Study: Women Executives Help Close Wage Gap—But Mostly at the Top
High-level female employees tend to see their compensation go up with a woman as CEO, a new study finds—but women at the lower end of the pay scale are less likely to get a boost.
When women take on leadership roles at their organizations, odds are good that the gender -based pay gap will narrow or even close near the top of the org chart. But the gap actually widens lower down in the ranks, according to a new study published in The Economic Journal.
The report, titled “Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance,” says that on average, female employees who were among an organization’s top 25 percent of earners saw their wages increase by 10 percent with female leadership—but for women in the bottom 25 percent, wages fell by 3 percent. For men, the effect was the opposite: High earners saw their wages go down, but low earners received an increase.
The findings of the study, which examined aggregated data from the Italian manufacturing field from 1980 to 1997—a sample that included about 1 million workers annually—implied a stronger focus on performance by organizations with a female CEO at the helm. The study focused on almost 800 organizations where women made up about 21 percent of the workforce; only 2.5 percent of those organizations had a woman CEO.
Based on the data, the researchers suggested that if organizations made up of at least 20 percent women employees also had a woman CEO, sales per worker could improve by 14 percent. That’s because women CEOs are more likely to place other women in roles where they have a good chance to excel, the researchers said.
“These results follow from the assumption that female CEOs are better at processing information about female workers’ productivity,” the report states [PDF]. “Therefore, wages of females employed by female CEOs are more sensitive to individual productivity.”
In a news release, lead researcher Luca Flabbi of the University of North Carolina said the findings show that leaders generally have a better understanding of the skills of employees of their own gender.
“We explain our results with a model where executives learn about the skills of their workers, and they are better at assessing workers of their same gender,” Flabbi said. “In a world dominated by male executives, female workers prove it hard to show their skills, and therefore to climb the firm’s hierarchy. In firms with many women, therefore, there is a lot of unexploited talent. When a woman becomes the CEO, she is better able to assess the qualities of the female workers and assign them to tasks more in line with their ability, thus boosting firm performance.”
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