Build your network at working! – Corvinus Researcher on her Roska Tamás Lecture

Why did you become interested in the difference between women’s and men’s wages? 

My research focuses mainly on the labour market, but I have always had a broad interest in this area. On the one hand, I have been very interested in the role of networking in the labour market since I was a young student. On the other hand, it has always been important for me to learn more about the factors that influence inequalities in the labour market. This led to my interest in studying and understanding gender inequalities at a fairly early age. 

However, it is also important to point out that data-driven research logic is much closer to me than theory-driven. Fortunately, thanks to the Centre for Economic and Regional Studies (KRTK) Data Bank, there is an excellent database available that offers amazing possibilities for studying labour market inequalities. The data collectied by public administration entities  on which I conducted most of my research is a database created by combining data from different governmentbodies, covering half of the population of Hungary. The latest version of this database now follows individuals on a monthly basis for 15 years, in an anonymous format, so it is a great way to study career paths. 

What is the situation in Hungary with regard to women’s and men’s wages, and what are the reasons for the inequality? 

On the pay gap, it is worth noting that in Hungary (according to Eurostat data for 2021) the gender gap in average gross earnings is 17.3 percent in favour of men, compared to the EU average of only 12.7 percent. Comparative studies using administrative data have also measured a domestic wage gap of 15-17%, which is average by European standards. 

Wage inequalities are partly due to differences in personal characteristics. For example, women often have less experience in the labour market than men, partly because of childbearing, which can affect wages. It is also of great importance that women and men tend to choose different occupations, industries and even different types of jobs, which lead to significant wage differences. But even today, most of the differences are still generated within companies. Between men and women similar in every respect, we can see a wage gap of around 10 percent, which is rather high. This may be due, among others, to discrimination, but differences in the bargaining power, self-confidence and assertiveness of women and men may also matter. 

Naturally, wage differentials can also be influenced by the career paths of individuals, and by gender differences in career development and career management. Although we know somewhat less about this from the literature. 

What is the role of career paths in terms of earnings? 

In our related research, we looked at gender differences in career paths, focusing on managers. We also examined whether career development and career management have any impact on the level of wages earned in the first management position and on the gender pay gap there. 

Our results show that the path you take before becoming a manager matters a lot, as certain career paths are typically associated with higher wages. These are, for example, the gradually built careers, where employees move up the occupational ladder gradually. They also include career paths that are more related to natural sciences and information technology. 

It was also clear that women and men would become leaders in very different ways. For example, women tend to make progress within their current jobs in larger firms, while men tend to achieve management positions by moving between companies. And we saw a 12 per cent raw disadvantage in women’s wages already in the first management positions. This is a lot, considering that these differences will only increase later on. According to our examinations, the majority of the pay gap is almost exclusively due to gender, but individual characteristics and career paths also play important roles. 

You have also researched the role of networking in developing employment and earning opportunities. 

Networking is extremely important for several reasons. Former classmates and colleagues may be fairly useful to both the employee and the employer. Firstly, jobseekers learn about more relevant job opportunities through their connections, making it easier for them to find good offers and jobs that suit them better. Ex-colleagues can also help their acquaintances through personal referrals, which can make it easier to get a job and help you get better pay and promotion opportunities. What’s more, former colleagues can also help to create better employee-employer matches. This way jobseekers find the jobs that best suit them, and companies hire the best possible candidates for a given position. 

A colleague’s reference offers much more relevant information to companies than a well-written CV. And the information you get is more credible, especially if it comes from an already tried and tested employee who works for the company. From the hiring company’s point of view, these are all important benefits, as they reduce the costs associated with recruitment and pre-screening of candidates. The new recruit can also easily integrate into the team already working there if he/she has a good friend among them. 

At data level, we cannot necessarily detect and isolate these individual mechanisms, but their combined effect can be measured. Based on my research, individuals are almost 4 times more likely to be hired by a particular company if they have a former colleague working there, than if they do not. It can also be seen that if you start at a company you know, you start from an average salary level that is 4-5% higher. However, depending on the position, this premium can be much higher, up to 10 percent for those in intellectual jobs. Also, acquaintances play an important role in upward mobility: if you start at the company of a former colleague, you are more likely to end up at a better paying company and in a better position than before. But it is important to underline that there were significant gender differences in all the aspects examined. 

What are the reasons for the differences observed? 

The difference has two main components. Firstly, the quality of the network of connections is different for women and men. This is partly for structural reasons. As women are more likely to work in female-dominated firms and in lower positions, they have fewer opportunities to build useful professional relationships that can help them more in their later careers. But individual preferences also affect the quality of networks, in other words the considerations that women and men have in building their relationships. For example, women often prioritise emotional factors over strategic relationship building. Secondly, how and for what purpose women and men use their relationships and the extent to which people they know can or are willing to help them may also play important roles in the differences. 

In other words, should we make friends with managers so that we can benefit from their help at some point in our career? 

No, of course not, but it’s important to be aware that the quality of your network of connections is an important factor that can affect your long-term career progression. And it is certainly true that a little awareness does not hurt. Going to company and professional events and giving ourselves the chance to engage in networking, paying more attention to building a good network of connections and maintaining our professional relationships can definitely be to our advantage. Of course, the other side of the coin is that companies also need to make sure that they create a colourful workplace and organise events (such as family-friendly events) that all employees can attend. 

How has Corvinus helped your research? 

I would like to highlight the role of my supervisors, László Lőrincz and Tamás Bartus. They were the ones who encouraged me to pursue a PhD after I completed the master programme, and who have guided me through the last five years. The doctoral school supported my career both professionally and financially, and I was able to attend several conferences, which provided a very good opportunity to learn and promote my research. 

Portrait: Péter Lugosi 

Virág Ilyés’s Roska Tamás Scientific Lecture (from minute 44): 36th OTDK Social Sciences Section opening event on 12 April 2023 

Katalin Török