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Abstract
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In this experiment, we will investigate the impact of an equal pay policy on hiring discrimination at different levels of competition in the labour market. We design a laboratory experiment where we will use reservation wage to stimulate the hoteling model (Hotelling, 1929) to introduce competition in the hiring market. We consider different scenarios for the hiring market: (i) No equal pay policy + no employer competition; (ii) Equal pay policy + no employer competition; iii) No equal pay policy + employer competition; iv) Equal pay policy + employer competition. The experiment is designed to test three questions: (1) Whether and how an equal pay policy affects employers’ decisions toward ethnic majority and minority candidates differently; (2) Whether employer competition affects employers' decisions with and without an equal pay policy.
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After
The Equal Pay Law mandates that firms pay the same wage to workers employed in the same occupation. In this experiment, we aim to investigate the impact of an Equal Pay Policy on hiring discrimination at varying levels of competition in the labour market. We've designed a laboratory experiment where we'll use the concept of a reservation wage to emulate the Hotelling model (Hotelling, 1929), thereby introducing competition into the hiring market. The experiment is designed to answer three questions: 1) How does an equal pay policy influence employers' wage decisions for different groups? 2) How does an equal pay policy affect employers' hiring decisions for different groups? 3) Does competition in the labour market influence the impact of the equal pay policy?
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Last Published
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June 20, 2023 09:09 PM
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After
June 23, 2023 03:01 AM
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Primary Outcomes (End Points)
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Overall Effect: The main outcomes of interest are how an equal pay policy impacts 1) the percentage of candidates hired, and 2) the average wage of hired candidates between two ethnic types.
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The main outcome of interest is how an equal pay policy impacts the percentage of minority workers being hired and the wage dispersion between the minority and majority workers.
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Primary Outcomes (Explanation)
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Before
We will compare the percentage of candidates hired that are minorities in Treatment 1 (NC-Fixed) and Treatment 2 (NC-Flexible) to identify the impact of an equal pay policy in the non-competitive labour market. Similarly, we will also compare the percentage of candidates hired that are minorities in Treatment 2 (C-Fixed) and Treatment 4 (C-Flexible) to identify the impact of an equal pay policy in the competitive labour market. We will also compare the average wage of hired candidates between majority and minority groups to identify the role of wage cost plays in the impact of an equal pay policy.
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We will compare the percentage of hired minority candidates and the average wage gap between minority and majority candidates in both Treatment 1 (Ind_Flex) and Treatment 2 (Ind_Fixed) to understand the overall effects of an Equal Pay Policy in a non-competitive market. Similarly, we will compare the percentage of hired minority candidates and the wage gap between minority and majority candidates in both Treatment 3 (Comp_Flex) and Treatment 4 (Comp_Fixed) to understand the overall effects of an Equal Pay Policy in a competitive market. The difference in treatment effects will identify the role of competition plays in the impact of an Equal Pay Policy.
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Experimental Design (Public)
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Before
This experiment consists of two phases: 1) the preliminary phase, in which we aim to recruit 150 participants to complete a series of anagram tasks; and 2) the main phase, in which we aim to recruit 100 participants for each of the four treatments to complete a hiring task (i.e., 400 participants in total).
In the preliminary phase, participants will be asked to complete five 2-minute anagram tasks individually and paid by piece-rate performance. This phase is designed to generate actual profiles of candidates to be used in the main phase of the experiment. The benefit of using actual profiles is to introduce real consequences for discriminatory behaviour and therefore capture the actual level of employer discrimination (Hedegaard & Tyran, 2018). To construct a balanced candidates pool for the second phase, 75 participants will be recruited from an ethnic minority group (i.e., East Asians) and the remaining 75 will be recruited from the ethnic majority group (i.e., Whites). Out of the five performances, we drop the lowest and the highest scores to form the final candidate profiles. And we randomly choose 2 scores from the rest of 3 scores remaining as the pre-performance score and interview performance score
In the main phase of the experiment, participants will be asked to finish a manager task to make some hiring decisions, given a set of 4 pre-screened candidate profiles drawn from the data collected in the preliminary phase. Each participant in this phase will be assigned to one of the following four experimental treatments: an NC-Flexible treatment with neither the equal pay policy nor the hiring competition (Treatment 1), an NC-fixed treatment without the hiring competition, but with the equal pay policy that forces employers to offer the same wage to all desired candidates (Treatment 2), a C-Flexible treatment without the equal pay policy but with hiring competition in which each employer needs to compete with another employer in terms of wages for each desired candidates (Treatment 3), and a C-Fixed treatment with both equal pay policy and hiring competition. Note that we will only recruit participants from the ethnic majority group as employers/managers". Each set of the four candidates' profiles include 2 minority candidates and 2 majority candidates, which are randomly selected from the pool collected in the preliminary phase.
