The Gender Wage Gap, Between-Firm Inequality, and Devaluation: Testing a New Hypothesis in the Service Sector

Unequal sorting of men and women into higher and lower-wage firms contributes significantly to the gender wage gap according to recent analysis of national labor markets. We confirm the importance of this between-firm gender segregation in wages and examine a second outcome of hours using unique employer-employee data from the service sector. We then examine what explains the relationship between firm gender composition and wages. In contrast to prevailing economic explanations that trace between-firm differences in wages to differences in firm surplus, we find evidence consistent with devaluation and potentially a gender-specific use of "low road" employment strategies.