Gender gap in career at European Central Bank (ECB)

The gender gap in the professional career at the European Central Bank (ECB) - foundinginfo

Gender gap in the professional career: The presence of women in the economics profession is particularly low, both relative tothe general population and to other disciplines . This low representation is especially pronounced as one moves up the hierarchy.

In the US, for example, women represent 35% of new doctorates in economics, 30% of assistant professors, 25% of full professors, and about 15% of those who hold a chair.

In Europe, these percentages are somewhat higher, but the decreasing gradient between ranges is maintained.

Evidence of a leaky pipeline for women in economics is not new. As early as the early 2000s, a lower probability of promotion was documented for women than for men. Until then there had been improvements, but since the mid-2000s, the growth in the presence of women in the profession has stagnated.

In November 2021, at the WE ARE IN Macroeconomics and Finance conference in Frankfurt, Christine Lagarde stated: “Widening women’s participation and removing the obstacles they face is not just a question of fairness, which in itself would be enough, but which is also necessary because preventing women from reaching leadership roles is detrimental to society as a whole since diversity is key to creating knowledge”.

Why should we economists care about diversity?

The available evidence shows that a more diverse group produces more robust knowledge for two main reasons:

1. Opinions among economists differ. Male and female economists have different views, even controlling for graduation cohort and the type of job they hold ( May 2014 ). Therefore, the absence of some groups can bias decision-making.

2. Diversity changes the dynamics of the group when making decisions and the behavior of its members. For example, diverse groups show more intense mutual control and produce better results in a business-oriented setting (Hoogendoorn et al 2013).

Diversity is also a concern at central banks

In October 2014, the Federal Reserve hosted a National Summit on Diversity in the Economics Profession. In her remarks, Janet Yellen said: “When the economy is tested by the challenges ahead, I hope that our profession can say that we have done everything possible to attract the best people and the best ideas.”

Why does the ECB value diversity?

The ECB is the central bank of the euro area and, together with the 19 national central banks in the area, make up the Eurosystem. It was created in 1998 with the main objective of maintaining price stability. In addition, it is responsible for the supervision of banks in the eurozone.

Work place

OIts workforce is made up of more than 3,000 employees from the 28 countries that make up the EU and the United Kingdom. These employees are incorporated into different salary bands depending on their educational level and previous experience.

These entry salaries are fixed and are public. Within the band, salary increases occur in steps; each year, these salary steps are assigned to each employee based on their personal development and their contribution to the performance of the ECB. Promotions from one salary band to the next higher are given after winning a competitive selection process. To enter this process, candidates must apply.

At the end of 2010, the Executive Board of the ECB issued a public statement strongly supporting diversity. They posted the following message on their website: “At the ECB, we believe that diversity creates excellence: more diverse teams mean a broader range of opinions, leading to better and stronger results.”

Mario Draghi himself declared then that: “We are moving towards being a more diverse institution, which also means an institution that is more flexible in its way of thinking and more effective in its decision-making.”

From here on, the BCE makes a firm commitment to support diversity, including gender parity, and several measures are put in place: diversity ambassadors in each business area, mentoring and training program, women’s network leaders, opportunities for flexible hours and telecommuting, mandatory presence of women on selection panels, training for managers, among others. Currently, 32% of senior management are women and the goal is to reach 40% by 2026.

The gender gap in promotions

The ECB wanted to know the effectiveness of these measures, so they gave us access to anonymized data from ECB staff records from 2003 and selection/promotion processes from 2012.

Our analysis, summarized in this research article, is limited to expert-level staff in all areas that primarily employ economists, to consider a homogeneous group of staff in terms of educational level and previous work experience.

Comparing their salaries from entry to expert level, it is observed that the differences between men and women are increasing year after year, except for those employees who remain within the same salary range . These results point to promotions as a key source of the gender pay gap.

Indeed, the gap between men and women in the probability of being promoted to the next salary band also increases with the seniority of the workers .

The most interesting for the purpose of the study, however, is to compare what happens before and after 2011, when the ECB made its decisive commitment to diversity. What is observed is that until the end of 2010, the probability of promotion was significantly lower for women than for men (taking into account observable differences in individual characteristics, the annual probability of promotion for women was on average 3% lower than that of comparable men, which accumulated up to 37% after 10 years) while since 2011 that gap has closed considerably (Figure 3).

In view of this result, one could conclude that the policies adopted by the ECB had already served their purpose. However, analyzing the information available for the selection processes, we see that the absence of a gender gap in promotion as of 2011 is masking two other gaps that are offset:

  1. NEGATIVE

gender gap in the probability of requesting a promotion. That is, all observed individual characteristics being equal, women are less likely than men to apply for an open vacancy. Part of this gap is explained by the fact that the fewer women apply the more competitive the selection process is.

  1. POSITIVE

gender gap in the conditional promotion to being an applicant: once they apply for a vacancy, the probability of winning the selection process is greater for women than for men with similar observable characteristics.In short, women are less likely to apply for promotion, but those who do are more likely than men to be promoted. Critical voices could argue that this result simply reflects positive discrimination in favor of women.

However, in the article, we show that this is not the case, because, after promotion, the salary progression of women within their new salary band is better than that of their male counterparts, which – given that these salary increases are assigned to each employee based on their contribution to the performance of the BCE – implies that the promotion obtained was not due to unconditionally favoring women over men in that process, but rather due to positive self-selection of the best female candidates to run. Also,

In conclusion, these results show the effectiveness of corporate diversity policies in mitigating gender gaps in requests for promotion and in professional promotions. Furthermore, they show that, in a context such as the ECB, supply-side explanations remain relevant.

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