new workplace practices and the gender wage gap

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ISBN 87-7882-018-9 (print)ISBN 87-7882-019-7 (online)

WORKING PAPER 04-18

Nabanita Datta Gupta and Tor Eriksson

New workplace practices and the genderwage gap

Department of EconomicsAarhus School of Business


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New workplace practices and the gender wage gap

Nabanita Datta Gupta1,2,3

and

Tor Eriksson1,2

Abstract

We explore the effect of introducing new workplace practices on the gender gap using a

unique 1999 survey on work and compensation practices of Danish private sector firms

merged to a large matched employer-employee database. Self-managed teams, project

organisation and job rotation schemes are the most widely implemented work practices.

Wage gains from adopting new workplace practices accrue mainly to hourly paid males andsalaried females but do not generate large changes in the gender gap in pay at the level of the

firm. Considering practices individually, however, the gender wage gap among salaried

workers is significantly reduced in firms which offer job rotation and project organisation,

while among hourly paid workers the use of quality control circles significantly widens the

gap in pay between male and female workers.

JEL Codes: J16, J31, M54

Keywords: new work practices, employer-employee data, wage differentials, gender

Acknowledgements: We are grateful to the Danish Social Science Research Council for

financial support and to Jens Therkelsen for able research assistance. Thanks also to session

participants at the 2004 EALE meetings in Lisbon and the 2004 AEA conference in Mons for

useful comments.

1 Department of Economics, Aarhus School of Business, Prismet, Silkeborgvej 2, DK-8000 Aarhus C;

2 Center for Corporate Performance, Aarhus.

3 The Danish National Institute of Social Research, Copenhagen.


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I. Introduction

A growing area of research these days focuses on the reorganization of work taking place in

the modern-day organization, away from a task-specialized structure towards a more task-

integrated organizational structure (Lindbeck and Snower, 2000). The new organizational

structure has introduced work practices such as job rotation and learning across tasks,

teamwork, decentralization of responsibility and worker participation in decision making.

The adoption of new work practices has led to a breakdown of traditional occupational

barriers and the establishment of flatter organizational structures. Moreover, high-

performance work practices are usually accompanied and sustained by performance-based

pay, giving rise to new payment schemes.

In terms of their adoption, such practices diffused slowly in the decade of the 1970s and

1980s but began to be widely adopted starting from the early 1990s, and by 1997,

approximately 71% of U.S. firms had adopted some form of innovative human resource

management practices (Osterman, 1994; 2000). In Europe considerably fewer employers have

implemented these practices, see OECD (1999). However, in Scandinavia, including

Denmark, the new practices have been adopted more frequently than in the rest of Europe.

A great deal of the previous research in this area has focused on the effect of new workplace

practices on establishment level outcomes such as total labour costs, and firm productivity;

see Ichniowski and Shaw (2003) for a recent survey. Relatively less is known about their

effects on workers wages, and in particular, whether these practices affect groups of workers

differently. This is largely due to a lack of micro data on workers matched to firm-level data

on the adoption of high-performance work practices. Even when wage outcomes are

considered, previous studies have assumed that the returns to these practices do not vary by

gender, race or other group characteristics, the typical outcome under study being total labour

compensation or average establishment level earnings; a notable exception is Bauer and

Bender (2000). In this paper, we consider the effect of new work practices on men and

womens wages and test for whether the introduction of innovative human resource

management practices in recent times has had an impact on the gender wage gap.

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There are several channels through which new workplace practices may lowerthe gender gap

in wages. First, the breakdown of traditional occupational lines or barriers through quality

control circles or job rotation gives women an entry in to the design and production side,

traditionally mens domain, and allows for learning across tasks and skill accumulation in

tasks that are more remunerative than traditionally female tasks. Second, decentralization of

supervisory authority and increased worker participation in decision-making give women

greater bargaining power and control over wages and working conditions compared to

hierarchical organizational structures in which supervisory positions are mostly held by men.

Another mechanism could be that incentive-based pay systems that accompany high-

performance work practices allow for transparency in pay as wages are based on known,

objective and quantifiable performance criteria, making it easier for women to bargain for

matching increases or to seek legal recourse in situations where wage discrimination may be

present. Further, job rotation imparts flexibility in workers schedules, allowing women to

more effectively balance home and work responsibilities, thereby raising their productivity at

the workplace. Finally, a recent line of experimental enquiry within cognitive and social

psychology explores whether women have an enhanced ability to multitask or superior

communicative and collaborative skills (Williams et al., 1991; Rubenstein et al., 2001;

Hannah and Murachver, 1999; Underwood et al., 1990; 1994). Possessing a relative

advantage in such skills could make women better matched to meet the demands of the

modern workplace and thereby raise their value to employers.

There exist a few channels through which new workplace practices could serve to increase

the gender gap in pay. Because of family responsibilities, women may find it difficult to make

the needed investments to take full advantage of the new practices. Also, decentralization of

pay negotiation and incentive-based pay remove centrally-determined wage floors which have

effectively increased womens wages relative to mens. Yet another factor that can boost male

wages in this context is if (mostly male) supervisors in firms which adopt practices are given

pay increases by management in exchange for their cooperation in supporting and

disseminating these practices within their units (Black and Lynch, 2004), i.e. to act as

facilitators. The overall effect on the gender wage gap is theoretically inconclusive and can

only be determined by empirical means. Our purpose is therefore to quantify the effect of

these practices on the wage gap, controlling for other observable human capital and firm

characteristics that are known to affect wages.

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By combining a unique 1999 survey of employers in Denmark to register data on their

employees, we have matched data on a total of 224,262 workers working in 1,387 of the firms

that were surveyed. Further, the firms that were surveyed were asked to provide information

on the adoption of innovative work practices as well as new incentive-based pay practices.

This allows us to estimate the wage impacts of new workplace practices on groups of male

and female workers and on the gender wage gap within the private sector in Denmark.

