The Organizational Mechanism of Meritocracy Paradox: Merit Pay and Gender Wage Inequality in Japanese Firms

• In Event: 2356 - Managers' Bias and Employees' Bias-reduction Strategies

Abstract

Despite recent findings that organizational practices expected to reduce inequality often fail to achieve the goal and sometimes increase inequality, mechanisms of practice failure have not been fully understood. In this paper, we attend to the intra-organizational struggle over policy implementation to explain the unexpected outcomes of gap-reducing practices. Internal members do not simply embrace the ideal of such practices, but may resist a full implementation of those practices that are against their belief and interest. We took the case of the merit-based payment system, which is viewed to reduce gender inequality by helping managers stop relying on biases, and tested our argument with linked employer-employee panel data. Our findings show that earnings gap between men and women increased after the adoption of merit pay in Japanese firms, and internal members who resisted its adoption, as well as those who benefited from the previous seniority-based payment system, significantly increased the gender earnings gap after the adoption. These findings suggest that intra-organizational resistance can significantly impair the effectiveness of organizational practices that are intended to reduce workplace gender inequalities. Our study contributes to the literature of organizations and inequality both empirically and theoretically. Empirically, the linked data allowed us to investigate the impact of organizational policy change on individual employees. Theoretically, we highlighted the importance of organizational contexts to explain why practices expected to reduce inequality often fail.

Authors

• Eunmi Mun, University of Illinois at Urbana-Champaign

• Naomi Kodama, Nihon University