Periodic Reporting for period 1 - GENCARGAP (Gender Career Gap and Firm Composition)
Reporting period: 2020-09-09 to 2022-09-08
Despite considerable progress over the last century, gender inequality in the labor market remains high. Women still earn lower wages, are less likely to be employed and to be represented in the positions of power than observationally similar men. Economic research has long sought to understand the underlying causes of these large gender imbalances. Sorting across firms has been shown to play a particularly important role as women tend to work in smaller, lower-wage firms, that employ more women. Could these differences in gender composition of firms be in themselves a factor contributing to the labor market gender imbalances? Why should firms’ gender composition matter?
The answer to this question varies across different levels of firm hierarchy. Starting from the top, female executives may act as a role model for more junior female employees, shifting their expectations and career aspirations. Having a female manager may create better mentoring and learning opportunities for women. Having more women at the lower end of the firm hierarchy, on the other hand, may create more competition if women tend to compete more against other women. The main objective of this project is to identify the impact of gender composition at different levels of hierarchy in a firm on career development of men and women.
The answer to this question varies across different levels of firm hierarchy. Starting from the top, female executives may act as a role model for more junior female employees, shifting their expectations and career aspirations. Having a female manager may create better mentoring and learning opportunities for women. Having more women at the lower end of the firm hierarchy, on the other hand, may create more competition if women tend to compete more against other women. The main objective of this project is to identify the impact of gender composition at different levels of hierarchy in a firm on career development of men and women.
These mechanisms are addressed in two lines of research that constitute this project: one focusing on the impact of gender composition of peers (i.e. workers who belong to the same cohort of labor market entrants) on the entrant’s subsequent careers; the other analyses the impact of gender composition of firm’s management on the same entrants, focusing on the heterogeneous impact gender composition of mid-range managers and executives. The main data source is the Italian administrative data provided by the National Social Security Institute. The scope and the panel structure of the data allows the analysis to focus on male and female workers as they start their first full-time employment. The identification strategy relies on the within firm and occupation variation in gender composition effectively comparing men and women entering the firm at different moments in time, while controlling for firm’s employment and wage growth, as well as wage levels to capture changes in firm’s performance and policies that could have a confounding impact on the careers of new entrants.
Consistent with gender-specific labor market competition among women, the results show that starting one’s career in a firm with relatively more female peers has a persistent and statistically and economically significant negative impact on employment and wages of female labor market entrants. The impact on employment of male entrants is null and the impact of their wages is small and only marginally significant. Increasing the share of women among the junior colleagues by 10 percentage points (pp) decreases employment among female entrants by 0.34 pp in two-year’s time and this effect persists albeit at a much lower level up to 10 years later. The further analysis of the wage growth shows a persistent negative impact on wages of female entrants, up to ten years after labor market entry.
The impact of the share of women among firm’s managers has a positive and rather nuanced effect on employment of both male and female labor market entrants. Increasing the share of female managers by 10 pp increases male employment by 0.4 pp two years after labor market entry and persists for full 10 years. Interestingly, the impact on women is of lower magnitude and is driven by both mid-range managers and executives, although the role of female executives is strongly dominant in the medium run. The effect on men stems solely from the female mid-range managers. Further analysis suggests that the gender composition of managerial class only matters in the male-dominated industries. In these, female managers and executives are particularly scarce. Hence the estimates may indicate differences in quality of male and female managers in these industries, as selection into these positions is expected to differ by gender.
Both analyses include estimates of the impact of gender composition on labor market mobility as well as the type of firm workers transition into. Importantly, the analysis of the impact of gender composition on fertility-related decisions was also carried out. Women who start their careers in companies with a higher percentage of female managers are found to be more likely to return to work after maternity leave in the medium and long-run: the probability of returning to work for mothers increases by an average of 1.5 pp. This is an important result, given that the child penalty is often driven by the extensive margin, that is mothers dropping out of the labor force after having a child.
