ellen k. nyhus empar pons university of agder university valencia non-cognitive traits and the...

Ellen K. Nyhus Empar PonsUniversity of Agder University Valencia

Non-cognitive traits and the gender wage gap

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Research Question

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

INTRODUCTION AND MOTIVATION

Ellen K. Nyhus / Empar Pons

Evidence shows that women receive lower wages than men

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The Big-5 Personality Traits

Extraversion; Emotional Stability; Agreeableness; Conscientiousness and Openness to Experience (Intellect)



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

We analyse the effects of some non-cognitive traits

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The Big-5 Personality Traits

Based on previous findings regarding productivity and use of hierarchy negotiation tactics we expect to find:

• Positive relationships with wagesEmotional stability

Conscientiousness

Intellect

Negative relationship with wagesAgreeableness

• Ambiguous relationship with wagesExtraversion



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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



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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

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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

DATA AND MEASUREMENT


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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)



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1) Obtain the mean scores for men and women

2) OLS estimates of wage equations by gender

LnW natural 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

- Other Controls• Family structure and other socio-economic information • Workplace characteristics

- Non-cognitive traits

'XWln

METHODOLOGY


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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?

)(')'(lnln fmfmfmfm XXXWW

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

METHODOLOGY


mfffmmfm XXXWW '''lnln

Observed wage gap

+

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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 the pooled sample of the

two demographic groups, pool

)(')(')'(lnln fpoolfpoolmmpoolfmfm XXXXWW

Explained part Unexplained part

METHODOLOGY


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Men (370 observations)

Women (252 observations)

Mean Std. Dev. Mean Std. Dev.

Hourly wage 19.18 7.89 14.83 5.14

Log hourly wage 2.88 0.38 2.64 0.36

Extraversion 29.86 6.99 30.25 6.98

Emotional 36.14 6.52 33.83 5.87

Agreeable 37.51 5.00 40.68 4.80

Intellect 34.88 5.01 33.85 4.84

Conscientious 35.54 5.79 36.97 5.88

Future 50.37 8.40 50.27 8.62

Chance 20.25 5.21 19.44 5.32

Internal 31.80 5.53 31.43 5.30

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

Main statistics

RESULTS

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Wage equation including human capital and additional controls

men women

Extraversion 0.003 0.002

(0.308) [0.051] (0.515) [0.039]

Emotional -0.003 0.001

(0.348) [-0.046] (0.811) [0.014]

Agreeable -0.006 -0.010

(0.129) [-0.080] (0.046)* [-0.130]

Intelect 0.014 0.005

(0.000)** [0.179] (0.303) [0.068]

Conscientious -0.004 0.003

(0.175) [-0.063] (0.434) [0.048]

Future 0.002 -0.004

(0.327) [0.047] (0.148) [-0.084]

Chance -0.008 -0.006

(0.017)* [-0.111] (0.158) [-0.086]

Internal 0.003 -0.004

(0.281) [0.051] (0.327) [-0.058]

Adjusted R-squared 0.351 0.292

F test (Prob>F) 6,61 (0.000) 1,11 (0.347)

RESULTS

Significant difference in Believing in Chance

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RESULTS

)(')(')'(lnln fpoolfpoolmmpoolfmfm XXXXWW

Raw differential

0.2457

100%

Explained partDue endowments

(diff. in characteristics)

0.0916

37.3 %

Unexplained partDue coefficients(diff. in returns)

0.1540

62.7%


Calculating differences in characteristics and cofficients from the

main statistics and the regresion results just presented, we can

obtain the gender wage gap decomposition

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11.5% are due to differences in non-cognitive traits (Agreeableness

and Intellect) and less than 0.5% to differences in returns

Gender wage gap decomposition:How much the non-cognitive traits explain

RESULTS

Raw differential 0.2457 100 %

Due endowments Due coefficients

Non-cognitive Traits 0.0283 11.5117%

Non-cognitive Traits 0.0009 0.3825%

Extraversion -0.0007 -0.2690 Extraversion -0.0004 -0.1533

Emotional -0.0018 -0.7410 Emotional -0.0021 -0.8663

Agreeable 0.0212 8.6487% Agreeable 0.0036 1.4730

Intellect 0.0122 4.9790% Intellect -0.0015 -0.5970

Conscientious 0.0017 0.7042 Conscientious -0.0032 -1.3083

Future 0.0000 0.0000 Future 0.0018 0.7169

Chance -0.0046 -1.8687 Chance 0.0001 0.0434

Internal 0.0001 0.0584 Internal 0.0026 1.0742

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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

RESULTS


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The inclusion of non-cognitive traits in the wage model

reduces the unexplained gender wage gap in 12.5 points

RESULTS

Gender wage gap decomposition: The non-cognitive traits role

Model without non-cognitive traits

Model with non-cognitive traits

Gender Wage GapRaw differential 0.2457 100% 0.2457 100 %

Explained PartDue EndowmentsDifferences in Characteristics 0.0608 24.8% 0.0916 37.3%

Unexplained PartDue CoefficientsDifferences in Returns

0.1848 75.2% 0.1540 62.7%

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• 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

CONCLUSIONS


Thank you for your attention

Ellen K. Nyhus Empar PonsUniversity of Agder University Valencia

Non-cognitive traits and the gender wage gap

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Background

• Bowles, Gintis & Osborne (2001) argue that some non-cognitive

traits may be incentive-enhancing in 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 the Big-Five personality traits and earnings through

1) Productivity

2) Use of Hierarchy Negotiations tactics



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• 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

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

Locus of Control



We expect internals to have higher wages than externals

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Future Orientation

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



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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 not a measure of intelligence (small positive correlations with IQ), John & Srivastava (1999)



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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

The Big-5 Personality Traits AND



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Hierarchy Negotiations Tactics

The Big-5 Personality Traits AND


• 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”


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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)

The Big-5 Personality traits AND



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IndustriousnessKnowledge

WAGES

+ Extraverted + Emotional stability

+Openness/Intellect - Agreeableness + Conscientiousness

Social DisplayNetworking

+ Extraverted +Openness/Intellect

+/- Agreeableness + Conscientiousness

+ Extraverted - Emotional stability

- Agreeableness - Conscientiousness

Deception Manipulation

-+ NS


Kul-Heku & Buss (1996); Lund et al (2007)

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•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


Non-Cognitive Measures: stability and endogeneity


ellen k. nyhus empar pons university of agder university valencia non-cognitive traits and the...

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