Gender pay differentials: Impact of the workplace

Where people work - including the type of workplace and industry - has a significant bearing on the persistent wage gap between the sexes, according to a first-ever study that documents the impact of specific workplace characteristics on gender pay differentials.

Using data from the Workplace and Employee Survey (WES), the study is the first to address the role of specific workplace characteristics, such as high performance workplace systems, foreign ownership and workplace part-time rate in explaining wage differences between men and women.

In 1999, women were paid an average of 80 cents for every dollar earned by men. In other words, women earned an average of $17.14 per hour while men received $21.54 per hour.

There are many possible reasons for this pay gap, including differences in individual work experience, in what people do (for example, occupation and job tasks) and in where they work (for example, specific workplace characteristics).

While the survey allows an examination of a number of conventional explanations - such as education and experience - it also allows a thorough examination of the role played by the workplace in explaining the gender pay differential.

The study showed that 44% of the wage gap was attributable to factors usually considered in previous studies. Most importantly, it found that a further 18% of the gap was associated with workplace characteristics, captured for the first time in the WES. The remaining 38% of the wage gap could not be explained.

Among factors usually considered in previous studies, differences in worker characteristics - particularly experience and occupation - accounted for 24% of the wage gap, while the other 20% was a result of the clustering of women in low-wage industries.

Among workplace characteristics, the workplace part-time rate accounted for 11% of the wage gap, while other factors - namely, teamwork, foreign ownership and pay-for-performance - accounted for an additional 7%.

The workplace part-time rate : an important factor

It is well known that women are more likely than men to work part-time. Despite this, they could be employed in workplaces where the percentage of part-time workers is fairly low.

This could happen if, for instance, women were employed disproportionately in sectors with a low part-time rate, such as manufacturing.

This, however, is not the case. Women are employed in workplaces where the fraction of part-time employment is almost twice as high as it is for men.

Since workplaces with a considerable part-time workforce tend to pay lower wages than other establishments, gender differences in the workplace part-time rate may be a factor underlying the wage gap between men and women.

The study found that such differences account for 11% of the overall gender wage gap, even after controlling for differences in observable worker characteristics, industry and occupation.

The reasons why workplaces with a considerable part-time workforce pay lower wages than other establishments are currently unknown.

These workplaces may offer job characteristics (such as flexible work schedules) that women value and for which women may be willing to accept lower wages. Alternatively, these workplaces may employ relatively unskilled workers, thereby offering relatively low wages.

The modern workplace

Modern workplaces are generally seen as those in which the organization of work, among other things, is based to a relatively great extent on teams and where pay rates are tied to workers' performance.

In 1999, women were less likely than men to work in teams. Only 29% were involved in self-directed workgroups - the most intense form of teamwork - compared with 36% for men.

Self-directed workgroups operate with a high degree of autonomy. Workers in these workgroups may earn more than other workers, since they take on more responsibility and perform a wider variety of tasks, such as problem solving and group decision making.

Women were also less likely than men to have their earnings tied to their performance. Workers whose pay is affected by their performance may receive higher wages to compensate them for greater effort on the job.

Finally, women were less likely than men to be employed in foreign-held establishments, in which employees tend to earn more than those employed in other establishments. Roughly 11% of men and 6% of women are employed in foreign-held establishments.

These three factors - teamwork, pay-for-performance and foreign ownership - account for a small but not negligible portion (7%) of the hourly wage gap between men and women in 1999.

Differences among industries remain key

The distribution of men and women across industries remains a major force underlying the gender pay differential.

This study demonstrates that the contribution of industry in explaining the wage gap is higher than what is usually found using information collected from individuals in household surveys.

According to the study, roughly 20% of the wage gap is attributable to the fact that women are clustered in low-wage industries. Other studies using data from household surveys indicate that about 15% of the gender wage gap is attributable to differences in the distribution of men and women across industries. The difference may partly reflect the more accurate measure of industry in WES data.

This study does not address the issue of why men and women tend to work in particular types of industries or workplaces. Rather, it addresses the direct impact of these differences on hourly wages.

Experience and occupation matter

Other factors, such as work experience and occupation, play a role in explaining the pay gap between men and women.

In 1999, men averaged 18 years of full-time work experience compared with 14 for women. Since wages increase with work experience, this difference in the time spent working full-time accounts for 10% of the hourly wage gap between men and women. In addition, the study found that 14% of the wage gap reflects the fact that men and women have different occupations.

Much of the gap remains unexplained

Despite the addition of a rich variety of workplace variables, roughly 38% of the gender pay gap remains baffling. As a result, after accounting for differences in worker and workplace characteristics, women earn roughly 92 cents for every dollar earned by men. This means that worker and workplace characteristics account for 12 cents of the 20-cent gap (for every dollar earned) observed between men and women in the raw data.

The study The "who, what, when and where" of gender pay differentials, no. 4, (71-584-MIE, free) is now available from Statistics Canada's Web site (). From the Our products and services page, choose Free publications and then Labour. The study is also available on the Web site of Human Resources Development Canada's Applied Research Branch (www.hrdc-drhc.gc.ca/arb). A paper version (71-584-MPE, $15) will be available soon.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Marie Drolet (613-951-5691), Business and Labour Market Analysis Division, or Nathalie Caron (613-951-4090; fax: 613-951-4087; labour@statcan.gc.ca), Labour Statistics Division.