The social pay gap across occupations: Experimental evidence

Although receiving equal wages for work of equal value is a legal right in many countries, there is evidence that it does not hold for social occupations (e.g., health care, education). Considering this existing wage penalty or social pay gap, we design a laboratory experiment that mimics actual income distributions (Germany, USA), incorporates social occupations in the lab society, and allows for (voluntary) redistribution among subjects. The results show that – regardless of (non-)random assignment to social jobs and the level of income inequality – individuals in social jobs are only partly compensated for their social effort in a market design. Indeed, a downward spiral, induced by emotional reactions, emerges as social effort and donations converge to a ‘low’ equilibrium. These results suggest that a market approach fails to eliminate the social pay gap.