How Rank Pay Variation Under Performance Systems Affects the Gender Pay Gap

• In Event: 21017 - Organizational Policies and Gender Inequality

Abstract

Since the 1997 financial crisis in Korea, most companies have adopted performance-based pay systems, moving away from traditional seniority-based pay. While these systems were expected to reduce managerial gender bias and allocate pay based solely on individual performance, their adoption has revealed new complexities. Drawing on the literature on gendered organizations and occupational segregation (Acker, 1990; Reskin, 1993), this study examines how pay variation across ranks, shaped by the presence or absence of performance-based pay systems, influences the gender pay gap across sectors.
Using linked employer-employee data from the Human Capital Corporate Panel (HCCP) from 771 Korean companies and 66,348 workers between 2005 and 2017, the study finds that greater pay variation across ranks is associated with a widening gender pay gap in non-manufacturing sectors, especially in firms implementing performance-based pay systems. This trend is driven by subjective performance evaluations, gendered task allocation, and stereotype-driven barriers, which disproportionately affect women (Feldberg, 2022; Nelson et al., 2023). By contrast, in manufacturing sectors, where tasks are more standardized and metrics are clearer, pay variation across ranks combined with performance-based systems correlates with a narrower gender pay gap, suggesting that structural constraints can reduce gender bias.
The findings emphasize that pay variation across ranks, when implemented under performance-based pay systems, may unintentionally exacerbate gender segregation and pay disparities in sectors where evaluation criteria and task allocation are less standardized. This underscores the importance of critically assessing how performance-based systems are implemented within different organizational and industry contexts.

Author

• Myung-Ji Heo, University of Arizona