Several nations now require companies to make their wage data public in an effort to encourage them to pay men and women equally. A recent study from researchers at the University of Copenhagen, the University of North Carolina, Cornell University, and Columbia University is the first to find that when this policy is enacted, the gender pay gap shrinks.
For their study, the team of researchers observed data from a survey conducted in Denmark. In 2006, the country passed a law that required companies with more than 35 employees to publicly disclose the discrepancies in pay between their male and female employees. The researchers compared those companies to firms with 25 to 34 employees that didn’t have to release their data.
The results found that from 2003 to 2008, the gender pay gap at the reporting companies decreased by 7 percent, while the wage gap at non-reporting firms held steady. However, the reporting firms had a 2.5 percent decline in productivity and a 2.8 percent drop in the companies’ wage bills. Typically, in order to comply with the new policy, the reporting firms tended to slow the growth of the salaries of their male employees rather than increase the wages of their women employees. However, the regulated firms were more likely to promote women, and hired 5 percent more women in intermediate and lower-level jobs compared with the non-reporting group.
“It’s important to understand how this type of regulation affects companies in order to see what is the best way to form this type of mandate,” said co-author Margarita Tsoutsoura, an associate professor of finance who holds the John and Dyan Smith Endowed Chair of Family Business at Cornell University. “On one hand we want to lose the pay gap. On the other, we want to do it in a way where we don’t harm companies.”
Dr. Tsoutsoura holds a bachelor’s degree in economics from the University of Piraesu in Greece, a master’s degree in financial engineering from the University of California, Berkeley, and a Ph.D. in finance and economics from Columbia University.
The full study, “Do Firms Respond to Gender Pay Pap Transparency?” may be accessed here.