The gender employment gap remains a major barrier to inclusive and sustainable development. This study highlights a concrete lever through which firms can contribute: increasing women's workforce participation by narrowing within-firm wage disparities. We aim to inform debates on gender equality in organizations by documenting robust empirical links between internal wage structures and women's employment outcomes, and by outlining implications for managerial practice and future research on the persistent underrepresentation of women in formal employment.
We analyze a dataset comprising nearly 2,800 Chilean firms over seven years, encompassing more than 140,000 employee-month wage records across 170 industries. Our models incorporate firm-year and industry-month fixed effects to account for unobservable factors and address potential endogeneity issues.
Our findings indicate that greater within-firm wage dispersion is associated with a lower share of women in the workforce. This gap appears to operate through two channels: firms with higher pay dispersion hire fewer women relative to men and experience higher female attrition. From a practical standpoint, pronounced internal pay inequality may therefore serve as a useful diagnostic indicator for organizations seeking to improve gender equality.
While the findings establish a statistically significant association, causality cannot be conclusively determined.
Firms can play a pivotal role in reducing gender inequality by adopting narrower wage dispersion policies. Organizations can monitor their internal wage distributions, incorporate dispersion measures into regular pay-equity audits and assess whether step pay hierarchies might unintentionally discourage female applicants.
This study examines the nuanced relationship between wage dispersion and female workforce participation, distinguishing its effects on recruitment and attrition. Utilizing a comprehensive dataset from a developing country, we illustrate how adjustments in wage structures can promote critical social objectives.