In spite of the Danish gender wage gap being one of the lowest in the group of developed

countries, the female-male wage ratio in Denmark has shown signs of stagnation in the 1980s

and 1990s at a more or less constant level of 80-88%, depending on the measure of wages

being employed (straight wages or total compensation, see for example Pedersen and Deding,

2002). In recent years, there has even been a slight increase in the pay gap even in the face of

women improving their qualifications vis--vis men (Datta Gupta et al., 2004). A number of

previous studies have linked womens relatively lower pay to their over-representation in the

public sector, which has experienced slower wage growth relative to the private sector in

recent decades (Rosholm and Smith, 1996; Datta Gupta et al., 2002). However, a few recent

studies which have had access to matched data have turned attention to the private sector,

where the raw male-female gap in pay is considerably larger than the national average, even

when considering full-time workers only. Further, even within narrowly defined industry and

occupation groupings, Datta Gupta and Rothstein (forthcoming) and Deding and Wong

(2004) find a significant unexplained gap exists even after controlling for standard human

capital characteristics. Thus, the potential exists for finding alternative explanations for the

private sector gender wage gap in Denmark.

The rest of the paper is organized as follows. Section II yields a brief review of the earlier

literature. In the next sections we discuss some methodological issues and describe the data at

our disposal. The fifth and the sixth sections give the empirical model and the empirical

estimates, respectively. Section VII concludes.

II. Previous Research

Only a few previous studies have had access to data on work practices at the individual or

firm level. A study on the relationship between workplace innovations and wages by Black

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and Lynch (2000) match plant level practices with plant level productivity and average

establishment wages and estimate production functions and wage functions using both cross-

sectional and longitudinal data drawn from a survey of U.S. establishments from 1993 and

1996. The study finds that the reorganization of workplaces to incorporate high performance

work practices leads to an increase in average establishment wages of about 6%. But, at the

same time, profit sharing and/or stock options lead to lower regular pay for workers,

particularly technical and clerical/sales workers. Their study is based on a sample size of 766

establishments in 1996 (cross-section) and 193 establishments in the panel (1993-1996).

Further, the sample is limited to the manufacturing sector only and therefore not necessarily

representative of the economy as a whole.

Cappelli and Neumark (2001) use a national probability sample of establishments that

includes comparable measures of performance and work practices across organizations and

are able to, by virtue of its longitudinal design, incorporate data stemming from a period

preceding the introduction of these practices. This allows them to purge their estimates for

firm or establishment level heterogeneity that may arise due to high-performing firms having

a greater ability to adopt such practices (best practices). Their findings point to higher labor

costs per employee and therefore increased employee compensation from adopting these

practices but weak productivity effects so that the overall effect on profitability is

inconclusive.

Caroli and van Reenen (2001) study organisational changes, which imply a delayering of

work organisations in a panel of French firms. They find that these changes had a positive

impact on productivity. In addition, they find that the new work practices were biased against

unskilled labour.

A paper by Bailey, Berg and Sandy (2001) examines the relationship between high

performance work systems (HPWS) and earnings of 4,000 management employees in 45

establishments in the steel, apparel and medical electronics and imaging industries in the

period 1995-97. They find that, except in the case of medical electronics, management

workers employed in workplaces in industries that have more high-performance practices do

earn more than those in traditional workplaces, after controlling for gender, race, education,

experience and tenure. The lack of an effect in the medical industries probably reflects the

importance of formal qualifications and education for pay in that industry.

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We are aware of only a few micro studies examining the question of whether workplace

practices can explain a significant part of the gender wage gap. Drolet (2002) using matched

employer-employee data on 24,302 workers from the 1999 Canadian Workplace and

Employee Survey find that without industry and occupation, workplace characteristics

account for 27.9% and worker characteristics for 10.8% of the pay gap. However, the largest

contributor of workplace characteristics is the workplace part-time rate, which alone accounts

for 17.7% of the pay gap. In terms of measures of high-performance workplace practices,

Drolet (2002) has access to two measures, which are whether or not the worker participates in

self-directed workgroups and whether or not the worker receives performance-based pay.

These two variables account for 2.5% and 2.3% of the pay gap when occupation and industry

are not included, and 2.1% and 2.2% when they are included. When occupation and industry

are included, respectively, in worker and workplace characteristics the part of the pay gap

explained by these components increases to 18.6% and 42.6%. Thus, while overall 61.2% of

the gender wage gap is explained in this study, the contribution of the two new workplace

practice measures is minor and the largest single contributing factor explaining gender

differences in pay between men and women in Canada appears to be industry.

Another recent paper by Garcia et al. (2002) investigates the relationship between job

characteristics and the gender wage gap using data from a Spanish survey from1991. They

estimate the effect of individual and job characteristics on male and female wages, after

controlling for selection due to participation and occupational choice. In terms of job

characteristics they distinguish between 5 types of measures. These relate respectively to the

degree of worker autonomy in the workplace, the degree of control by others over the

workers output, the degree of supervisory power over other employees, the power to decide

on issues related to other employees and the degree of educational mismatch. Their results

show that taking into account these types of job quality measures can explain a fraction of

the wage gap that would otherwise have been attributed to discrimination. Still, a substantial

portion of the wage gap (81%) remains unexplained in Spain.

Two previous Danish studies have used matched employer-employee data to study the effect

of firm and job level factors on the gender wage gap.

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Lausten (2001) examines the gender earnings gap at the executive level using a data set of

Danish executives in the period 1992-1995. Findings show that the gender wage gap among

Danish executives is explained by individual, job, occupation and industry differences. In

terms of job characteristics, there is information on CEO status, headship of division, an index

of the level of authority held and board membership. Decomposition of wage equations into

inter- and intra-occupational differences shows that two thirds of the wage gap of executives

is due to differences between occupations, while individual-specific characteristics contribute

negatively, i.e. in favour of female executives. The gender wage gap among executives is

found to be strongly influenced by the real level of authority.

Datta Gupta and Rothstein (2001) use matched employer-employee cross-sectional data from

1983 and 1995 for full-time private sector workers in Denmark to examine how segregation

of women by occupation, industry, establishment and job cells impacts the male-female wage

differential. For both salaried and manual workers, job cells are found to be the most

segregated, followed by occupation, while segregation is less evident at the industry and

establishment levels. Based on fixed effects wage regressions, they find that occupation

differences account for much of the wage gap between male and female salaried, but not

manual employees in Denmark. Second, differences in actual experience, industry, and

establishment explain much of the gender wage differential for manual, but not salaried

employees. And finally, even in the fullest specification, which includes human capital

characteristics and job-cell fixed effects, both salaried and manual male and female

employees earn different wages within job cells.

