How To Fix Wage Bias

It seems reasonably well documented that tall, slim, pretty people get higher wages.  A 2005 review:

Hamermesh and Biddle found that the "plainness penalty" is 9 percent and that the "beauty premium" is 5 percent after controlling for other variables, such as education and experience. In other words, a person with below-average looks tended to earn 9 percent less per hour, and an above-average person tended to earn 5 percent more per hour than an average-looking person. For the median male in 1996 working fulltime, the respective penalty and premium amounted to approximately $2,600 and $1,400 annually. The corresponding penalty and premium for the median female worker are $2,000 and $1,100. … In a separate paper . …They found evidence of a beauty premium for attorneys that increases with age, at least for the 1971-78 classes. Five years after graduating, a male lawyer from these classes with a beauty rating of one rank above average had approximately 10 percent higher earnings than his counterpart with a rating of one rank below average. Fifteen years after graduation, the beauty premium increased to 12 percent.

(Beauty matters more for men and more for the old!) It also seems that some race and gender combinations get higher wages.  Many claim that these variations are mainly driven by variations in who is more productive at their jobs.  For example, one recent study finds beauty wage premiums are entirely explained by IQ variations. 

What if you don’t believe this?  What if you instead think these patterns reflect wage biases, in the sense that groups who tend to be paid more are overpaid, and do not tend to offer proportionally more (profit-type) value to their employers?  Well in this case you think you see a profit opportunity — you think these companies could make more money if they changed their wage policies to put less emphasis on hiring the types of people you think tend to be overpaid. 

I see three ways to take advantage of such bias-induced profit opportunities:   

  1. If a company tracks which new hires gave them good value, you could become involved in hiring and gain a track record for suggesting good hires.
  2. If a company can be bought out, you could buy it, change its wage policies, wait until it makes more profits from your new policy, and then sell it.
  3. You could start a new firm that uses your favored wage policy, wait for profits, and then sell it.

For example, if you think law firms tend to pay too much for tall white men over short black women, then you could start a law firm hiring short black women lawyers. 

Of course not everyone is in a position to do this, but surely many people are.  If in fact these biases are real, this should be a far more effective and profitable way to correct those biases than lobbying for court remedies or legislation.  If we want this to be possible, we want more competitive industries, easier to buy and sell firms, and good internal tracking of hire advice.   

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  • Stuart Armstrong

    Very interesting idea!

    Though I suspect the first person to implement such a policy would find any slight changes completely swamped by the publicity (positive or negative) that such a move would attract.

    Are there any good historical examples? It seems certain that the wages and estimated abilities of women were underestimated historically; did this provide a profit opportunity for canny entrepreneurs?

  • Stuart Armstrong

    Extra! Read all about it: A shocking new study suggests that ugly and obese fashion models may make less money than beautiful slim ones. The models blame employer bias…

  • Jerome Thomas

    Either higher wages of the beautiful are merely a function of their typically higher IQs or wage disparties reflect irrational employer biases? This strikes me as a false dilemma. The vast majority of jobs involve a certain degree of interaction with other people.

    I would argue that the proportion of jobs in which an attractive appearance has a positive impact on performance as well as wages is quite large.

  • h.s. ema

    can you name the fields in law where you think looks would not matter?
    does it seem obvious to you that in litigation, looks would matter?
    better looking people would win more cases off judges and juries. Possibly?

    Now, how about tax? There is rarely one right answer in tax. The IRS makes judgments based on the lawyer’s argument (sounds a little like litigation?) The client does not necessarily know how to judge lawyers based on quality, they must judge based on how the lawyer makes them feel, and how well they usually do for their clients, but how well they do might depend a little bit on how they looked to an IRS judge. Alternatively, for big corporate decisions, where lawyers try to actually influence legislation decisions on the hill, could it be that it matters what you look like when you are trying to get important people on the Hill to return your call, or consider your position?

    Clients hire lawyers, and agree to pay them vast sums, without a clear picture of how to judge who are the better lawyers (reputation? fancy offices?). Please explain again why the clients wouldn’t have biases, because I don’t see it from this post.

  • http://hanson.gmu.edu Robin Hanson

    Jerome, the IQ idea was just one example. An obvious alternative explanation is that customers/clients prefer attractive employees.

    h.s., I did not claim looks don’t matter.

  • Larry

    I agree with the comment just above. I work in tax and I’ve noticed that my firm hires a great many women who are considerably more attractive than average. I believe this is a deliberate strategy. We sell our services to people in corporate tax departments. These people, mostly men, would be more inclined to bring on an attractive woman to work around the office for a few weeks.

