Does Negotiating Eliminate Gender Gaps in Wage Outcomes?

One explanation of the female penalty in wage outcomes is that women “don't ask,” i.e., under-negotiate; thus, if women always negotiated, the female penalty should vanish. We test this hypothesis by scraping worker profiles (N>10,000) from an online labor marketplace where all workers must “ask,” i.e., propose an offer when negotiating their wages. We observe proposed wages, received wages, and a rich set of covariates, e.g., verified test scores. We find a female penalty at lower wages (5–90 USD/hr), but a female premium at higher wages (90–120 USD/hr). To explain our results, we develop a theory where high offers are costly signals of high ability; a baseline female penalty hurts low ability female workers, but ironically allows high ability female (vs. male) workers to more credibly signal their high ability. While “asking” does not eliminate gender gaps, our results do suggest negotiators will likely benefit if they “ask.”