None of these previous studies has, however, been able to examine the effect of a wide array

of high performance work practices on male and female wages for an adequately large sample

of establishments spanning a relatively long period. By having access to an unique survey of

the extent of adoption of new work practices among firms in Denmark matched to a large

employer-employee data base, our is the first study to be able to quantify the impact of a

number of practices on the wages of male and female employees within the firm, controlling

for other firm-level characteristics.

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III. Methodological Issues

Two methodological issues present themselves in the estimation of wage models accounting

for new work place practices. First, more productive workers self-select into jobs

characterized by high-performance work practices or where pay is tied to performance (see

for example Parent, 1999; Lazear, 2000). While this type of selection may bias the return to

practices upwards in a wage regression, it will in general have no consequences for the male-

female gap in pay unless there is differential self-selection by males and females to firms

offering workplace practices. We shed some light on this type of selection and its

consequences for the gender wage gap in Section VI.

The other type of selection that potentially occurs is that firms that face the threat of closure

may be the ones most likely to adopt such practices or due to best practices. Thus, there is a

need to measure performance before these practices are introduced, (see for example Cappelli

and Neumark, 2001). As the sample period in the current analysis spans the period 1992 to

2000, and as on average a fifth of the firms had adopted a practice already in the 1980s, a

relatively large number of firms in the sample are observed before the adoption of such

practices, allowing us to control for this type of heterogeneity.

IV. Data Description

The analysis uses a data set on Danish private sector firms with more than 20 employees,

which has been constructed by merging information from two sources. The first source is a

questionnaire directed at firms that contains information about their work and compensation

practices. The other is a longitudinal employer-employee data set1 that provides information

about firm characteristics and performance as well as about the firms employees.

The survey was administered by Statistics Denmark as a mail questionnaire survey in May

and June 1999, which was sent out to 3,200 private sector firms with more than 20

employees. The firms were chosen from a random sample, stratified according to size (as

measured by the number of full time employees) and industry. The survey over-sampled large

1See www.ccp.asb.dkfor a more detailed description.

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http://www.cls.dk/http://www.cls.dk/


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and medium-sized firms: all firms with 50 employees or more were included, and 35 per cent

of firms in the 20-49 employees range. The response rate was 51 per cent, which is relatively

high for a rather long and detailed questionnaire of the type that was used.2

The survey represents a unique source of information on Danish firms internal labour

markets and changes therein. Besides some background information about the firm, the firm

was asked about its work organisation, compensation systems, recruitment, internal training

practices and how it evaluates its employees. For a brief description of the questionnaire and

the main results (in Danish), see Eriksson et al. (2000).

Owing to the high response rate, the survey provides us with 1,605 useful observations. For

the questions concerning work design and practices, the firms were asked to differentiate

between hourly paid and salaried employees.

Using unique firm identification numbers within Statistics Denmark, the survey data were

supplemented with information about the firms as well as about their workforces. This

information is taken from a large employer-employee linked database, which covers all

private sector firms and all the employees who worked in them (in Denmark) in any year

during the period 1980 to 2000.3 The panel contains detailed information about employee

characteristics4 (and hence, firms workforces in any year) and about their labour earnings and

other income. In addition, the panel has economic information about the firms, with 20 or

more full-time equivalent employees, for the years 1992 to 2000.

Firms use of work (and pay) practices can be measured along several dimensions. The

measure adopted in the survey questionnaire is whether a firm has implemented one of six

work designs:

(i) Self-managed teams. Self-managed teams is a work organization which gives its members

authority over decisions regarding how to perform tasks or even, which tasks to perform.

2 The response rates for the size and one-digit industry cells vary only little: between 47 and 53 per cent. Thus,

the representativeness of the sample is of no major concern.3The important feature of the panel is the link between firms and employees, which is consistent over time. Thedata originate from two separate registers maintained by Statistics Denmark: the integrated database for labourmarket research (IDA) and the business statistics database (BSD).

4Worker characteristics at the person-year level include gender, age, ongoing tenure, and level and years of

education.

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Important aspects of team working is pooling of skills and skills development of individual

workers.

(ii) Job rotation. Job rotation is a system where the workers are explicitly required to rotate

between different jobs. This increases the variety of tasks to be performed by the employee

and is also likely to enhance the employees understanding of the operation.

(iii) Quality circles. Groups of workers who meet regularly to solve problems concerning

productivity and people and to discuss aspects of performance and quality.

(iv) Total quality management (TQM); an important element is that TQM programmes, of

which ISO9000 probably is the best known, include employee involvement.

(v)Benchmarking. Benchmarking is a formal system of learning about practices in other firms

and organisations.

(vi) Project organisation. Groups of workers are organised in projects with defined targets,

timetables, budgets and frequently considerable authority with respect to how to perform

tasks.

It is important to note that the firms were also asked about when each work practice (if any)

was adopted. However, one important piece of information we do not have regarding the

implementation of the practices is the proportion of employees affected by the particular work

designs.5 Nor were the respondents asked to rank the practices according to some notion of

their importance. The firms were also asked a corresponding question regarding the

implementation of performance related pay (PRP) practices. More precisely the firms were

asked whether they had adopted one of four PRP methods team bonus, individual bonus,

stock and stock options and profit sharing for four different categories of employees: top

managers, middle-management, other white collar workers and blue collar workers; see

Eriksson (2001), for details. Unlike for the work practices, the firms were unfortunately not

asked about when they had implemented the different pay practices. The questionnaire only

asked the firms whether they had made considerable changes in their payment systems in

recent years, without being more specific as to when or to which payment system.

5

If seems plausible to assume that the higher the number of practices used, the larger is the proportion ofworkers in the firm involved in some of the new work practices. Thus, the number of practices implemented canserve as a proxy for coverage.

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Table 1 gives some information on the firms that have and have not adopted the new work

organisations, respectively, by each work practice in year 1998.6 Table 2 provides

corresponding information regarding new pay practices. From Table 1 we may note that the

most widely implemented new work practices are self-managed teams, project organisation

and job rotation schemes. These numbers refer to the percentage of firms that have or have

not adopted the practices. Corresponding shares of employees working in firms that have or

have not introduced the practices are found in Table 3. As larger firms are substantially more

likely to have adopted new work or pay practices (see Eriksson, 2001), the proportion of

workers in firms with them is larger than the share of firms that have them.

