Abstract

There is growing interest in the gender wage gap (GWG) in Germany and elsewhere in Europe. Recent policy initiatives have tried to increase pressure on employers to ensure their policies and practices do not discriminate, either directly or indirectly, against women. In Germany and the UK, for instance, there are new requirements for large employers to report their GWG.

These initiatives come after a period in which the GWG has been falling, albeit slowly. The GWG remains large, despite the fact that women have overtaken men in terms of academic attainment and have been closing the work experience gap. Compared to a few decades ago, human capital variables explain relatively little of the GWG. The question arises: how do we account for the remaining GWG?
One issue that remains poorly understood is the role of the employer. This seems ironic in light of popular conceptions about where the GWG originates and in light of policy initiatives targeting employers. It arises because most of the analysis of the GWG undertaken by economists and other academics is not based on linked employer-employee data (LEED). Consequently, we only know a limited amount about the role played by employer heterogeneity and worker-firm matches in accounting for the GWG. There are theoretical grounds for thinking that worker sorting and segregation across workplaces and firms could play a sizeable role in accounting for the GWG, and that there may be substantial across-employer heterogeneity in terms of women’s earnings progression.
Some papers have been written using LEED to understand the GWG but, as yet, there is little consensus about the role of workplaces and firms in helping to explain the GWG.