Female consumers are more likely than male consumers to “punish” a brand with their wallets by not purchasing its goods and services after learning that a company pays its male and female employees unequally, new research from the U.K. found.
Several countries, including the U.K., now require that public and private companies report their gender pay gap information to the government. A group of researchers studied how these public statistics affect consumer purchasing behavior in a paper published Jan. 21 in the Journal of Consumer Psychology.
The study found that when firms are revealed to have gender pay gaps, both male and female consumers are less willing to pay for the companies’ products. This reaction is driven by consumer perceptions of unfairness, and it was more significant among women than men.
Tobias Schlager, a professor at the University of Lausanne in Switzerland and the lead author of the paper, told The Academic Times that men generally respond differently to learning that women earn less than them. Men usually identify gender pay gaps as a problem, but do not consistently follow up with actions such as boycotting brands or pressuring for equal pay.
“Consumers who believe that a company is treating its employees unfairly can be hesitant to purchase goods from that company because it implies support for inequitable firm practices,” the authors said in the paper.
The team of researchers ran six separate studies with adults in the U.K. to determine how gender pay gaps negatively affect consumer purchasing behavior. In one study, participants were given $1 and were asked how much they would like to bid on a $5 Uber gift card, in an auction-style bid with other participants. They were told the highest bid would receive the gift card, and were prompted to increase their bid in $0.05 increments. One group was told that Uber had a 33% gender pay gap, and a control group was not.
Both male and female consumers in the pay gap disclosure group bid about $0.25 on the gift card. Men in the control group bid about $0.27, indicating that their knowledge of a pay gap did not make much difference in how men valued the gift card. But women in the control group bid about $0.30, which represented a more significant drop in their valuation of the card.
The researchers separately measured how gender pay gaps ranked in importance compared to other hypothetical business transgressions by a firm, such as using child labor, illegal dumping and price-fixing. Among women, only a company’s use of child labor led to a significantly lower willingness to buy from a brand than its disclosure of a gender pay gap.
The participants were also tested with an interactive mock-up of a news website that included articles with information on large gender pay gaps at well-known brands, including Uber. After reading the articles, the consumers were asked if they were overall likely to continue using Uber. But they were also asked whether they would use the ride-hailing app in dire circumstances, such as if they were a 20-minute walk from work and it was raining.
This test found that if there was a high chance of rain, all participants were more likely to say they would use Uber despite knowing about its gender pay gap. The researchers noted that this suggested that the pay gap only discourages consumers from choosing a specific company if their choice does not “incur substantial costs to the self,” such as getting wet from the rain.
Despite personal cost obstacles, the authors of the paper said that the public disclosure of pay gaps is important for advancing gender equality. Firms are more likely to feel pressure from consumers to pay their employees more equitably when facing reputational stigma and financial damage from customer boycotts.
Each spring since 2018, all U.K. organizations with more than 250 employees have been mandated by the British government to report their gender pay gap information from the previous year.
In 2019, 9,961 companies filed their 2018 numbers by the deadline, and 7,755 of those companies reported paying their male employees more than their female employees. Those figures indicated that about a quarter of British companies had a pay gap of more than 20% in favor of men, and almost eight in 10 firms paid men more than women.
Last spring, the U.K. government waived the requirement that firms had to release their 2019 figures in light of the spreading coronavirus. It was estimated that about half of the firms that are normally required to release their gender pay gap information chose not to do so in 2020.
Advocates for pay equality considered this a setback for progress, according to Business in the Community, a business outreach charity that promotes responsible business practices in the U.K.
Based on the numbers reported in 2020, Business in the Community found that there was a year-over-year increase in the gender pay gap from 11.9% in 2018-19 to 12.8% in 2019-20, partially attributed to the COVID-19 pandemic. In previous years, the gender pay gap in the U.K. had been decreasing.
“Women are more likely to work in the industries worst hit by lockdown, more likely picking up the extra child care needed as schools and nurseries remain closed and more likely to work in lower-paid, less-secure work than men,” the organization said.
Unlike the U.K., firms in the U.S. are not required to make gender pay gap information public. Only 65 of the largest companies in the U.S. have publicly reported such statistics since 2016, according to Business Insider, in comparison to the nearly 10,000 total British companies that normally do so every year.
Data from the U.S. Census Bureau shows that American women’s median annual earnings are $9,766 less than men’s, and that a woman working full time in 2018 earned 81.6 cents for every dollar a man made. This puts the average gender pay gap in the U.S. at roughly 18.9%, though the gap varies by state.
And women earn just 57% of what men make in average annual pay globally, according to recent estimates cited in the paper. The authors said that future research is needed to explore how consumers respond to efforts made by companies to reduce their gender pay gaps over time, and how consumers respond to gender pay gaps of different magnitudes.
“These results may have societal implications for the greater good: gender pay gap disclosure could lead to actual changes in consumer responses, thereby putting pressure on firms to reduce gender inequality,” the authors said.
The study, “Consumers – especially women – avoid buying from firms with higher gender pay gaps” was published in the Journal of Consumer Psychology on Jan. 21. Tobias Schlager of the University of Lausanne was the lead author. Bhavya Mohan, of the University of San Francisco, Katy DeCelles, of the University of Toronto, and Michael Norton, of Harvard Business School, served as co-authors.
This story has been updated to clarify a figure cited by the authors of the study.