Since the questionnaire was only sent out to private sector firms with 20 or more full-time

employees, the (unweighted) average proportion of women in the firms 28.3per cent is

considerably lower than in the whole Danish labour force, in which females make up about

fifty per cent. It can, moreover, be seen that firms that have adopted NWPs have on average a

larger proportion of female employees than other firms.

So, female employees are more likely to work in a firm with one or more of the new work

practices. The average firm wage for women is, however, higher in firms which have not

adopted the new practices, save firms with TQM where wages are roughly the same as in

those without TQM, and project organisation where women earn less in firms without this

practice. For male workers there is a similar pattern, except again for project organisation, and

for firms with and without teams, where men are on average paid the same hourly wage. The

raw firm level gender gap is slightly smaller in firms that have introduced job rotation,

quality circles and TQM than in those without, whereas the gap is clearly larger in firms that

have adopted teams and in particular, project organisations.

Turning to Table 2, according to which every second firm has the so called qualification pay

system a formalised wage setting system, where extra pay is given an employee based on

her qualifications such as education, experience of a certain job or tasks, skills acquired

through on-the-job training, etc. and 25-30 per cent have team or individual bonuses, we

may, to begin with, notice that the proportion of females is the same in firms with and without

6

Other distinguishing characteristics of firms that have adopted the new work practices are that they are in themanufacturing and financial services sectors, foreign owned, have a higher share of educated employees and useperformance pay systems. For details, see Eriksson (2001).

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the performance related pay systems, save stock and stock options where there are more

women working in firms that have them, and profit schemes that are more common in firms

with relatively more female workers. For both genders we observe the following pattern: with

the exception for qualification pay, the average wage is higher in firms without the new pay

practices than in those which have introduced them, and the differences are typically quite

large. The pattern is rather peculiar as the qualification pay system is supposed to tie wages to

qualifications and hence reduce differentials for other reasons, whereas the other payment

schemes do not have that type of goals. As for the firm gender gaps, they are smaller in firms

with a qualification pay system, whereas they are larger in firms with bonus systems, stock

and stock option schemes and profit sharing schemes.

Of course, all the wage differences in Tables 1 and 2 may be due to differences in the

composition and skills structures of the workforces in firms with and without the new work

and pay schemes. In particular, the relatively large differentials between adopters and non-

adopters of new pay practices may reflect the sorting effect (see Lazear, 2000) that pay

systems rewarding for good performance attract the best workers. The similarity of patterns

for both genders also suggests that there are a number of factors we have not yet considered

that give rise to differences in pay between adopters and non-adopters of different work and

pay practices. In the following section we will, therefore, carry out analyses that aim at

controlling for these differences as well as accounting for when and which of the different

work practices were implemented in the firms.

V. Empirical Model

The dependent variable in the analysis is the log of hourly wages, where wages are deflated

by the consumer price index. More specifically, we compute for each firm and year, (i) the

average hourly wage separately for females and males, and (ii) the gender wage differential.

Differences in the average firm wages reflect of course differences in the composition of the

firms workforces with respect to age, education and other both human capital variables. As

the firms workforce structures typically change only slowly, we do not enter these as

explanatory variables in the estimations but capture them by using firm fixed effects and firm-

specific trends.

Thus, log hourly wages for sex group i in firmj at time tis given by:

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ijtjtitjjtijijtjiijt NWPTFTSFSTFSLogW +++++++= )()()( 321321 .(1)

where Si indicates sex group i, Fjis an indicator for the firm, Tindicates the time period and

NWPjt is an indicator for new workplace practices, the dependent variable of interest. Note

that the NWP indicator which we will operationalise in alternative ways, is a time-varying

variable. Thus, the indicator captures the effect of introducing a specific or one additional new

work practice in the firm. An advantage of observing firms before they introduce NWP is that

we can purge the estimates for some firm-level heterogeneity that arises because of the best

practices effect.

The gender gap in wages can be written as

fjtmjt

jtfmtfmjfmjfmfjtmjt NWPTSSFSSSSLogWLogW

+

+++= )()()()( 211(2)

or,

jtjttjjjt dNWPTbFbaLogW ++++= 21 (3)

The assumption in the model in (3) that there is a common time trend for all firms seems

unnecessarily restrictive and so, we try with substituting it with firm-specific time trends,

purging the data of all observed and unobserved time invariant firm-specific effects, including

any bias that might arise if within-firm changes in work practices are correlated with time-

varying unobservables that affect male and female wages differently. The NWP indicator is

entered in three different ways. First, we use a simple dummy for whether or not the firm has

adopted at least one of the new work practices. This is of course a very crude measure. Oursecond measure is the number of new work practices, which informs us about the marginal

effect of additional work practices. This measure allows for synergies arising from bundling

practices together, without either arbitrarily grouping practices ex ante or selecting those

groupings that best fit the data ex post. The third operationalisation is including the individual

work practices. We run the equations separately for female wages, male wages and the gender

differential. A small number of the firms have either very few (less than 5) male or female

employees, and for these observations the firm gender wage gap measure is rather

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meaningless. We have therefore, omitted the firms with less than five male or female

employees from the estimation sample.

VI. Estimation Results

Let us to begin with consider the simplest version of the NWP indicator: at least one practice,

the estimates of which are collected in Table 4. We can see that there are positive (3-4 per

cent) and significant estimates for both male and female hourly paid employees and men in

salaried employment. As the wage gains are about the same size for both men and women, the

gender differential is not affected by the introduction of new work practices, measured in this

admittedly very crude manner.

Turning next to Table 5, where the number of practices is used as the NWP indicator, we may

observe that the firm average wage for hourly paid males is increasing in the number of

practices adopted up to 4 after which the estimates still increase but become insignificant. It

should be noted, however, that the estimates for five or six practices are based on very few

observations. The wage of female hourly paid workers is significantly higher in firms that

have implemented one practice. As for men, the wage increases with additional practices, but

the estimates do not differ significantly from zero. The firm level gender gap estimates carry

relatively large standard errors, and do not differ statistically from zero.

Interestingly, for salaried employees we observe an opposite pattern. Here, female employees

wages are increasing in the number of new work practices adopted, whereas for men only the

first new practice implemented gives rise to an increase in their wages. Thus, it seems as the

gains from the introduction of new work practices accrue mainly to hourly paid males and

salaried females. Moreover, firms, which adopt bundles of new work practices are paying

their employees more. The wage gains are not, however, large enough to generate changes in

gender wage differentials at the level of the firms. One observation from Table 5 worth

making is that the majority of the estimates for the hourly paid workers are positive, whilst for

the salaried employees most of them are negative.

