The Old Boys' Club: Schmoozing and the Gender Gap

Offices are social places. Employees and managers take coffee breaks together, go to lunch, hang out over drinks, and talk about family and hobbies. In this study, we provide evidence that employees’ social interactions with their managers can be advantageous for their careers and that this phenomenon can contribute to the gender pay gap. We use administrative and survey data from a large financial institution. We conduct an event-study analysis of manager rotation to estimate the causal effect of managers’ gender on their employees’ career progressions. We find that male employees assigned to male managers were promoted faster in the following years than male employees assigned to female managers; female employees, on the contrary, had the same career progression regardless of their managers’ gender. These differences were not accompanied by any differences in effort or performance, and they explain a third of the gender gap in promotions at this firm. Then, we provide evidence suggesting that these effects were mediated by the social interactions between male employees and male managers. First, we show that the effects were present only among employees who worked in close proximity to their managers. Second, we show that the effects coincided with an uptick in the share of breaks taken with the managers. Third, we estimate the impact of social interactions on career progression using quasi-random variation induced by smoking habits. When male employees who smoke transitioned to male managers who smoke, they took breaks with their managers more often and were subsequently promoted at higher rates than male smokers who transitioned to non-smoking managers. The boost in socialization and promotion rates closely mirrors the pattern among male employees assigned a male manager.