  • tcpkac

    One small problem : any mechanism for tracking the value-add of the employee after hire would have the same bias. And we would share it.
    On the hard wired neural mechanisms for preferring beauty in human proportions, see :
    http://www.pubmedcentral.nih.gov/articlerender.fcgi?tool=pubmed&pubmedid=18030335

  • Paul Gowder

    Tcpkac’s worry seems significant. Also, suppose — as seems likely (surely there’s a way to get this out of the data?) — the differences are fairly small, i.e. law firms generally only a few lawyers because of their looks, and they’re only slightly less competent than their uglier counterparts. Then the market correction story is a little harder — no one firm is going to make a lot of profits by hiring the ugly or solve the problem by outcompeting its uglier competitors. It would have to be one of those sorts of stories about the marginal firm staying in business because they hired the ugly person, and the supra-marginal firm going out of business… the sort of thing that only works in *really* competitive markets where firms are *really* sensitive to costs.

  • http://denisbider.blogspot.com denis bider

    “An obvious alternative explanation is that customers/clients prefer attractive employees.”

    And likeable attorneys quite possibly deliver better results with courts and juries – that is even if we ignore that the beauty premiums can be explained with variations in IQ.

  • Nick Tarleton

    If more attractive lawyers get better results in court, this is an obvious social problem. How might it be fixed? Paper bags on heads?

    (Really, the fundamental problem seems to be the use of an adversarial system, with all its obvious potential biases, instead of one explicitly designed for rational truth-finding. I wish I knew what that might look like.)

  • Caledonian

    If more attractive lawyers get better results in court, this is an obvious social problem. How might it be fixed? Paper bags on heads?

    Removing all humans from the decision-making process.

    That, or nuke the planet from orbit. It’s the only way to be sure.

  • http://photoncourier.blogspot.com david foster

    It’s possible that better-looking people have more self-confidence…which is probably a benefit in most careers *up to a point*, after which it becomes a detriment.

  • tcpkac

    On closer inspection, is there even a bias ? Robin’s reference article refers back to the Persico/Postlewaite/Silverman work which found the best correlate to high wages to have been adolescent height. This has been linked to Mary Cover Jones work in 1957 on the personality traits of early vs late maturers, to develop the idea that these characteristics, as experienced in and reflected by the individuals peer group in adolescence, have real and lasting effects on personality.
    Independantly, various studies have shown the correlation between good looks and the personality traits of self confidence and assertiveness.
    Taken together, all these factors suggest that what is being paid for is not so much the good looks as the personality which tends to have been created by the individual having height / strength / good looks in their adolescence.
    So, perhaps there really is no bias. You get what you pay for, and what you pay for is personality.

  • tcpkac

    I see David Foster covered half my comment while I was still writing. David, I’ll bet you’re pretty good looking.

  • http://profile.typekey.com/briarandbramble/ briarandbramble

    It is quite possible that the beauty premium is actually too small. It could be that more attractive people (for certain occupations) are actually vastly more profitable than unattractive people, and yet they earn only a small premium.
    It could also be that the safest way for an employer to pay a wage premium to an attractive person is to require less work, rather than to pay more money.

  • billyseenit

    Beauty is perception. Any ugly duckling can improve their beauty rating by possessing a positive attitude and smiling more. So brush your teeth and start saying hi to those you pass during the day. thewayweseeit.info

  • http://yudkowsky.net/ Eliezer Yudkowsky

    Norway mandates 40% women on the boards of publicly traded companies.

    Too bad they didn’t randomize the requirement so that we could track the competitiveness of the experimental group versus the control group.

  • http://dl4.jottit.com/contact Richard Hollerith

    Before the mandate any publicly traded company in Norway could voluntarily participate as an experimental group or a control group, but of course now it is unlawful to serve as a control group.

  • http://www.msn.com Firozali A Mulla MBA PhD

    Richard
    This is what you state.
    It seems reasonably well documented that tall, slim, pretty people get higher wages. A 2005 review:

    And I agree with you, the rudiments remain as they are but we look a little deep?
    I have addendum. It is not officious but this is pathetic when you have in the board meeting, the HR seated and interviews held, there is a likely candidate even with the looks, there is a call from the wife, or relative, or a friend stating that he/she has a bother who failed in the examination needs a help placing this boy/girl in your company. What happens, is you are compelled as friend at times to give in and tell the already candidate sited opposite you, “I am sorry I have just been told by my, a lie, superiors that the post is filled up. Is that it? A big saga on your side to tell all that you need people then to discard the human factor and give way to the whims? This is happening in the poor countries and has nothing to do with charismatic or beauty. It is call or a salute of the honour. I agree that the beauty gets the job hence the beauty products by the huge pharmaceuticals companies. They advertise how they will change pigments of your skin so you look fair. No. I have nothing to do with this. Let it be. Fair or no fair does not hurt me. What hurts me is, the education one puts to hearts, burnt the sleep to the last ray of sun, studies hard to pass the exams only to be told indirectly that we are recruiting lookers in all departments including the garage and pipe fixing where no human goes.
    This is our today’s HR and we.
    I thank you
    Firozali A Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

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