Your pay is determined by the gender of your boss
Well, it isn’t really, but about one third of the gender pay gap could be defined by whether your boss is of the same gender as you are or not. This is the rather stunning result of a study by Zoe Cullen and Ricardo Perez-Truglia published in the American Economic Review in July.
They got access to HR data at a major Southeast Asian bank that included not only pay data and promotions but also data about smoking habits and the line manager of each employee. In that particular bank, about one third of men were smokers and 5% of women, which apparently is pretty close to the global average.
One thing that smokers do is step outdoors to have a cigarette and as every smoker knows, this is usually a social event when smokers chat about work and other things. In effect, going outdoors acts like a bonding exercise and if your boss smokes and you do, chances are that you run into each other from time to time during your cigarette break.
There is nothing nefarious about these joint cigarette breaks but guess what happens when the next promotion is coming up or the boss has to decide who gets a pay rise and who doesn’t? The chart below shows the average pay grades of smoking and non-smoking employees before and after a change in management from a non-smoking to a smoking manager. Note how smokers start to get promoted faster than non-smokers by a manager who also smokes. Again, nothing sinister going on here, just that familiarity breeds trust, and being trusted by your boss makes it more likely you get promoted.
Pay grade of smokers and non-smokers after management change from non-smoking to smoking manager
Source: Cullen and Perez-Truglia (2023)
Now look at the two charts below which show a shift from a female line manager to a male line manager (left chart) and from a male line manager to a female line manager (right chart). Male employees get ahead faster under a male line manager than under a female line manager and women the other way around.
Pay grade of employees after management change from female to male (left chart) and male to female (right chart)
Source: Cullen and Perez-Truglia (2023)
This gender effect is so strong that in the bank they studied, Cullen and Perez-Truglia could explain one third of the gender pay gap between men and women by this unconscious bias. That is huge and it shows how unconscious biases can have a substantial impact on the career progression of employees. It is well known that we all have a bias towards hiring people who are similar to us or that we can identify with in some respect. But this familiarity bias doesn’t stop at the hiring decision. It continues with promotions and wage increases, which is why it is so important to have gender (and ethnic) diversity at the top level of businesses. Not only does it provide cognitive diversity and better risk management on the business level, but it also reduces unfairness in how employees are treated.