Fearless Idea 28: Close the Gender Wage Gap

SMITH BRAIN TRUST — Something inequitable happens when men and women with similar jobs get laid off at the same time from the same companies, and then move to the same new employer. The gender wage gap — whatever it was before — widens during the transition. Only one factor helps to soften the outcome. A study co-authored by professor Liu Yang at the University of Maryland’s Robert H. Smith School of Business shows that when women workers get rehired by women managers, the wage disparity is cut in half.

Yang says the study, published in the Journal of Financial Economics, suggests that women in leadership roles promote a shift toward egalitarian hiring and compensation policies. “When women hold senior leadership positions, they cultivate more female-friendly cultures inside their firms, and subsequently improve career prospects for those women,” Yang says. “Shareholders of male-led firms should take note of these implications.”

The study examines data from the U.S. Census Bureau’s Longitudinal Employer Household Dynamics program, which tracks 461,449 workers in 9,244 closing plants across 23 states between 1993 and 2006.

Among other things, the study challenges the notion that women earn less than men because they prioritize family ahead of career — causing them to limit their work hours and productivity.

Yang says male-led firms pay women less than men in every wage group, including workers over 55, for whom the constraints of family are less likely to differ by gender. Women in the highest wage brackets working in male-led firms have the highest wage disparity.

“This further erodes the notion that gender wage disparity is driven by women sacrificing career advancement in favor of family,” Yang says. “Managerial bias, rather than lack of qualifications, fuels the gender wage gap.”

Read more: “Female Leadership and Gender Equity – Evidence from Plant Closure” (with G. Tate), Journal of Financial Economics, Volume 117, Issue 1, July 2015, 77-97.

Liu Yang is an associate professor in finance at the University of Maryland’s Robert H. Smith School of Business. She is also executive director of the University of Maryland Federal Statistical Research Data Center.

Research interests: Corporate finance, including mergers and acquisitions, corporate restructuring, corporate governance, labor economics and financial institutions; influence of female leadership on gender wage gaps.

Selected accomplishments: 2013 and 2014 top 15 percent teaching award, UMD; 2011 research grant, Harold and Pauline Price Center for Entrepreneurial Studies, UCLA; 2010 research grant, Fink Center for Finance & Investment, UCLA; 2010 Best Paper in Corporate Finance, Financial Management Association Meetings; 2009 Best Paper, California Corporate Finance Conference.

About this series: The Smith School faculty is celebrating Women’s History Month 2017 in partnership with ADVANCE, an initiative to transform the University of Maryland by investing in a culture of inclusive excellence. Daily faculty spotlights support activities from the school’s Office of Diversity Initiatives, culminating with the sixth annual Women Leading Women forum on March 30, 2017.

Other fearless ideas from: Rajshree Agarwal  |  Ritu Agarwal  |  Leigh Anenson  |  Kathryn M. Bartol  |  Christine Beckman  |  Margrét Bjarnadóttir  |  M. Cecilia Bustamante  |  Rellie Derfler-Rozin  |  Waverly Ding  |  Wedad J. Elmaghraby  |  Rosellina Ferraro  |  Rebecca Hann  |  Amna Kirmani  |  Hanna Lee  |  Hui Liao  |  Wendy W. Moe  |  Courtney Paulson  |  Louiqa Raschid  |  Rebecca Ratner  |  Rachelle Sampson  |  Debra L. Shapiro  |  Cynthia Kay Stevens  |  M. Susan Taylor  |  Vijaya Venkataramani  |  Janet Wagner  |  Yajin Wang  |  Yajun Wang  |  Liu Yang  |  Jie Zhang  |  Lingling Zhang  |  PhD Candidates