Table 6 gathers the results from regressions with all the individual practices included. Not

many of the estimates differ statistically from zero. This may in part be because they are

adopted in bundles. At any rate, TQM has a quite strong positive effect on both male and

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female wages. The magnitude, 7-12 per cent, is relatively large, especially in a labour market

like the Danish one, which is characterised by an internationally very compressed wage

structure. The impacts of most the practices on the gender gap are positive for the hourly paid

workers, albeit not significant. For the salaried employees, the impacts are more varied,

although they are mainly negative for the commonly adopted practices. The gender gap

estimate for project organisations is statistically significant at the 10 per cent level.

In Tables A-1 to A-6 in the appendix, the results from regressions in which we enter

individual practices one by one are presented. Because the results for the number of practices

indicate that bundles matter, we should not expect to dovetail many effects from these

estimations.7 And, indeed we do not. Hourly paid men in firms with project organisations earn

a wage premium, whereas female workers on hourly pay in firms with quality circles are paid

7.5 % less than in firm without. For workers paid on an hourly basis, the gender gap is larger

in firms with quality circles and the rarely used benchmarking schemes. In no case is the gap

reduced.

The picture differs somewhat for the salaried employees: both men and women working in

firms that introduce TQM receive a higher wage. The difference with respect to those who do

not is again quite large. Regarding the gender wage differences, we find three practices to

reduce the gap: job rotation schemes, project organisations and total quality management. The

last effect is not statistically significant, though.

Summing up, also the estimates from including the practices separately one at a time into

equation (1) yield some additional support to our earlier findings in that the introduction of

new work practices in firms, widens the gender wage gap for hourly paid workers, but reduces

it for the salaried workers.

Do the above estimates measure the true productivity-enhancing impact of workplace

practices or do they merely reflect the fact that firms that introduce such practices are able to

attract more productive workers? And, if so, is there differential selection across men and

women to such firms? We examine this question in a rather simple way by re-estimating the

model with the simplest version of the NWP indicator at least one practice on the group of

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incumbents only, i.e. workers who were employed in the firm before the practices were

introduced and who remained in the firm afterwards. That is, new entrants who joined the

firm after the adoption of such practices are not included in the estimation. Neither do we

include employees who leave the firm following the introduction of work practices. Although

this is a simplistic way of exploring the selection issue, the effect on wages of the self-

selection of more able workers to the firm is likely underestimated as the less able most likely

leave the firm following the introduction of new practices requiring some degree of worker

investment.

Table 7presents the results of this estimation. Compared to Table 4, wage effects of NWP

are smaller and never significant, although t-ratios greater than 1 are obtained in the case of

male and female hourly paid workers and male salaried workers. For these groups, the wage

effects are roughly two-thirds the size of those obtained previously in Table 4. Thus, some

part of the size and significance of the impacts on workers wages of new practices seen in

Table 4 are a result of worker sorting by ability. This seems to be especially pronounced in

the case of female salaried workers, for whom incumbents receive almost no wage gains from

practices. However, in no case are the results for the gender wage gap different from those

found in Table 4. Of course, one caveat is that this sorting effect may arise due to

workplace practices enhancing the productivity of entrants more than incumbents. But it is

difficult to conceive why this may be the case. Hence, the overall conclusion from this

exercise seems to be that both productivity enhancing effects and sorting effects seem to be

present and it is not necessary to try to portion out the separate contributions of each, as these

effects can be expected to occur simultaneously.

VII. Conclusions

This paper investigates the effect of new workplace practices on the gender wage gap by

combining information on the adoption of an array of workplace practices obtained from a

unique survey on firms to matched panel data on the population of workers within these firms.

Thus, this is one of few studies to explore the issue of whether such practices impact groups

of workers within firm differently, in contrast to the previous literature that is largely focused

on establishment-wide earnings outcomes.

7 For example, firms with TQM have often introduced quality circles, too. Consequently, when entering them

16


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We find that the most widely implemented work practices in the private sector in Denmark

are self-managed teams, project organisation and job rotation schemes. In terms of groups of

workers who most benefit from these schemes, we find that the wage gains from introduction

of new workplace practices seem to accrue mainly to hourly paid males and salaried females,

but that these gains are not sufficiently large to generate large changes in the gender gap in

pay at the level of the firm.

Still, when considering individual work practices, we find that the introduction of such work

practices in firms in general seems to widen the gender wage gap for hourly paid workers and

reduce it for the salaried workers after purging the estimates of all observed and unobserved

time-invariant firm-specific factors and a firm-specific time trend. For hourly paid workers,

the pay gap significantly increases in firms with quality circles and benchmarking while for

salaried employees it is reduced significantly through adoption of practices such as job

rotation and project organisation. Further, it can be seen that it is female salaried employees

who benefit particularly from job rotation schemes and project organisation. This may

indicate that in part, females in salaried jobs benefit from the increased learning across tasks,

variation in responsibility and the greater authority and control over task definition and

planning implied by such practices, and these factors raise their relative wages. On the other

hand, female hourly wage employees who typically have a weaker attachment to the labour

force are potentially not able to take advantage of these practices and are found to face a

relative wage disadvantage from schemes such as quality circles, which may impose time

demands that are difficult to accord with family responsibilities. We also provide (indirect)

evidence that firms that offer new workplace practices in part tend to attract better quality

workers by comparing wage effects of working in a firm with at least one practice arising

over all workers in the firm to those arising within incumbents only. Particularly in the case

of female salaried workers, it seems that the wage gain from being employed in a firm with at

least one high performance practice is largely driven by the higher wages of (presumably)

more able entrants to such firms.

one by one into the regressions, the results may differ from those where are both present.

17


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Table 1. Some characteristics of adopters and non-adopters of new work practices.

Work practice: Teams Teams Job rot. Job rot. Q. circles Q. circles

Has adopted: NO YES NO YES NO YESProp. of firms 77.5 22.5 87.3 12.7 97.2 2.8

Prop. of women

in firm

27.2 32.0 27.3 35.4 28.3 30.1

Av. wage females 140.54 137.46 140.43 135.89 140.00 134.75

Av. wage males 178.41 178.64 179.11 174.02 178.63 172.67

Raw gender gap 38.12 41.25 38.96 37.92 38.85 37.92

Work practice: TQM TQM Proj.org. Proj. org. Benchmk. Benchmk.

