Labor Market Consequences of Pay Equity Laws

• In Event: Equity and employment: hiring, retention, wages, and workplace conditions

Abstract

Portugal enacted legislation in 2018 targeting gender wage gaps, penalizing firms with over 250 employees that had gaps over 5%. Using administrative data that links employees to job-titles within firms, we analyze its impact both within and between genders using an event study design. First, we show that in treated firms, jobs with initial gaps exceeding 5% saw a 9% reduction, mainly through slower male wage growth. Jobs with negative gaps saw reduced female wage growth to close the gap by half. However, jobs with gaps between 0-5% unexpectedly rose by 21% due to slower female wage growth. These unintended consequences are more pronounced in male-dominated industries. Further, we find that firms did not change their size to evade the law, nor did it impact job gender composition, or hours worked. Our findings highlight how the establishment of a well-intentioned but uniform target gender wage gap that clarified the repercussions for gender imbalances thereby leading to unintended consequences.

Author

• Md Moshi Ul Alam, Clark University
  Presenting Author