A new study in Denmark shows gender pay legislation helps close the gender pay gap by slowing male wage growth and increasing female promotion.
Wage transparency laws can reduce the gender pay gap at a faster rate by slowing wage growth for male employees and causing an increase in the hiring and promoting of women within firms, according to a new think tank study.
The Centre for Economic Policy Research study by Morten Bennedsen and colleagues, used evidence from a 2006 legislation change in Denmark that required firms to provide gender disaggregated wage statistics.
It shows that after the law passed the gender pay gap declined by approximately two percentage points, or a 7% reduction relative to the pre-legislation mean. Meanwhile, the wages of male employees grew 1.67% slower than wages of male employees in control firms and male employees experienced slower wage growth than their female counterparts.
Companies subject to the regulation were also more likely to hire and promote more women.
While the report noted a reduction in firm productivity and in the overall wage bill, it said firm profitability was unchanged.
The CEPR says: “The results of the study indicate that firms with higher gender pay inequality close the gender gap more aggressively, perhaps due to the fact that transparency leads to an increase in accountability in these firms.”