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New Study Shows How Gender Pay Gap Widens

Apr 21, 2014
World Class Faculty & Research

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Effect Reduced at Firms Where a Majority of Senior Leaders Are Women

COLLEGE PARK, Md. — Women wage earners suffer more than men when they leave similar jobs at the same company and relocate to the same new employer following layoffs, a first-of-its-kind study from the University of Maryland’s Robert H. Smith School of Business shows. The gender pay gap widens during the transition regardless of age, race, education or seniority, although the effects are less pronounced at firms where a majority of senior leaders are women.

“The gender wage gap is true across the board,” said Smith Finance Professor Liu Yang, co-author of the study with Geoffrey Tate from the University of North Carolina at Chapel Hill. “No matter how we look at the data, there is a difference and the women suffer more.”

Yang said the study challenges the argument that gender pay differences are largely a reflection of unequal career choices of men and women because it measures wage changes when all workers are laid off due to plant closure rather than the wage itself.

“We show that women fall farther behind men when they leave the same job for the same reason and get hired at the same new company,” she said. “It’s not about career choices or differences in human capital because this already would have been reflected at the old job.”

She said the study shows how gender pay differences can widen over time, even when men and women start with similar salaries. In the cases she examined from 1993 to 2006, where involuntary job changes due to plant closure occurred, women’s salaries slipped about 5 percent compared to men in the same situation.

Although having a female boss or hiring manager did make some difference, the study shows a more significant change occurs when at least three of the top five executives in an organization are female. “Women making a transition in this case do much better,” Yang said. “They still have a loss compared to men, but it is cut in half.”

The study, accepted for publication in the Journal of Financial Economics, is based on data recently made available by the U.S. Census Bureau’s Longitudinal Employer Household Dynamics program. Yang said the study is the first that looks at gender pay changes during career transitions rather than comparing men’s and women’s compensation within the same organization.

Yang is available for media comment at 301-405-5295 or lyang@rhsmith.umd.edu.

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About the University of Maryland's Robert H. Smith School of Business 

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.