Ihsaan Bassier and Leila Gautham | May 5, 2025
New research shows that the company you work for makes the biggest difference.
Why do women earn less than men? Normal suspects – occupation, time, experience – explain some of them. But this is the only reason it is so powerful and overlooked that it is often overlooked. It's a place where women work. The companies that hire them play a major role in shaping lifetime revenue.
In South Africa strict Gender wage gaps, many of which are The cause is unknown Depends on the characteristics of the worker, such as occupation, skills, and experience.
With us New research Published in the Journal of Development Economics, it uses tax data on the space of official South African workers to reveal notable facts. Almost half of the gender pay gap in South Africa is explained by women who work for lower wage companies than men. That means they tend to work in companies where more women pay. all There are few workers.
Furthermore, this phenomenon evolves dramatically in women's lives.
we Tracked millions of workers between 2010 and 2018 Use tax data. We wanted to understand how much money different companies paid, regardless of the type of worker. To do this, we compared what the two companies pay to the same worker. We looked at workers who switched companies and compared how their pay changed when they moved to a new company. By doing this for many workers and businesses, we see that we tend to pay more or less to people from similar backgrounds and jobs.
In the official South Africa sector, women are paid 12% less than men on average. About 45% (5.5% points) of this gap is due to the fact that women are concentrated in businesses that are generally less (both women and men).
This is not because women are not paid much within the same company, but because such direct discrimination plays a much smaller role. Instead, it is primarily about sorting. Women and men end up in different businesses, and people pay differently.
Women disproportionately participate in low-wage sectors such as education, retail and personal care, while men are overrepresented in high-value sectors such as construction, mining and manufacturing.
As Labor and Development Economistwe argue that reducing gender pay gaps takes more time than women enter men-controlled jobs or promote equal pay for equal work. It means tackling an invisible structure that leads women to low-wage businesses.
Gender gaps that grow and shrink
What's particularly clear is how the gap in corporate payments changes throughout the lifecycle. For workers in their early 20s, this gap is almost nonexistent. However, from the mid-20s to the mid-40s – almost in the year of parenting, the gap widens significantly.
First, women who are continuously employed throughout their 30s tend to move to companies with worse pay than men, even if they switch jobs at similar speeds.
Second, women who have joined or re-entered formal jobs (after unemployment or informal job spells) tend to start with lower wage companies than men. This drawback when re-entering contributes to the overall gap, but is more constant in the lifecycle.
Interestingly, churn (moving in and out of employment) is common, but men and women do it at a similar speed. The key difference is the type of company they land when they come back. Almost half of the gap between participants is explained by industry sorting. Women are disproportionately involved in low-wage sectors such as education, retail and personal care, while men are overrepresented in high-value sectors such as construction, mining and manufacturing.
This is not because women have fewer (or different) skills. It may be another contributor to the overall gender gap in wages, but that's not what we saw. This is the wage disadvantage facing women in companies that pay less. same Jobs and skills.
Companies with women tend to be in low-wage industries, with fewer resources and less likely to be covered by collective bargaining agreements (union-negotiated industry wages) that boost wages.
Just like men, women may leave or re-enter the formal job at the same speed as men, and in fact, they may switch jobs when they are hired. The problem is that their job switching is unlikely to lead to an upward movement of wage hierarchies due to the need to prioritize employers' discrimination and non-paying job characteristics (such as flexibility).
Then something amazing happens. As women age to their late 40s and late 50s, gender differences begin to close. They begin to make moves that are more advantageous than men.
This is because they are classified as low-wage companies early in their careers, and are likely to have more room to climb. And they can ultimately do so by alleviating child-related constraints later in life.
Companies in developing countries
Our findings – Women who end up in low-wage businesses account for almost half of the wage gap – higher than estimates from High-income countries such as Portugal and Italywhich explains Approximately 20%-25%. However, in developing countries like Brazil and Chile, contributions are It's similar to what we found.
Why are businesses more important in places like South Africa?
The labor market is more “monopsonic” – Companies have more power to set wages due to high unemployment and fewer external options for workers.. Therefore, due to the lack of formal jobs, it is difficult to enter or rise within the formal sector, especially for women. In fact, we show that in South Africa, where the level of format is low, the gender gap in corporate wages is wider.
One useful exception is the public sector where states are actively pursuing gender equity in their employment. The administration employs a much higher share of women than men and offers relatively high wage insurance premiums.
Policy can focus on facilitating women's access to well-paid businesses, especially in developing countries, when formats are limited and transitions to good jobs are more difficult.
This means policies that support childcare, promote flexibility without penalizing wages, or reduce employment discrimination. Otherwise, sorting into low-wage companies continues to replicate the gender pay gap moving one job at a time.
Ihsaan Bassiereconomics researcher, Surrey University and Leila GauthamEconomics lecturer, University of Leeds
This article has been republished conversation Under the Creative Commons license. Please read Original article.
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