The gender pay gap has received considerable attention over the past decade or so, but it’s perhaps fair to say that most of the attention has been on the private sector.  New research from Drexel University highlights that it is just as prevalent in the non-profit sector.

The analysis found that female executives in the sector earned 8.9% less than men, with the gap becoming even greater when there was room for negotiation in the setting of the salary.

The study looked at IRS data from nearly 1,000 filings across four years to understand the differences in executive pay.  They first tried to understand whether there was a pay gap at all in the non-profit sector, and then to understand what role negotiation opportunities might have played in that gap.

“For various reasons, we may not expect to observe a gender pay gap among the nonprofit sector even though recent research has found gaps in pay among for-profit executives,” the researchers say. “First, there is more female participation in the nonprofit workforce compared to the for-profit sector. Second, one may expect stakeholders, like donors or boards of directors to curtail gender pay gaps, but we didn’t find this to be enough of a factor to prevent gender pay gaps.”

Negotiating the difference

To understand the role negotiations were playing in the pay gap, the researchers explored the various settings in which opportunities, and a willingness, to negotiate presented themselves.  They also explored any external employment options executives may have had along with the pay constraints in the organization, the existing gender composition of the leadership team, and any pay variability within that team.  They argue that each of these will influence the negotiation environment.

The analysis revealed that the external employment opportunities available to executives and the competition for those roles tended to result in greater gender pay gaps as male executives were better able to capitalize on a broader external labor market to effectively negotiate higher pay.

This was not so common, however, in organizations with a high representation of women at board level, and especially so when the CEO herself was a woman.  The researchers argue that this is perhaps because female leaders encourage female employees to negotiate more effectively.

“This study documents the contexts that influence negotiation on the gender pay gap, which is part of a larger societal issue,” the researchers conclude. “Employers should be cognizant of how the environment for negotiating compensation within their organizations can lead to gender-based pay disparities. Perhaps more importantly, business leaders and educators should think about ways to empower female workers to get more out of salary negotiations, which would hopefully help to close gender pay gaps in the future.”