11. The Gender Wage Gap of Recent University Graduates

The purpose of this research was to question whether the behavioural tendencies of men and women could help explain the gender wage gap of recent university graduates. It was conducted after discovering that a 2013 study found that even once accounting for observable characteristics such as age, experience, industry, occupation, and field of study, female graduates were still earning 6-14% less than their male counterparts. Using the willingness of a graduate to gamble a current job offer for a potentially better job offer in the future as a proxy for risk, this research investigates the impact risk preferences have on the gender wage gap. More specifically, it attempts to calculate how much of the observed wage gap can be attributed to the greater risk aversion of women. Our data was from the National Longitudinal Survey of Youth 1997. Using a McCall Job Search model and an MLE, we found that women take approximately 4.5 fewer weeks to accept a job, accept significantly lower starting salaries, and are systematically offered lower salaries than their male counterparts. Furthermore, we found that women have an Arrow-Pratt coefficient almost 1.25 times that of men. These results suggest that women are more willing to accept lower wage positions offered to them today because they are less willing to gamble that a higher wage position will come along tomorrow. Moreover, they propose that this female unwillingness to gamble can explain up to a quarter of the difference in the wages accepted by men and women.