In 2017, women around the world earned only 57% of what men did. 

Fortunately, several countries (including Australia, Germany, Iceland, and the UK) have started forcing companies to publish their gender pay gaps. For example, in 2019, Accenture UK paid women 9.8% less while Amazon UK had no gap.

So what happens when people learn about a company’s large pay gap?

People are less likely to buy from companies with a high gender pay gap - particularly women

Impacted metrics: Customer acquisition | Customer spending
Channels: Corporate management | Brand strategy

Tip type: New research (January 2021)
Previous tip: The effect of “Vote with your tip: Cats or Dogs?” (All tips here)

Recommendation

For marketers and managers

• Do: Pay your workers fairly and equitably, without significant differences between genders

• Don’t: Hide and hope that you won’t be forced to reveal your gender pay gap data or your customers won’t learn about it

• Try: Call out your competitors’ gender pay gaps (assuming you’ve closed the gap at your firm, or are much further along)

For policymakers

Force firms to disclose their gender pay gap (like the UK did in 2018 for firms with more than 250 employees) to create financial pressure on them to adapt. 

To strengthen the effect and keep it top of mind among consumers, make sure to update and publish reports regularly. You can also create and publicize lists of worst performers per industry (e.g. “Worst 5 gender pay gap companies in the advertising industry”) to encourage a ‘race to equality’.

Effects

• When people are aware that a company has a gender pay gap (i.e. men are paid more than women, on average) they are less likely to buy from them. 

• Among women, the effect is particularly strong and only the use of child labor leads to a significantly lower willingness to buy than disclosing a gender pay gap.

• For example:

  • Both women and men said they were 29.5% less willing to buy from Adidas when they were made aware of its gender pay gap (on average per hour, women earn 82 cents for every $1 that men make). That figure became 41.8% when counting only women

  • On average, women bid 16.7% less for an Uber gift card when they were made aware that women working for Uber earn 33% less than men

• The effect disappears, for both women and men, when not buying incurs a significant cost (e.g. order an Uber or walk in the rain).

• Previous research has found a similar negative effect on sales for companies that have a higher than average gap between CEO and median worker pay.

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Why it works

• We perceive gender pay gaps to be unfair. Previous research found that we tend to punish what we perceive as unfair, even when it doesn’t directly affect our own welfare and even when it comes at a cost (if the cost is not too high).

• The stronger effect for women is likely because they are the ones directly affected and because women are generally more punitive than men towards business transgressions.

Limitations

• It’s unclear how aware or top of mind the companies’ gender pay gaps must be to significantly impact purchase decisions. In this study, people made a decision right after they were given (or reminded about) the information.

• We don’t know how people respond to companies making clear efforts to close their gender pay gap over time.

Companies using this

• Workforces in developed economies experienced a trend of reduction of the gender pay gap until the 1990s, when progress slowed significantly.

• You can view UK companies’ gender pay gaps here.

Steps to implement

• Improve recruitment and progression of women in your company to reduce the gender pay gap.

• The UK government offers a clear and actionable guide for how you can do that, based on the latest evidence.

Study type

Online experiments and market observation (of consumer sentiment towards 158 companies when company gender pay gap data was published in the UK in April 2018). United States and United Kingdom.

Source

Schlager, T., Mohan, B., DeCelles, K., & Norton, M. I. (January 2021). Consumers–especially women–avoid buying from firms with higher gender pay gaps. Journal of Consumer Psychology.

[Link to paper]

Affiliations

HEC Lausanne, University of San Francisco,  University of Toronto, and Harvard Business School. Switzerland, Canada, and United States.

Remember: Because of the groundbreaking nature of this paper, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

Want to reproduce this, share feedback, or ask a question? -> Reach out at thomas@ariyh.com

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