The employer/manager is given the interview performances of all four candidates and is asked whether they want to hire or not hire for each candidate; and if they hire, what is the wage they are willing to offer. Each candidate will have an unknown reservation wage. Employer/manager can successfully hire the candidate if their wage offer is higher than candidate's reservation wage (Treatment 1 and 2), or if their wage offer is higher than both candidate's reservation wage and the other manager (competitor)'s wage offer to the same candidate (Treatment 3 and 4). The potential employer/manage will be able to select an identical wage offer (Treatment 2 and 4) or different wage offers to different candidates. On top of interview performances, the potential employer/manager will also be given candidates’ age, prolific id (not exactly the same as the real ID), and the ethnicity information (reflected through the surnames).
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After
This experiment consists of two phases: 1) the preliminary phase, in which we aim to recruit 150 participants to complete a series of anagram tasks; and 2) the main phase, in which we aim to recruit 200 participants for each of the four treatments to complete a hiring task (i.e., 800 participants in total).
In the preliminary phase, participants will be asked to complete five 2-minute anagram tasks individually and paid by piece-rate performance. This phase is designed to generate actual profiles of candidates to be used in the main phase of the experiment. The benefit of using actual profiles is to introduce real consequences for discriminatory behaviour and therefore capture the actual level of employer discrimination (Hedegaard & Tyran, 2018). To construct a balanced candidates pool for the second phase, 75 participants will be recruited from an ethnic minority group (i.e., East Asians) and the remaining 75 will be recruited from the ethnic majority group (i.e., Whites). Out of the five performances, we drop the lowest and the highest scores to form the final candidate profiles. And we randomly choose 2 scores from the rest of 3 scores remaining as the pre-performance score and interview performance score
In the main phase of the experiment, participants will undertake a manager's role to make hiring decisions, using a set of four pre-screened candidate profiles based on data from the preliminary phase. Each participant will be assigned to one of the following four experimental treatments: Individual-Flexible treatment - without the equal pay policy or hiring competition (Treatment 1), Individual-Fixed treatment - with an equal pay policy (requiring employers to offer the same wage to all chosen candidates) but without hiring competition (Treatment 2), Competition-Flexible treatment - with hiring competition (employers compete with each other over wages for each candidate) but without the equal pay policy (Treatment 3), and Competition-Fixed treatment - with both the equal pay policy and hiring competition (Treatment 4). We will recruit only participants from the ethnic majority group to act as employers/managers. Each set of four candidate profiles includes two minority and two majority candidates, randomly selected from the pool collected in the preliminary phase.
The employer/manager will be provided with the interview performances of all four candidates. They will then decide whether or not to hire each candidate and, if they opt to hire, what wage they are willing to offer. Each candidate will have an undisclosed reservation wage. The employer/manager can successfully hire a candidate if their wage offer is higher than the candidate's reservation wage (Treatments 1 and 2), or if their wage offer is higher than both the candidate's reservation wage and the competing manager's wage offer for the same candidate (Treatments 3 and 4). Depending on the treatment, the potential employer/manager can choose to offer an identical wage (Treatments 2 and 4) or different wages to different candidates. Along with interview performances, the potential employer/manager will also be given information about the candidates’ ages, prolific IDs (not their actual IDs), and ethnicity (reflected through their surnames).
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Planned Number of Clusters
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Each treatment has 100 sessions. So there will be 600 sessions
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400 candidate pools
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Planned Number of Observations
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Each session has 4 employee candidates and 2 participants. The total observations are 4x2x6x100= 4800 observations
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Each treatment has 400 candidate pools. Each pool has 2 managers and 4 workers. So the total will be 800 managers and 1600 workers.
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Sample size (or number of clusters) by treatment arms
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600 sessions
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800 sessions
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Secondary Outcomes (End Points)
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The primary outcome can be broken down into three parts: 1) Impact on Hiring and Selection, 2) Impact on Wage Offers and Payments, and 3) Impact on the overall employment rate and wage payments in different competitive markets. For the first and second parts, we're interested in how the equal pay policy affects differences across ethnic and ability groups. We're operating under the assumption that managers believe the average ability of minority workers is lower than that of majority workers. For the third part, we are interested in to see how the equal pay policy impacts the overall employment rate and wage payments in different competitive markets.
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Secondary Outcomes (Explanation)
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(1) Hiring and Selecting Effect: Whether and how much the managers hire and select less minority and low-ability workers with the Equal Pay Policy
(2) Wage offering and paying effect: Whether and how much the managers pay less wage for the minority and low ability workers with the Equal Pay Policy
(3) Overall effect: Whether an increase in competition will not affect the overall employment rate but reduce the average wage for all hired workers with the Equal Pay Policy.
(4) Competition Effect: In a laissez-faire market, whether the increase in competition will increase the impact of an ability signal on wage, reduce the wage dispersion between majority and minority (Hirata & Soares, 2020), but reduce the hiring rate of minority workers (Lagerlöf, 2020).
(5) Sorting Effect: The sorting Effect measures the competition effect on the Equal Pay Policy. We are interested in with equal pay policy, whether an increase in competition will lead to a sorting effect that managers will hire only one ethnic type of workers in order to lower the wage cost (Lagerlöf, 2020).
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