February 8, 2023

Research by scholars from Harvard, the University of California, Berkeley and the University of California, San Francisco finds that gender segregation between companies contributes significantly to the gender wage gap in the service sector. The study also finds that this gender wage gap at the company level not only leads to women receiving less in pay, but also receiving fewer working hours.

These findings were reported in a peer-reviewed research article published in the journal Work & Occupations by scholars affiliated with the Shift Project, a joint research initiative between Harvard Kennedy School’s Malcolm Wiener Center for Social Policy and the University of California, San Francisco. The authors are Carmen Brick, a PhD candidate in sociology at the University of California, Berkeley; Daniel Schneider, Malcolm Wiener Professor of Social Policy at Harvard Kennedy School; and Kristen Harknett, Professor of Sociology at UCSF.

Scholars have long studied the gender wage gap and have identified occupational segregation as an important cause of the gap – women are concentrated in occupations that pay less. However, firms are the actual wage setters in the labor market. The study uses unique worker-firm matched data and finds that a similar segregation of women into lower paying firms plays a substantial role in accounting for the gender wage gap in the service sector.

The concentration of women at lower-paying companies within the service sector explains approximately 40% of the gender wage gap between workers with similar demographic characteristics. Female workers would be able to gain more than an additional $735 annually if they were employed in the higher-paying companies within the service sector, roughly equivalent to pay for 2 weeks of work for workers within the sample who roughly earn $12.25/hour and work about 30 hours per week. If women were employed in the firms where workers received the greatest number of weekly hours, they would work nearly 25 hours more per year and earn $306 more at that same rate. The total difference in income due to these wage and hour gaps could meaningfully help low-income households since many of these households report a lack of funds to weather even a financial emergency of a few hundred dollars.

“For low wage workers, every dollar counts, so this wage gap is economically significant. Why do women make less? We have a lot of standard explanations, including that women end up in types of jobs that pay less. That does matter, but it’s also that women end up working at companies that are lower paying,” says Daniel Schneider. The research findings give little reason to believe that women self-select into lower-paying companies and finds evidence that the work of women is devalued by certain companies, leading to them being paid less.

At a time when multiple government agencies, including the U.S. Securities and Exchange Commission (SEC), are considering new human capital disclosure requirements, this work reinforces the importance of corporate transparency around pay and gender inequality. “There should be more disclosure of what companies are paying their workers. This research reinforces the importance of firms or companies as pay setters and creating inequality. Employers set wages, not occupations, so we need to look at employers,” says Schneider.

About the Shift Project

The Shift Project, housed at Harvard Kennedy School’s Malcolm Wiener Center for Social Policy, is the largest source of data on work scheduling for hourly service workers, with reports from 200,000 workers in the retail and fast-food sectors from across the country. The data include worker schedules, economic security, and the health and well-being of workers and families.

Isabella Roden