Mahima Agarwal (NMIMS, Mumbai

MAHIMA AGARWAL

NMIMS, Mumbai

Glass Ceiling Effect: Application of Game Theory and Economic Ramifications

The gender-based wage discrimination encountered by women in various industries and fields of study is called the Glass Ceiling effect (GCE). The term explains prevalent gender biases in various sectors, which give rise to barriers of entry and lack of subsequent growth opportunities for working women. Some of the instances are as follows:

In the corporate world, women continue to be underrepresented at every level, especially at the top levels of management, even though there is a rise in the absolute number of women in senior leadership position. Despite having similar rate of return on investment, female directors are allotted a small budget as compared to male directors.

Candlesticks Depicting Male and Female Directorial Budget Allocations (* sign depicts outlier) Source: Miller (2018)

The percentage of female professors teaching top tier management in India is 6.67%, while it is 17%, 18% and 21% in the UK, US and Australia respectively. When female researchers are absent from work, they are assumed to be attending to their children whereas their male counterparts when absent, are assumed to be researching.

Source: Mckinsey & Company

Quantifying GCE through Game Theory

Here's a nascent model utilizing game theory to quantify the trade-off between household work and professional work faced by women at the point of marriage.

The model is non-zero in nature; Marriages aren’t situations of absolute victory or absolute defeat, hence it is impractical to assume that one person will win it all and the other will lose it all.

Additionally, another key assumption required is that the income levels of both the prospective husband and wife are equal. Had she been earning less, there is a loss in bargaining power which may result in the husband influencing this decision to a large extent. Hence, at equal income level, the basket of goods that can be reached when the husband works and the wife doesn’t, is the same as the one reached if the wife works and the husband doesn’t.

Given below is a basic payoff matrix using arbitrary payoffs to demonstrate the possible strategies and preferences of each agent: Here, Player 1 is the woman and player 2 is the man. The two strategies at their disposal are to either work (W) or to not work (DW) post marriage. Hence, the two strategies lend us 4 possible outcomes namely, 1.(DW,DW): This strategy is not a rational possibility, since it will result in zero income for the family

and hence, no utility will be generated- (0,0).

2.(W,W): In this case, the man’s payoff is slightly lower relative to the woman’s, since the man derives certain utility in his work from the notion of providing for his partner, which is a very deeply rooted traditionalist perception in the male psyche – (4,3).

3.(W,DW): Here, the man’s payoff falls drastically, due to traditionalist notions leading him to consider housework as ‘unproductive’, or ‘disgraceful’ to him in some ways. The woman’s payoff falls slightly, since she too may fall prey to traditionalist notions and feel socially worse off for having a stay-at-home husband. However, the fall in her payoff is lesser relative to the man’s, since she’s getting utility from being able to work- (3,1).

4.(DW,W): Here, the woman’s payoff is seen to fall since she isn’t working, but it does not fall to the extent that the man’s does when he stays at home, because women value domestic work as important and productive to a greater extent than men do, so she’ll get some added utility from the traditionalist element of a matriarch tending to her home. The man’s payoff rises substantially due to the traditionalist notion of being the sole breadwinner for his family- (2,5). Nash Equilibrium: When we apply Nash equilibrium to the above model, even after factoring in each and every possible orthodox mindset that the prospective husband and wife may harbour, we find that the equilibrium that we arrive at can is (W,W), implying that even under the most traditional notions, it is most rational for both husband as well as the wife to continue working post-marriage. While the payoffs mentioned are arbitrary, the numbers reflect the relative relationship between each choice, and real payoff values can easily be calculated by defining utility functions for each agent in the game.

GCE and Economic Development

Gender Equality is an essential parameter for measuring the development of an economy. By breaking the barriers that hinder women from getting– the same way as men – human capital endowments, economic opportunities and human rights, the recognition of gender equality affords economies better economic growth and accelerates development. The figure below depicts the association between the GGI (Gender Gap Index) and the HDI (Human Development Index-). The GGI illustrates disparities between the two genders, where zero denotes inequality and one denotes perfect equality. The HDI, on the other hand, is the most widely accepted economic development index in use today.

(Source: Global Gender Gap Report, World Bank)

The above plot depicts a cross-country analysis with the help of data available from 114 different countries. There is a relatively strong positive correlation of 0.55 between the HDI and the GGI which means countries whose level of equality between men and women is high tend to have a high level of human development as well (for example, Finland). At the same time, countries having huge gender inequalities have a low development index (for example, Afghanistan)

One thing is clear: There is no way a country can achieve its economic and social development goals without first addressing the issue of GCE.

The Indian Context

As per the Economic Survey (2020-2021) by the Government of India, the Labour Force Participation Rate of women belonging to the productive age of 15-45 years is a low 26.50% in contrast to 80.30% for males. Women here earn roughly 65% of the wages of their male colleagues for performing the same job In the year 2019 (World Economic Forum Report, 2020). Only 3.7% of CEOs and Managing Directors of NSE -listed companies were females, a marginal increment from 3.2% five years ago ( Economic Times, 2019). Just by increasing the Women Labour Participation Rate by 10% India can add upto $770 bn to its GDP by 2025 (McKinsey Global Institute, 2018). Hence, it needs to shatter the Glass Ceiling and promote nondiscriminatory practices at the workplace so as to embark on a growth trajectory and maintain its status of being one of the fastest growing economies of the world.

References:

1.ht tp s:/ /www.i nvesto pedia.co m/ ter m s/g/g la ssceiling.asp 2.https://www.indiabudget.gov.in/economicsurvey/ doc/vol1chapter/echap04_vol1.pdf 3.World Economic Forum, The Global Gender Gap Report 2020 (2019) 4 . h t t p s: / / e c o n o m i c t i m e s. i n d i a t i m e s. c o m / n e w s/ company/corporate-trends/at-only-3-corporate-indiai s-s t i l l-s t r u g g l i n g-t o-b r i n g-w o m e n-t o-t h e-t o p / articleshow/68589499.cms?from=mdr