Hollywood’s Gender Pay Gap

Ricard Gil
Ricard Gil

Ricard Gil, PhD (Economics, University of Chicago), joined the Johns Hopkins Carey Business School in 2011. He is an Associate Professor in the research track with expertise in organizational economics, focusing on strategy and industrial organization.

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Jennifer Lawrence has recently denounced the existing Gender Pay Gap between male and female actors in Hollywood. While more than 2,500 miles away, this is a topic that should be of interest to you, the Carey community, whether you are male or female, student, alumnus, faculty or staff. Conducting business with humanity in mind stands not only for creating society value but also in acknowledging the contribution of agents and stakeholders to the final success of business enterprises.

Jennifer Lawrence states that “actresses are massively underpaid relatively speaking to their male counterparts.” Make no mistake, Lawrence made $52 million in 2014 making her the highest paid actress in the world, but yet this amount fell $28 million short of the highest paid actor in the profession at the moment, Robert Downey Jr. You can search for this information and related news on the World Wide Web, and really start seeing that most of the top paid actors earn far more than the best paid actresses, even though Lawrence herself earns more than the majority of actors. Having established the fact that actresses do earn less than actors, then the question is where this gap actually comes from. Are we to blame studios, talent agencies or movie consumers for the gender pay gap in Hollywood, and the global motion picture industry?

Why does this matter to us as students, future and current managers and scholars? Well, this comes back to ancient questions of how to compensate workers in scenarios that require team work where the marginal contribution of individuals’ work is not directly observed in the market place. What steps should we follow to determine whether such gender pay gap exists in the motion picture production?

We may first want to ask whether Robert Downey Jr.’s movies make more money than Jennifer Lawrence’s movies. Is that so? If it is, how do the former outperform the latter? Is it on domestic box office? Is it on foreign box office? Is it merchandising? Is it ancillary markets such as video on demand or DVD sales? If differences in movie performance explain differences in pay (even partially), then movie goers may also be a bit at fault for the observed differences in pay between actors and actresses.

The next question that we want to ask is whether movies that employ actresses in more relevant roles are fundamentally different than those that employ actors in more relevant roles. In other words, are actresses more likely to play secondary roles than actors? If the answer to the question is YES, then another question is whether the motion picture industry purposely produces movies that employ female characters in less relevant roles. If the answer to that is yet again YES, why is that? Is it demand driven? Is it a result of biases in studio executives?

Finally, there is a third question that I believe is the base of Ms. Lawrence’s statement. Holding constant movie performance, movie genre and cast gender composition, do actresses earn far less than their marginal contribution to movie performance relative to actors with the same marginal contribution to their own movie’s performance? This is the same as asking whether the institution of agency and talent management (distinctive institutional characteristic of Hollywood) plays a role in this compensation gap.

I do not quite have an explanation for the existing gender pay gap in Hollywood, but this is certainly a topic of interest here at Carey. When talent gets paid less than its marginal contribution, talent may be misallocated and this misallocation will directly affect efficiency.

FOOD FOR THOUGHT: A “surprise” appearance in the ranking of top world paid actresses is Chinese actress Fan Bingbing with $21 million last year, 4th highest paid actress in the world. Two things may be contributing to this fact: one is of course her unique importance in a large booming market such as the Chinese movie industry, but the other may be that this actress is self-managed through her own production company.

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