for this idea…
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Numerous theories claim to explain the gender gaps in pay and promotions. But one of the most compelling is the ‘the old boys’ club’ or perhaps more accurately the “bromance” potential – the supposed advantage men have schmoozing with other, more powerful men. Until now, most of the evidence for this has been anecdotal, but a new Harvard paper, The Old Boys’ Club: Schmoozing and the Gender Gap, by Zoe Cullen and Ricardo Perez-Truglia finds quantitative support for this idea.
Research Data and Design
Cullen and Perez-Truglia use data dating from 2015-18 from a large Asian bank that has a similar profile to western companies in terms of gender gaps in pay and hierarchy. The bank has 14,736 unique employees, of which 1,269 held a managerial role at some point.
Their key focus is on teams that experience changes in managerial personnel. The idea is to track the performance of employees in teams where initially the manager was female, but then was replaced by a male. By looking at a large enough sample of such switches (they have over 10,000 events), they can determine whether male employees having a manager of the same gender makes a difference to their pay and promotion prospects.
Does It?
The punchline is a resounding ‘yes’. When male employees are assigned to male managers, they are promoted faster in the following years than they would have been if they were assigned to female managers. Meanwhile, female employees have the same career progression regardless of the manager’s gender.
In terms of magnitude, by around two to three years after switching from a female manager to a male one, male employees experience 13% higher pay compared to male employees that retained a female manager. The researchers find that removing this advantage would reduce the gender gap in pay grades by 38%. And that’s huge.
Perhaps male managers somehow get the best out of male employees. However, the researchers find no evidence for this. There is no improvement in the retention, effort, or performance of these male employees.
So Why the Rewards?
Cullen and Perez-Truglia find the most plausible explanation is the increased social interaction male employees get with their new male manager. And they base this on the observation that the most pronounced increases in pay and promotion only happen a year or so after the manager change. If the reason was purely sexism, the effects, they suggest, would be more immediate.
Moreover, they find that seating arrangements matter. For male employees who were not in close proximity to their new male manager, they found no effect on their pay. And vice versa. This was likely due to the social interaction being nearby allowed. Survey data on how breaks were spent corroborated this since male employees would get more break time with male managers.
Perhaps the most compelling evidence for the socialisation thesis was looking at smokers. The researchers looked exclusively at male employees and male managers. They found that if the manager switch involved moving from a non-smoking manager to a smoking one, then the pay and promotion boost was comparable to that of switching from a female to male manager. The ability for smoking employees to take smoking breaks with their manager (and hence socialise) was no doubt the causal mechanism for this.
Bottom Line
This is a powerful study that gives a clearer understanding of how a gender gap can emerge. It appears less to do with outright sexism and more to do with the way men socialise with each other. One peculiarly interesting outcome of the study is that similar effects are not found among female employees and female managers. The apparent absence of an ‘old girls’ club’ would be an interesting area of future research. Leaving that aside for now, however, a clear implication of the study is for male managers to be aware of how much time they spend with their male and female employees. Equalising that could help address some of the gender gaps that exist in the labour market.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)