How the Gender Pay Gap Impacts Consumer Behavior

Women all over the world have been fighting for equal pay for centuries. However, the gender pay gap, defined as women earning less money than men for the same work, is still a worldwide phenomenon. Even though many people feel strongly about this issue, not all consumers change their purchasing behavior accordingly; hence it remains unclear how disclosing firms’ gender pay gap influences consumer behavior.

Researchers from the University of Lausanne, University of San Francisco, University of Toronto, and Harvard Business School, in a six-part study, investigated how gender influences consumer psychology in response to unequal pay.

Methodology: The Impact of Disclosing Gender Pay Gaps on Consumer Behavior

Study 1: The purpose of this study was to explore how revealing companies’ gender pay gaps impacted consumers’ willingness to pay and whether this differed by gender. 300 participants were assigned to one of the following conditions:

neutral = participants were given an overview of Adidas
inequality = participants were told about the gender pay gap of Adidas employees

The participants were then asked their willingness to buy products from Adidas. Overall, the findings suggested that all consumers were less willing to buy Adidas in the inequality condition and that the difference between the two conditions was significantly larger for women than men.

Study 2: Here, the researchers sought to explore how consumers’ level of necessity for a product influences their behavior.

800 participants were given links to a google news website that displayed four articles about Uber. In the neutral condition, these were four random articles related to Uber. In the inequality condition, two articles discussed Uber’s gender pay gaps. Additionally, half the participants were asked if they would get an Uber if they were a 20-min walk from work, and there was a 10% chance of rain, and the other half got asked the same question but with a 90% chance of rain.

Almost all the participants in the inequality and 90% chance of rain condition would get an Uber, suggesting that consumers are discouraged from purchasing from a company with significant gender pay gaps exclusively when this does not incur substantial costs to the self.

Study 3: In the third study, 840 participants were assigned to either the neutral condition where participants were introduced to Uber or the inequality condition where they were told that women Uber employees get paid 33% less than men.

The participants were then asked to bid for a $5 Uber card. Unsurprisingly, in the inequality condition, participants had significantly lower bidding prices; these were also significantly lower for females than males.

Study 4: In the fourth study, the researchers explored how the impact of revealing the gender pay gap on consumer behavior compares to the disclosure of other business transgressions. Here, 801 participants were asked to imagine they wanted to purchase a new set of headphones and that they had found a retailer that was currently selling some below their budget. Then the participants were told one of the following business transgressions regarding the company:

Uses child labor
Illegally dumps their waste
Came to an illicit agreement with competitors
Has an anti-family culture
Engages in wasteful energy use practices
Discriminates against underprivileged groups in their hiring practices
Has been accused of sexual impropriety
Pays their average female employee compared to their male employee significantly less

The results indicated that the gender pay gap condition significantly impacted consumer behavior more negatively than having an anti family culture and wasting energy. However, the child labor and discrimination of minority groups’ conditions significantly harmed more consumer willingness to pay than the gender pay gap. Moreover, out of all the business transgressions, the consumer reaction of revealing gender pay gaps was the only one that was greatly dependent on the consumer’s gender.

Study 5A: Contrarily to the previous studies, the researchers examined real-world data regarding firms that have disclosed their employees’ salaries. The researchers examined consumer sentiment by analyzing 94,000 Twitter posts that mentioned 158 firms that had disclosed their employees’ salaries and then scored them on a scale of negative valence.

The results indicated that the bigger the gender wage gap disclosed, the more negative the tweets about the company were. This finding suggests that a systemic publication of the gender wage gap of companies is necessary to ignite consumer responses.

Study 5B: For the last study, the researchers obtained a set of 500 tweets that mentioned “gender gap” or “pay gap.” Then the account users were identified as male, female, or unidentifiable based on the names and pictures, and the tweets were scored on a negative valence scale. The results found that women respond more negatively to the gender wage gap issue and discussed it more often.

Results and Implications of the Gender Pay Gap

Overall, this paper indicates three crucial points regarding the influence of revealing the gender pay gap of a firm on consumer behavior:

Disclosing the gender pay gap negatively influences consumer willingness to buy, but this effect is greater for women
This negative effect is attenuated when consumers face relatively severe costs to the self
Women generally discuss more the gender pay gap on social media, and their comments are more negative

These results have important implications for governments that should consider the strong influence disclosing gender pay gaps has on consumers. In addition, firms should be aware that paying employees differently based on gender is not only ethically dubious but is also likely to cause severe financial harm.

Your Pop Neuro Consumer Behavior Insights

Revealing gender pay gaps could greatly harm a business, putting more pressure on firms to reduce gender inequality

The negative effect of the gender pay gap on consumer behavior is greater for women

Firms should investigate their consumers’ sentiment and purchasing behavior on social media

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References

Schlager, T., Mohan, B., DeCelles, K. and Norton, M., 2021. Consumers—Especially Women—Avoid Buying From Firms With Higher Gender Pay Gaps. Journal of Consumer Psychology, 31(3), pp.518-531.