Job-Hopping Toward Equity

Changing employers can help narrow the gender gap in executive compensation.

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Progress on shrinking the gender pay gap has been glacially slow. Though it has narrowed somewhat over the past 40 years, stark inequities persist. In 1980, women earned 64 cents for every dollar that men earned. By the end of the decade, that amount had increased to 74 cents, but since then, gains have been much more modest.1 As of 2018 (nearly 30 years later), the pay disparity was 81.6 cents on the dollar.2

Movement toward parity has been sluggish in all segments, but it’s slowest of all for people at higher earning levels, including managers and executives. Much of the research on this problem examines internal labor markets — that is, who gets promoted within organizations and how equitably they are compensated when they move up.3 However, the external market is becoming increasingly important in filling senior roles.4 Between 1970 and the early 2000s, the percentage of CEOs brought in from the outside jumped from 15% to 33% of all CEO hires.5 Clearly, we need to study the context of external job moves if we want a deeper understanding of current compensation trends.

For managers and executives, changing employers has been linked to larger increases in pay. So we set out to explore whether women — particularly those in senior roles — can use external moves to increase their own compensation and perhaps narrow the gender pay gap.

Existing survey-based studies suggest that gains from switching employers are less pronounced for women than for men.6 These studies broadly compare leavers versus stayers by gender. However, leavers and stayers may have different attributes that drive pay increases — and those differences may vary by gender.

For such reasons, we think it’s necessary to take a finer-grained look at the issue by asking some pointed questions.

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References

1. F.D. Blau and L.M. Kahn, “The Gender Wage Gap: Extent, Trends, and Explanations,” Journal of Economic Literature 55, no. 3 (September 2017): 789-865.

2. M. Leisenring, “Women Still Have to Work Three Months Longer to Equal What Men Earned in a Year,” U.S. Census Bureau, March 31, 2020, https://census.gov.

3. One of the few studies that tries to fill the gap in research on external job moves is C. Quintana-García and M.M. Elvira, “The Effect of the External Labor Market on the Gender Pay Gap Among Executives,” ILR Review 70, no. 1 (January 2017): 132-159.

4. M. Bidwell, F. Briscoe, I. Fernandez-Mateo, et al., “The Employment Relationship and Inequality: How and Why Changes in Employment Practices Are Reshaping Rewards in Organizations,” Academy of Management Annals 7, no. 1 (June 2013): 61-121.

5. K.J. Murphy and J. Zábojník, “Managerial Capital and the Market for CEOs,” SSRN, April 2007, https://papers.ssrn.com.

6. For example, see G.F. Dreher and T.H. Cox, “Labor Market Mobility and Cash Compensation: The Moderating Effects of Race and Gender,” Academy of Management Journal 43, no. 5 (October 2000): 890-900; and J.M. Brett and L.K. Stroh, “Jumping Ship: Who Benefits From an External Labor Market Career Strategy?” Journal of Applied Psychology 82, no. 3 (June 1997): 331-341.

7. T.L. Botelho and M. Abraham, “Pursuing Quality: How Search Costs and Uncertainty Magnify Gender-Based Double Standards in a Multistage Evaluation Process,” Administrative Science Quarterly 62, no. 4 (December 2017): 698-730; and G.F. Dreher, J. Lee, and T.A. Clerkin, “Mobility and Cash Compensation: The Moderating Effects of Gender, Race, and Executive Search Firms,” Journal of Management 37, no. 3 (May 2011): 651-681.

8. R.M. Fernandez and M. Abraham, “From Metaphors to Mechanisms: Gender Sorting In(to) an Organizational Hierarchy,” research paper 4779-10, MIT Sloan School of Management, Cambridge, Massachusetts, April 2010; and R.M. Fernandez and M. Abraham, “Glass Ceilings and Glass Doors? Internal and External Hiring in an Organizational Hierarchy,” research paper 4895-11, MIT Sloan School of Management, Cambridge, Massachusetts, January 2011.

9. B. Groysberg, P. Healy, and E. Lin, “Determinants of Gender Differences in Change in Pay Among Job-Switching Executives,” ILR Review, published online June 2020, forthcoming in print.

10. L.M. Leslie, C.F. Manchester, and P.C. Dahm, “Why and When Does the Gender Gap Reverse? Diversity Goals and the Pay Premium for High Potential Women,” Academy of Management Journal 60, no. 2 (April 2017): 402-432.

11. K.S. Lyness and D.E. Thompson, “Climbing the Corporate Ladder: Do Female and Male Executives Follow the Same Route?” Journal of Applied Psychology 85, no. 1 (February 2000): 86-101.

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