China has a long tradition of Confucianism, which emphasizes the subordinate roles of females in the society, as illustrated by the famous saying “lack of talent is a virtue of women” (nuzi wucai bianshi de). Although such beliefs have been diminishing during the planned economy (1949-1978) when the Chinese central government implemented a system of national wage scales based on the socialist egalitarianism principle wage dispersion due to human capital characteristics was suppressed, the portion of females in top organization jobs still remains low and gender earning differential still exists.
Several studies have investigated the gender earnings differential in recent years and shown an increasing gap between males and females (e.g. Zhang et al., 2008) in the last two decades. It is also shown that the gap is particularly large at the lower end of the earning distribution; however the gap widened greatly at the upper end in most recent years (2001-2004),
This paper aims at analyzing gender earnings differentials among top managers in China. Among a few studies that have investigated the female-male earnings differentials using Chinese data (e.g. Wang & Cai, 2008; Zhang, et al., 2008; Ng, 2007, Meng, 1998), none of them looked at how the gender pay differential varies by occupation groups, especially among those high paid. On the other hand, studies on executive compensation in China (e.g. Firth, Fung and Rui, 2007; Kato and Long, 2006; Zhu, 2007) largely use the data of listed firms which contains limited information pertaining to executives’ individual characteristics such as tenure, marital status and training. This prohibits researchers from investigating the underlying rationale why female managers are paid lower, e.g. how much of the gender CEO compensation gap relates to CEO’s individual characteristics.
Our motivation to conduct this study is threefold. First, the question of whether and how females are treated financially differently from their male counterparts in contemporary Chinese organizations is of great interest to the three parties in the employment relationship: the government policy makers, organizations, and employees. If pay differentials do exist and are largely due to workplace discrimination, then policy makers may need to address the employment equity issue through policies such as affirmative action regulation. On the other hand, if the gender pay differential is largely due to the lower education or training received by female managers, then discrimination policies regarding education and manager development/training would be more relevant than pay equity issue because this will address why male and females end up with different “human capital”. From the organization’s perspective, if gender pay differential are largely due to institutional barriers that disadvantage women, or other discriminatory factors at the workplace, firm performance will suffer because organizations are not maximizing the likelihood that pay and hiring go to the most productive managers. From the employees’ side, it would be interesting to know how these highest paid women are paid after they cross the “glass ceiling”.
Second, the unobserved differences between men and women are minimized as we are focusing on a specific occupation group where men and women are more likely to share some common unobserved characteristics such as career ambition. This is crucial for identifying the factors that lead to gender pay differential since the unexplained part of male female wage differential could be attributable to labour market discrimination, but could also be due to differences between men and women that are unobservable, such as relative lack of career commitment or job motivation (Bertrand and Hallock, 2001).