Has adopted: NO YES NO YES NO YES

Prop. of firms 94.1 5.9 86.1 13.9 96.2 3.8

Prop. of women

in firm

28.3 28.7 28.2 28.8 28.04 34.63

Av. wage females 139.87 139.50 139.11 144.6 139.60 145.66

Av. wage males 178.60 176.23 176.07 193.23 177.84 193.05

Raw gender gap 38.92 37.25 37.12 49.34 38.45 47.39

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Table 2. Some characteristics of adopters and non-adopters of new pay practices.

Pay practice: Team

bonus

Team

bonus

Individ.

bonus

Individ.

bonus

Stock,

s. options

Stock,

s. optionsHas adopted: NO YES NO YES NO YES

Prop. of firms 74.9 25.1 70.8 29.2 95.7 4.3

Prop. of women

In firm

28.1 28.8 27.8 29.6 28.0 36.0

Av. wage females 139.74 140.17 138.01 144.28 139.10 156.27

Av. wage males 177.35 181.77 173.53 190.46 176.23 227.99

Raw gender gap 37.82 41.79 35.72 46.34 37.33 71.72

Pay practice: Profit

sharing

Profit

sharing

Qualific.

pay

Qualific.

pay

Has adopted: NO YES NO YES

Prop. of firms 89.3 10.7 48.9 51.1

Prop. of women

In firm

28.7 25.4 28.2 28.4

Av. wage females 139.03 146.69 141.31 138.45

Av. wage males 177.19 189.04 181.97 175.09

Raw gender gap 38.36 42.07 40.81 36.91

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Table 3. The share of employees in firms with new work and pay practices by practice and

gender.

Percentage of employeesIn firms with:

Females Males

NWPs:

Teams

Job rotation

Quality circles

TQM

Benchmarking

Project organisation

32.5

25.9

6.6

10.5

13.03

19.9

24.6

21.8

5.3

9.2

10.16

20.0

NPPs:

Team bonus

Individual bonus

Profit sharing

Stock, stock options

Qualification pay

41.9

43.3

10.2

13.6

60.5

35.8

40.1

10.6

12.1

58.7

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Table 4. The impact of the adoption of new work practices on male and female wages. a

Males,hourly

Paid

Females,hourly

paid

Gendergap,

hourly

paid

Males,salaried

Females,salaried

Gender gap,salaried

At least

one

NWP

0.032**

(0.015)

0.037**

(0.016)

-0.005

(0.015)

0.028*

(0.016)

0.018

(0.015)

0.010

(0.016)

aFirm fixed effects and firm-specific time trends were included as additional controls.

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Table 5. The impact of the number of new work practices on firm average wage by gender

and the gender gapa

Number

of

Practices

Males

hourly

paid

Females

hourly

paid

Gender gap,

hourly

paid

Males

salaried

Females

salaried

Gender

gap,

salaried

One 0.029*

(0.016)

0.037**

(0.016)

-0.008

(0.015)

0.029*

(0.016)

0.015

(0.015)

0.013

(0.016)

Two 0.047**

(0.022)

0.035

(0.022)

0.012

(0.021)

0.028

(0.023)

0.036*

(0.021)

-0.009

(0.023)

Three 0.088***

(0.032)

0.050

(0.033)

0.038

(0.031)

0.019

(0.033)

0.060*

(0.032)

-0.041

(0.034)

Four 0.095*

(0.057)

0.088

(0.058)

0.007

(0.055)

0.029

(0.059)

0.102*

(0.056)

-0.073

(0.061)

Fivec 0.060

(0.099)

0.047

(0.101)

0.013

(0.095)

-0.072

(0.102)

-0.017

(0.097)

-0.055

(0.105)

Sixc 0.158

(0.167)

0.180

(0.171)

-0.021

(0.162)

-0.028

(0.174)

0.100

(0.165)

-0.128

(0.178)


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Table 6. The impact of different work practices on firm average wage by gender and the

gender gapa

Males,

hourly paid

Females,

hourlyPaid

Gender

gap,hourly

paid

Males,

salaried

Females,

salaried

Gender

gap,salaried

Teams 0.027

(0.018)

0.026

(0.018)

0.0004

(0.017)

0.017

(0.018)

-0.003

(0.017)

0.021

(0.019)

Job rotation -0.006

(0.021)

-0.004

(0.022)

-0.003

(0.021)

-0.006

(0.022)

0.031

(0.021)

-0.037

(0.023)

Quality circles -0.015

(0.056)

-0.062

(0.057)

0.047

(0.054)

0.031

(0.058)

-0.029

(0.055)

0.060

(0.060)

Total quality

Management

0.118***

(0.032)

0.102***

(0.033)

0.016

(0.031)

0.076**

(0.034)

0.120***

(0.032)

-0.045

(0.034)

Benchmarking 0.034

(0.029)

0.018

(0.030)

0.016

(0.028)

0.003

(0.030)

-0.021

(0.029)

0.024

(0.031)

Project orga-

nisation

0.004

(0.025)

-0.012

(0.025)

0.015

(0.024)

-0.031

(0.026)

0.011

(0.024)

-0.042*

(0.025)


27


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Table 7. The impact of the adoption of new work practices on male and female wages

incumbents only.a

Males,

hourly

Paid

Females,

hourly

paid

Gender

gap,

hourly

paid

Males,

salaried

Females,

salaried

Gender gap,

salaried

At least

one

NWP

0.020

(0.014)

0.018

(0.016)

0.005

(0.019)

0.020

(0.018)

0.001

(0.021)

0.026

(0.026)


28


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Appendix

Table A-1. Estimations of equation (1) for firm male wages

Dep. var.: log male hourly wage

Teams 0.010

(0.009)

Job rotation 0.010

(0.012)


(0.028)

Total quality

Management

0.007

(0.017)

Benchmarking 0.028

(0.019)

Project organi-

sation

0.025**

(0.012)

Table A-2. Estimations of equation (1) for firm female wages

Dep. var.: log female hourly wage

Teams 0.015

(0.010)

