Women’s Committee: Organizations and women’s discontent

25 Jul 2022

Renée Adams and Michelle Lowry on women’s experiences of discrimination and the potential effects on female labour supply in the RES July Quarterly Newsletter, issue 198.

Companies are increasingly looking to increase the diversity of their labour force. This is particularly true among the upper rungs of organizations, for example within leadership roles. Gender represents one key dimension of diversity, leading people to ask: why do some organizations find it easier than others to hire and retain women? Economists often point to individuals’ preferences and to the structure of work. If women, on average, have different preferences than men, then such differences may explain why women are less represented in some careers than others. The structure of work also differs across careers, with some types of jobs offering more flexibility than others. If women value flexibility more than men, then this may also contribute to sorting across job types.

But what about the role of discrimination in explaining women’s representation in different fields or occupations? It is arguably productive to focus on the role of discrimination because this is a factor over which organizations have control. Organizations cannot change peoples ‘preferences, and the extent to which they can restructure work may be limited in the short run. However, people in authority positions can address discrimination.

These observations raise the question of how prevalent discrimination is. Relatedly, how often do people in authoritative positions take action to address discrimination? Such questions are notoriously difficult to answer, because people often do not report discrimination.

In 2020, we conducted a survey of the professional culture in the American Finance Association(AFA). Responses to the survey enable us to shed light on the extent of discrimination and the extent to which those in authority addressed any discrimination, across different types of organizations. While members of the AFA share the same interest in finance and generally have the same training – a PhD in finance– they choose to work in different occupations. The majority of AFA members are academics working in universities, but research staff at government agencies and individuals working in for-profit firms in the finance sector are also members. Among academics, there is variation across type of university, from more research-focused to more teaching-focused universities.

The top panel of the figure shows the proportion of survey respondents working within each organizational type who report experiencing discrimination. The rates of reported discrimination are strikingly high: within all organizational types, the proportion is over 30%. Moreover, rates are even higher if we limit the sample to just women. For example, within top research universities, 51% of women report having experienced discrimination, compared to 28% of men. Similar differences exist within each type of organization. Among women the most frequent type of reported discrimination is sex-based. In contrast, the most frequent type of reported discrimination among men is discrimination related to their research.

The lower panel of the figure shows the frequency with which people in authoritative positions addressed the discrimination. Specifically, for each survey respondent who reported either experiencing or witnessing discrimination, we asked whether those in authority had taken action. Strikingly, the rate at which authority addresses discrimination is almost directly inversely related to the rate at which individuals experience discrimination. For example, government agencies report the highest rate of authoritative action, and one of the lowest rates of experienced discrimination. In contrast, organizational types where authority takes actionless frequently tend to have higher rates of discrimination.

These patterns highlight the power that organizations have to address discrimination. While these patterns represent correlations rather than causal evidence, selection effects are likely to beat least mitigated by the fact that people entering these professions, and who are included in our survey, all have similar interests in the same field (finance) and similar educational backgrounds (a PhD in finance).

Discrimination and bias lowers women’s representation among leadership positions through multiple channels. First, discrimination by one’s superiors lowers the probability of promotion. Second, experienced discrimination affects an individual’s career choices. In Adams and Lowry (2022b), we show that reported discrimination is significantly negatively related to individuals’ job satisfaction and significantly positively related to the likelihood that a person leaves a position. These findings highlight that even if reported discrimination is a noisy measure of true discrimination, perceptions of discrimination can have important labour market consequences. Third and more generally, negative opinions potentially have a negative effect on the propensity of other women to join an organization.

While it seems logical that women would shy away from occupations or industries in which discrimination exists, economists do not typically list discrimination as a factor that affects female labour supply. Indeed, a popular argument among economists is the pipeline theory, which holds that to “fix” diversity issues in economics we just need to get more women to enter the field. But women are not blind. Why would women want to enter the field if they know that women in the field face high rates of discrimination? Relatedly, why would women want to join an organization in which discrimination is rarely addressed, thereby providing an environment where such behaviour is not only tolerated but even accepted?

Further reading

Adams, R. and Lowry, M. (2022a). The culture of the finance profession: Evidence from the 2020/2021 American Finance Association Survey, unpublished working paper.

Adams, R. and Lowry, M. (2022b). What’s good for women is good for science: Evidence from the American Finance Association. The Review of Corporate Finance Studies, cfac013, https://doi.org/10.1093/rcfs/cfac013