Furthermore, because women are often overrepresented in lower-wage work, they typically see greater economic benefits than men from such policies, despite the policies being ostensibly gender-neutral.
But a new study complicates that picture, showing that when overall well-being (or well-being) is taken into account, women may actually benefit less than men from raising the minimum wage. The findings come from his research Nikola Persikoprofessor of managerial economics and decision sciences at the Kellogg School, who collaborated with Associate Professor Kellogg Erika Deserrano and Decio Coviello of HEC Montreal.
Using data from a major US retailer, the research confirmed that, among sales associates in the same department, women saw less benefit to their well-being from minimum wage increases than men.
Welfare disparities appeared because women responded to increases in the minimum wage by working disproportionately harder at their jobs. This was especially true in counties where market wages for most jobs were lower for women than for men. in counties where market wages were the same, there were no gender differences in welfare. This suggests that women were more motivated than men to keep their jobs because they had fewer opportunities to earn similar wages in a different workplace, which forced them to put in more effort.
“Particularly in markets where women’s wages are much lower than men’s, these are the times and places where women respond most strongly to an increase in the minimum wage,” says Persico. This has important implications for employee well-being beyond pay.
Effects of wage increases
Researchers worked with a national retailer that operates more than 2,000 stores in all 50 states to study the impact of minimum wage increases on its employees. For their analysis, Persico and her colleagues focused on a subsample of more than 10,000 sales associates who worked in about 200 of the retailer’s stores from February 2012 to June 2015.
In-house sales consultants assist walk-in customers by answering their questions and demonstrating product features. They receive a fixed base fee that varies by location and a commission earned through upselling of higher margin products, credit cards and warranties. Since their fixed base pay is usually lower than the minimum wage, the employer will supplement the workers’ pay to ensure it is at least the minimum wage when they are not earning enough from commissions.
All of the company’s stores have the same gender-neutral pay policies, but the minimum wage that constitutes their base pay varies by state and local law. The researchers identified more than 100 pairs of stores located near each other across state and county borders, where one of the stores in each pair was located in a jurisdiction that had raised the minimum wage and the other had not. This created a natural experiment that allowed the researchers to investigate the impact of these minimum wage increases on store employees.
To do this, the team developed a new formula. It showed that raising the minimum wage in stores in provinces where, on average, women were paid less than men only served to widen gender inequalities within the company.
Specifically, the increase in the minimum wage prompted female sales associates to work harder and, in turn, generate greater increases in hourly sales than their male counterparts. And because women put more effort into being productive and increasing sales and commissions, they were less likely to “top up” the minimum wage.
“In this way, unequal opportunities outside the company create inequalities in employee well-being within the company,” says Persico. “This happens even at companies with the most rigorous gender-neutral pay systems.”
The result? Even companies with gender-neutral pay policies may need to consider external factors, such as external employee opportunities, in order for their policies to have the intended effect.
However, the researchers believe that well-timed minimum wage increases could serve as a “gender-equalizing force” in the US labor market. That’s because women still hold lower-paying jobs more often than men, which means they’re more likely to see a pay rise.
Indeed, when the researchers assessed the impact of minimum wage increases on store employees in different roles and departments in their data set, they found that women benefited more from minimum wage increases than men for this very reason.
It is not enough to look at wages
While the past research has documented the effect of minimum wage increases on the pay distribution, the paper by Persico and colleagues may be the first to quantify the impact that a gender-neutral pay policy has on worker well-being.
“It is not necessarily enough to look only at the wage structure. We need to evaluate policies by looking at their effects on the gender wealth gap rather than focusing on the gender pay gap, because they may not align,” says Persico.
She notes that despite equal pay with men, women put in extra effort for fear of losing their jobs in an environment of limited opportunities. “Managers are looking for them, and if they don’t produce, they’ll lose their jobs,” he says. “They have an incentive to work harder.”