In conclusion, this project documents the importance of gender composition of firms on careers of men and women. The analysis suggests that women may be competing for employment with their female peers, while the same is not true for men. The results of the analysis are consistent with firms operating with implicit gender quotas for employment and, potentially, promotions. The analysis of the impact of gender composition of management, suggests that while having more women among managers benefits labor market entrants of both genders, the effects are particularly strong among male workers. A more detailed analysis of gender composition among mid-range and high-management of the firm suggests that mentoring quality maybe important for men, but role-model effect matter for female entrants. All in all, gender composition of firms at all levels of hierarchy seems to be an important determinant of career progression of male and female workers.
Consistent with gender-specific labor market competition among women, the results show that starting one’s career in a firm with relatively more female peers has a persistent and statistically and economically significant negative impact on employment and wages of female labor market entrants. The impact on employment of male entrants is null and the impact of their wages is small and only marginally significant. Increasing the share of women among the junior colleagues by 10 percentage points (pp) decreases employment among female entrants by 0.34 pp in two-year’s time and this effect persists albeit at a much lower level up to 10 years later. The further analysis of the wage growth shows a persistent negative impact on wages of female entrants, up to ten years after labor market entry.
The impact of the share of women among firm’s managers has a positive and rather nuanced effect on employment of both male and female labor market entrants. Increasing the share of female managers by 10 pp increases male employment by 0.4 pp two years after labor market entry and persists for full 10 years. Interestingly, the impact on women is of lower magnitude and is driven by both mid-range managers and executives, although the role of female executives is strongly dominant in the medium run. The effect on men stems solely from the female mid-range managers. Further analysis suggests that the gender composition of managerial class only matters in the male-dominated industries. In these, female managers and executives are particularly scarce. Hence the estimates may indicate differences in quality of male and female managers in these industries, as selection into these positions is expected to differ by gender.
Both analyses include estimates of the impact of gender composition on labor market mobility as well as the type of firm workers transition into. Importantly, the analysis of the impact of gender composition on fertility-related decisions was also carried out. Women who start their careers in companies with a higher percentage of female managers are found to be more likely to return to work after maternity leave in the medium and long-run: the probability of returning to work for mothers increases by an average of 1.5 pp. This is an important result, given that the child penalty is often driven by the extensive margin, that is mothers dropping out of the labor force after having a child.
In conclusion, this project documents the importance of gender composition of firms on careers of men and women. The analysis suggests that women may be competing for employment with their female peers, while the same is not true for men. The results of the analysis are consistent with firms operating with implicit gender quotas for employment and, potentially, promotions. The analysis of the impact of gender composition of management, suggests that while having more women among managers benefits labor market entrants of both genders, the effects are particularly strong among male workers. A more detailed analysis of gender composition among mid-range and high-management of the firm suggests that mentoring quality maybe important for men, but role-model effect matter for female entrants. All in all, gender composition of firms at all levels of hierarchy seems to be an important determinant of career progression of male and female workers.
The project contributes to the existing research and the general knowledge base on four different margins. The first is the focus on gender composition of firms at different levels of hierarchy, separately identifying the effect of gender composition of peers versus managers versus executives. This allows us to talk to various mechanisms through which firms' gender composition may affect workers' outcomes. The second contribution is the highly generic setup. Most literature so far focused on really specific contexts, such as high-skilled workers, doctors, academics, etc. In this project, I use all labor market entrants whose first full-time employment is in a private sector firm with at least 5 employees. Third, to the best of my knowledge, this is a first project to estimate the dynamic impact of gender composition on employment outcomes of labor market entrants. Finally, the data allows us to estimate the impact of gender composition on a wide range of labor market outcomes that usually cannot be observed. For instance, I estimate the impact of gender composition on inter-firm mobility, on characteristics of firms where a worker is employed in a future, the take-up of maternity leave and the return from the leave into employment.
Providing evidence that firms operate with implicit quotas and documenting the adverse impact such quotas may have on female workers is important for policy-makers as well as firms, if their objective is to reduce gender inequality in the labor market. Likewise, showing that having more women in managerial positions benefits men and women should be relevant for policy-makers, firms, workers and managers themselves.
Providing evidence that firms operate with implicit quotas and documenting the adverse impact such quotas may have on female workers is important for policy-makers as well as firms, if their objective is to reduce gender inequality in the labor market. Likewise, showing that having more women in managerial positions benefits men and women should be relevant for policy-makers, firms, workers and managers themselves.