Illustration: Auf hellem beige Hintergrund liegt ein schräg dargestellter roter Teppich; rechts geht ein Mann in blauem Anzug mit Umhängetasche nach rechts, links hängt spiegelverkehrt unter dem Teppich eine Frau im blauen Kostüm kopfüber und hält einen Notizblock — minimalistische, symbolische Darstellung.
Afry Harvy/Getty Images Plus
Press release

The important role of companies

New findings on the gender wage gap

Around one-third of the pay gap between men and women can be attributed to how companies pay their employees. This is the conclusion of an analysis of data on income and working hours for all employees in the private sector in ten European countries and the US state of Washington for the years 2010 to 2019. Germany stands out negatively in this international comparison: nowhere else is the contribution of companies to the gender wage gap so high.

An international team of researchers, including Anne Sophie Lassen from the WZB Berlin Social Science Center, carried out the analysis.  In Germany, a particularly large number of men work for employers who pay their employees above-average wages. Thirty percent of the gender wage gap in this country can be attributed to such firm-specific wage premiums. "This proportion is only similarly high in Hungary and the US; in Germany's immediate neighbors, the Netherlands, France, Denmark, and Sweden, the contribution of companies to the gender wage gap is less than 20 percent," explains economist Anne Sophie Lassen.

Two mechanisms contribute to the wage gap across countries: First and foremost, women tend to work in companies that pay employees of both genders below average, even when comparing employees with similar experience and skills ("sorting channel"). Second, women in the same company sometimes receive less money than their male colleagues for the same work ("pay-setting channel").

The gender pay gap is particularly large in countries where pay differences between companies are generally large – Germany is an extreme case in both dimensions. Another pattern can also be clearly seen in the German example: women here fall further behind in their careers than women in all other countries studied. Women in all countries experience a drop in income after the family phase – unlike men. However, the negative professional effects of motherhood are particularly pronounced in Germany. In addition, the probability that a woman will not return to work after the family phase is 40 percent here, compared to 25 percent in France and 3 to 15 percent in Scandinavian countries. At the same time, Germany is one of the countries that spends the least on early childhood education and care.

Politicians have effective means at their disposal to reduce gender differences in the labor market. Anne Sophie Lassen: "Family policy measures such as strengthening parental leave for fathers are just as important as measures that focus on companies, such as promoting wage transparency or strengthening trade unions."

Palladino, Marco G./Bertheau, Antoine/Hijzen, Alexander/Kunze, Astrid/Barreto, Cesar/Gülümser, Dogan/Lachowska, Marta/Lassen, Anne Sophie/Lattanzio, Salvatore/Lochner, Benjamin/Lombardi, Stefano/Meekes, Jordy/Muraközy, Balázs/Nordström, Oskar: "Firms and the Gender Wage Gap: A Comparison of Eleven Countries." In: Federal Reserve Bank of Chicago, Working Paper, 2025, No. 24. The study is available at: https://doi.org/10.21033/wp-2025-24

The study is part of the OECD initiative LinkEED 2.0, which aims to examine the link between policy and growth in areas such as energy transition, the labor market, and the integration of migrants. The data for Germany comes from the Institute for Employment Research (“Institut für Arbeitsmarkt- und Berufsforschung”, IAB).