Peer Bargaining and Productivity in Teams: Gender and the Inequitable Division of Pay

36 Pages Posted: 27 Feb 2018 Last revised: 18 Aug 2018

See all articles by Lamar Pierce

Lamar Pierce

Washington University, Saint Louis - John M. Olin School of Business

Laura W. Wang

University of Illinois at Urbana-Champaign

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School

Date Written: August 14, 2018

Abstract

A recent trend in organizational design is to reduce hierarchy and allow employee teams to self-manage tasks, responsibilities, and rewards. Yet we know little about the implications of this arrangement for worker productivity, pay equity, and organizational performance. We provide the first firm-based evidence that when worker teams are allowed to internally allocate compensation, the ensuing peer bargaining process can generate inequitable outcomes for women. We demonstrate this using risk-adjusted fixed-effect models to identify productivity and peer bargaining traits in 965 workers at 32 large Chinese beauty salons. We measure individual productivity through service and card sales and measure bargaining through the division of team-based commissions. We also build a parsimonious bargaining model to explain the mechanisms driving our empirical results. We find that although productivity and bargaining outcomes are positively correlated, female workers consistently receive bargaining outcomes below their productivity level, while men are consistently overcompensated. Importantly, we provide evidence that our results can only be explained by a combination of higher prosociality and lower bargaining power in women. Our findings provide unique organizational evidence on how the delegation of pay authority generates bargaining among peers that might impact firm operations and performance. Furthermore, we provide important evidence that the discriminatory social dynamics observed throughout society are evident in operational designs that delegate decision rights to teams. Managers seeking to implement self-management by peers must anticipate the myriad of productivity, retention, and ethical implications that can result when peer workers bargain over tasks and rewards.

Keywords: Productivity, Bargaining, Gender, Negotiation, Equity, Fairness, Compensation

Suggested Citation

Pierce, Lamar and Wang, Laura W. and Zhang, Dennis, Peer Bargaining and Productivity in Teams: Gender and the Inequitable Division of Pay (August 14, 2018). Available at SSRN: https://ssrn.com/abstract=3123915 or http://dx.doi.org/10.2139/ssrn.3123915

Lamar Pierce (Contact Author)

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-5205 (Phone)

Laura W. Wang

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States
4696844455 (Phone)

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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