Gender Pay Gap, Labor Unions and Firm Performance

Abstract

Using detailed employee-employer administrative data, we analyze the impact of the gender pay gap on the performance of firms and find that it depends on the presence of labor unions. When the firm is not unionized, the gender pay gap reduces profitability. In contrast, when unions are present, the gender gap has no effect on profitability in male-dominated firms and increases profitability in female-dominated firms. Our evidence suggests that when there is no union, giving priority to cohesion and pay equality is value-enhancing. In highly feminized firms, unions provide employees with the option of nonpecuniary benefits, with females opting for better work-life balance and males opting for higher salaries. Our findings indicate that in these firms, the gender pay gap may reflect the divergent interests of female and male employees and can positively affect firm value.

Keywords: labor unions, gender pay gap, feminization, performance, profitability, productivity, wages

JEL Classification: G32, G34, G38, J16, J21, J24, J31, J71