University pay (not real estate)

The FT had a good piece by Sarah O’Connor yesterday on the gender pay gap (a sensitive topic with a planner than I know well). Interestingly, it reported on some research done at LSE on its own in gender pay. It’s a subject even closer to my heart than real estate. To be honest – it’s university pay in general rather than the gender pay gap that really interests me 🙂  It’s also a really good example of a practical application of econometric modelling.

The university commissioned Oriana Bandiera, one of its economics professors, to investigate its own gender pay gap. She took anonymised payroll data for LSE academics, controlling for age and length of service. She also controlled for the quality of their research using “REF score” predictions — the LSE’s assessment of how well they would do in the external system that assesses the quality of research. She found women were earning 11 per cent less, on average, than men of similar age and tenure, producing research of similar quality.

The difference was negligible among the lowest paid but 30 per cent among the highest paid. This is partly because women are under-represented in high-paying departments such as economics. But, after controlling for department, the average gender pay gap was still 6 per cent. It has also grown wider since the late 1990s (although those data lack the control for quality because REF scores are a recent phenomenon).

It was speculated that the remaining gap was due to the increased likelihood that male academics would use threats to leave as leverage to negotiate increased remuneration. It certainly rings true. In my experience, I know a lot of individuals who have obtained substantial salary increases through so-called “retention” deals.  It can be easy to fall well below your ‘market’ value at universities and you tend to need to have an alternative job offer to prove it.

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