Job rotation 0.005

(0.013)

Quality circles -0.075***

(0.031)

Total quality

management

0.023

(0.019)

Benchmarking -0.013

(0.021)

Project organi-

sation

0.005

(0.014)

29


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Table A-3. Estimation of equation (3) for firm gender gaps

Dep. var.: gender hourly log wage gap

Teams -0.005(0.011)

Job rotation 0.005

(0.014)

Quality circles 0.056*

(0.033)

Total quality

Management

-0.016

(0.020)

Benchmarking 0.041*

(0.022)

Project organi-

sation

0.020

(0.014)

Table A-4. Estimations of equation (1) for firm male wages, salaried employees

Dep. var.: log male hourly wage

Teams 0.016

(0.018)

Job rotation -0.007

(0.022)

Quality circles 0.031

(0.058)

Total quality

Management

0.071**

(0.033)

Benchmarking 0.006

(0.030)

Project organi-

sation

-0.020

(0.025)

30


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Table A-5. Estimations of equation (1) for firm female wages, salaried employees

Dep. var.: log female hourly wage

Teams 0.003(0.017)

Job rotation 0.030

(0.021)


(0.055)

Total quality

Management

0.121***

(0.031)

Benchmarking -0.013

(0.028)

Project organi-

sation

0.027

(0.024)

Table A-6. Estimation of equation (3) for firm gender gaps, salaried employees

Dep. var.: gender hourly log wage gap

Teams 0.013

(0.018)

Job rotation -0.037*

(0.022)

Quality circles 0.065

(0.059)

Total quality

Management

-0.049

(0.034)

Benchmarking 0.018

(0.031)

Project organi-

sation

-0.046*

(0.026)

31


33/37

Department of Economics:

Skriftserie/Working Paper:

2002:

WP 02-1 Peter Jensen, Michael Rosholm and Mette Verner: A Comparison of Different

Estimators for Panel Data Sample Selection Models. ISSN 1397-4831.

WP 02-2 Erik Strjer Madsen, Camilla Jensen and Jrgen Drud Hansen: Scale in

Technology and Learning-by-doing in the Windmill Industry. ISSN 1397-4831.

WP 02-3 Peter Markussen, Gert Tinggaard Svendsen and Morten Vesterdal: The political

economy of a tradable GHG permit market in the European Union. ISSN 1397-

4831.

WP 02-4 Anders Frederiksen og Jan V. Hansen: Skattereformer: Dynamiske effekter og

fordelingskonsekvenser. ISSN 1397-4831.

WP 02-5 Anders Poulsen: On the Evolutionary Stability of Bargaining Inefficiency. ISSN

1397-4831.

WP 02-6 Jan Bentzen and Valdemar Smith: What does California have in common with

Finland, Norway and Sweden? ISSN 1397-4831.

WP 02-7 Odile Poulsen: Optimal Patent Policies: A Survey. ISSN 1397-4831.

WP 02-8 Jan Bentzen and Valdemar Smith: An empirical analysis of the interrelations

among the export of red wine from France, Italy and Spain. ISSN 1397-4831.

WP 02-9 A. Goenka and O. Poulsen: Indeterminacy and Labor Augmenting Externalities.

ISSN 1397-4831.

WP 02-10 Charlotte Christiansen and Helena Skyt Nielsen: The Educational Asset Market: A

Finance Perspective on Human Capital Investment. ISSN 1397-4831.

WP 02-11 Gert Tinggaard Svendsen and Morten Vesterdal: CO2 trade and market power in

the EU electricity sector. ISSN 1397-4831.

WP 02-12 Tibor Neugebauer, Anders Poulsen and Arthur Schram: Fairness and Reciprocity in

the Hawk-Dove game. ISSN 1397-4831.

WP 02-13 Yoshifumi Ueda and Gert Tinggaard Svendsen: How to Solve the Tragedy of the

Commons? Social Entrepreneurs and Global Public Goods. ISSN 1397-4831.

WP 02-14 Jan Bentzen and Valdemar Smith: An empirical analysis of the effect of labour

market characteristics on marital dissolution rates. ISSN 1397-4831.


34/37

WP 02-15 Christian Bjrnskov and Gert Tinggaard Svendsen: Why Does the Northern Light

Shine So Brightly? Decentralisation, social capital and the economy. ISSN 1397-

4831.

WP 02-16 Gert Tinggaard Svendsen: Lobbyism and CO2 trade in the EU. ISSN 1397-4831.

WP 02-17 Sren Harck: Reallnsaspirationer, fejlkorrektion og reallnskurver. ISSN 1397-

4831.

WP 02-18 Anders Poulsen and Odile Poulsen: Materialism, Reciprocity and Altruism in the

Prisoners Dilemma An Evolutionary Analysis. ISSN 1397-4831.

WP 02-19 Helena Skyt Nielsen, Marianne Simonsen and Mette Verner: Does the Gap in

Family-friendly Policies Drive the Family Gap? ISSN 1397-4831.

2003:

WP 03-1 Sren Harck: Er der nu en strukturelt bestemt langsigts-ledighed I SMEC?:

Phillipskurven i SMEC 99 vis--vis SMEC 94. ISSN 1397-4831.

WP 03-2 Beatrice Schindler Rangvid: Evaluating Private School Quality in Denmark. ISSN

1397-4831.

WP 03-3 Tor Eriksson: Managerial Pay and Executive Turnover in the Czech and Slovak

Republics. ISSN 1397-4831.

WP 03-4 Michael Svarer and Mette Verner: Do Children Stabilize Marriages? ISSN 1397-

4831.

WP 03-5 Christian Bjrnskov and Gert Tinggaard Svendsen: Measuring social capital Is

there a single underlying explanation? ISSN 1397-4831.

WP 03-6 Vibeke Jakobsen and Nina Smith: The educational attainment of the children of the

Danish guest worker immigrants. ISSN 1397-4831.

WP 03-7 Anders Poulsen: The Survival and Welfare Implications of Altruism When

Preferences are Endogenous. ISSN 1397-4831.

WP 03-8 Helena Skyt Nielsen and Mette Verner: Why are Well-educated Women not Full-

timers? ISSN 1397-4831.

WP 03-9 Anders Poulsen: On Efficiency, Tie-Breaking Rules and Role Assignment

Procedures in Evolutionary Bargaining. ISSN 1397-4831.

