Five years After the MeToo movement swept the world, the issue of sexual harassment continues to haunt the business professions. New allegations of misconduct at universities in America and Europe bring to light a spate of older cases. Eradication of harassment in academia is particularly difficult, as career advancement depends not only on the goodwill of older colleagues but also on colleagues at distant institutions, who often work with juniors to conduct research and review the articles pending publication compete in prestigious magazines.
But half a decade has not passed in vain. Many economists now use the same rigorous approach they use to assess the labor market or the impact of work-related injuries to assess the impact of harassment. Their findings help provide a sense of the costs – to victims and the broader workforce – of sexual assault, degrading treatment, and degrading comments. Fortunately, research also shows that some mitigations work, making misconduct control payoffs both significant and achievable.
The greatest cost of harassment is borne by the victims themselves. In addition to the severe psychological costs, there are also economic ones. Victims tend to quit their job to find a new job for which they may be less suited. Johanna Rickne from Stockholm University and Olle Folke from Uppsala University conducted a survey on sexual harassment and followed respondents for five years. They found that women who reported harassment were 25% more likely to leave their jobs than other women; the corresponding increase for male victims was 15%. The women who left also tended to earn less. Another study by Oxford University’s Abi Adams-Prassl and colleagues, using Finnish data on violent incidents, including sexual assault, shows that female victims are almost as likely to become permanently unemployed as workers who are made redundant after a plant closes; the probability is slightly lower for male victims.
Fear of unemployment also appears to deter victims of sexual harassment from speaking out. Gordon Dahl of the University of California, San Diego, and Matthew Knepper of the University of Georgia note that during recessions, only the more egregious tend to be reported.
Gender-based harassment also affects the rest of the population like a tax. One way to assign economic value to this is by estimating how much pay cut workers are willing to accept to avoid the risk of harassment. In their work, Ms. Rickne and Mr. Folke experimented with hypothetical job offers in Sweden. They find that the most vulnerable gender – primarily women – are, on average, willing to give up 17% of their salary to avoid harassment. In another study, Vanderbilt University’s Joni Hersch calculates that the collectively lost income of American women per sexual harassment case filed in any given year is $9.3 million.
Fortunately, the research can also stimulate thought about how to address sexual harassment. One lesson is that enhancing external options can help. Mr. Dahl and Mr. Knepper note that before North Carolina cut unemployment benefits in 2013, workers were more likely to report harassment. Conveniences that make it easier to find work, such as transport links to thriving job bases, should also make a difference. Where the potential for retaliation is high and outside opportunities are limited, as in the film industry or academia, cross-sectoral institutions must be strong enough to punish deviations. The American Economic Association has written codes of conduct and can initiate investigations, but lacks the teeth to gather evidence and impose sanctions.
Another lesson is that employers should be vested in combating sexual harassment. Bocconi University’s Caroline Coly and co-authors note that since 2017, women have been leaving organizations where they fear greater numbers of harassment. The Finnish study also finds that women other than the victims tend to leave a company where male violence against women has been reported. The corollary is that companies that are cracking down on harassment should have access to a broader talent pool, allowing them to outperform their competitors.
Evidence of such a bonus is beginning to emerge. Research suggests that companies run by female executives may have become more valuable since MeToo began. One reason could be that they approach male offenders differently. Ms. Adams-Prassl and colleagues find that female executives tend to fire offenders. This, in turn, encourages more women to stay. A paper by Harvard Business School’s Mark Egan and colleagues also shows that female bosses are less tolerant of other types of male misconduct, such as consumer disputes and misconduct.
pay the price
However, such incentives can only go so far. The final lesson is that organizations under which harassment occurs often underrepresent the true costs. America’s federal laws limit the number of sexual harassment damages a victim can receive from big corporations to $300,000. Using the same method used in workplace safety cases, Ms. Hersch argues, yields a larger figure: $9.3 million, the income sacrifice women are willing to make to avoid harassment. Such payments could deter companies from tolerating wrongdoing. But they may not be enough to change norms and corporate culture. To do this, those in power must speak up.
Economists must now focus on their own backyard. Anna, a former economist pHi.e A student at a European university (whose name we’ve changed) tells how her supervisor made inappropriate comments and eventually asked her to spend the night at his place – which she refused – before becoming resentful when she requested a change of supervisor. After her PhD Anna chose a career outside of academia. Not for lack of ambition, she says, but to avoid the toxic culture and unsafe environment that breeds it. Business would do well to ensure future Annas choose to stay.
Read more from Free Exchange, our column on business:
A 1980s playbook for dealing with inflation (December 1)
The weather again determines the economic results (November 24)
Only a revived economy can save China’s real estate industry (November 17)
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