WP 03-10 Anders Poulsen and Gert Tinggaard Svendsen: Rise and Decline of Social Capital

Excess Co-operation in the One-Shot Prisoners Dilemma Game. ISSN 1397-

4831.


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WP 03-11 Nabanita Datta Gupta and Amaresh Dubey: Poverty and Fertility: An Instrumental

Variables Analysis on Indian Micro Data. ISSN 1397-4831.

WP 03-12 Tor Eriksson: The Managerial Power Impact on Compensation Some Further

Evidence. ISSN 1397-4831.

WP 03-13 Christian Bjrnskov: Corruption and Social Capital. ISSN 1397-4831.

WP 03-14 Debashish Bhattacherjee: The Effects of Group Incentives in an Indian Firm

Evidence from Payroll Data. ISSN 1397-4831.WP 03-15 Tor Eriksson och Peter Jensen: Tidsbegrnsade anstllninger danska erfarenheter.

ISSN 1397-4831.

WP 03-16 Tom Coup, Valrie Smeets and Frdric Warzynski: Incentives, Sorting and

Productivity along the Career: Evidence from a Sample of Top Economists. ISSN

1397-4831.

WP 03-17 Jozef Koning, Patrick Van Cayseele and Frdric Warzynski: The Effects of

Privatization and Competitive Pressure on Firms Price-Cost Margins: Micro

Evidence from Emerging Economies. ISSN 1397-4831.

WP 03-18 Urs Steiner Brandt and Gert Tinggaard Svendsen: The coalition of industrialists

and environmentalists in the climate change issue. ISSN 1397-4831.

WP 03-19 Jan Bentzen: An empirical analysis of gasoline price convergence for 20 OECDcountries. ISSN 1397-4831.

WP 03-20 Jan Bentzen and Valdemar Smith: Regional income convergence in the

Scandinavian countries. ISSN 1397-4831.

WP 03-21 Gert Tinggaard Svendsen: Social Capital, Corruption and Economic Growth:

Eastern and Western Europe. ISSN 1397-4831.

WP 03-22 Jan Bentzen and Valdemar Smith: A Comparative Study of Wine Auction Prices:

Mouton Rothschild Premier Cru Class. ISSN 1397-4831.

WP 03-23 Peter Guldager: Folkepensionisternes incitamenter til at arbejde. ISSN 1397-4831.

WP 03-24 Valrie Smeets and Frdric Warzynski: Job Creation, Job Destruction and Voting

Behavior in Poland. ISSN 1397-4831.

WP 03-25 Tom Coup, Valrie Smeets and Frdric Warzynski: Incentives in Economic

Departments: Testing Tournaments? ISSN 1397-4831.

WP 03-26 Erik Strjer Madsen, Valdemar Smith and Mogens Dilling-Hansen: Industrial

clusters, firm location and productivity Some empirical evidence for Danish

firms. ISSN 1397-4831.


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WP 03-27 Aycan elikaksoy, Helena Skyt Nielsen and Mette Verner: Marriage Migration:

Just another case of positive assortative matching? ISSN 1397-4831.

2004:

WP 04-1 Elina Pylkknen and Nina Smith: Career Interruptions due to Parental Leave A

Comparative Study of Denmark and Sweden. ISSN 1397-4831.

WP 04-2 Urs Steiner Brandt and Gert Tinggaard Svendsen: Switch Point and First-Mover

Advantage: The Case of the Wind Turbine Industry. ISSN 1397-4831.

WP 04-3 Tor Eriksson and Jaime Ortega: The Adoption of Job Rotation: Testing the

Theories. ISSN 1397-4831.

WP 04-4 Valrie Smeets: Are There Fast Tracks in Economic Departments? Evidence from

a Sample of Top Economists. ISSN 1397-4831.

WP 04-5 Karsten Bjerring Olsen, Rikke Ibsen and Niels Westergaard-Nielsen: Does

Outsourcing Create Unemployment? The Case of the Danish Textile and Clothing

Industry. ISSN 1397-4831.

WP 04-6 Tor Eriksson and Johan Moritz Kuhn: Firm Spin-offs in Denmark 1981-2000

Patterns of Entry and Exit. ISSN 1397-4831.

WP 04-7 Mona Larsen and Nabanita Datta Gupta: The Impact of Health on Individual

Retirement Plans: a Panel Analysis comparing Self-reported versus DiagnosticMeasures. ISSN 1397-4831.

WP 04-8 Christian Bjrnskov: Inequality, Tolerance, and Growth. ISSN 1397-4831.

WP 04-9 Christian Bjrnskov: Legal Quality, Inequality, and Tolerance. ISSN 1397-4831.

WP 04-10 Karsten Bjerring Olsen: Economic Cooperation and Social Identity: Towards a

Model of Economic Cross-Cultural Integration. ISSN 1397-4831.

WP 04-11 Iben Bolvig: Within- and between-firm mobility in the low-wage labour market.

ISSN 1397-4831.

WP 04-12 Odile Poulsen and Gert Tinggaard Svendsen: Social Capital and Market

Centralisation: A Two-Sector Model. ISSN 1397-4831.

WP 04-13 Aditya Goenka and Odile Poulsen: Factor Intensity Reversal and Ergodic Chaos.

ISSN 1397-4831.

WP 04-14 Jan Bentzen and Valdemar Smith: Short-run and long-run relationships in the

consumption of alcohol in the Scandinavian countries.

ISBN 87-7882-010-3 (print); ISBN 87-7882-011-1 (online).


37/37

WP 04-15 Jan Bentzen, Erik Strjer Madsen, Valdemar Smith and Mogens Dilling-Hansen:

Persistence in Corporate Performance? Empirical Evidence from Panel Unit Root

Tests.

ISBN 87-7882-012-X (print); ISBN 87-7882-013-8 (online).

WP 04-16 Anders U. Poulsen and Jonathan H.W. Tan: Can Information Backfire?Experimental Evidence from the Ultimatum Game.


WP 04-17 Werner Roeger and Frdric Warzynski: A Joint Estimation of Price-Cost Margins

and Sunk Capital: Theory and Evidence from the European Electricity Industry.


WP 04-18 Nabanita Datta Gupta and Tor Eriksson: New workplace practices and the gender

wage gap.


new workplace practices and the gender wage gap

Documents