The gender wage gap and the moderating effect of education in public and private sector employment

AuthorAnders Ryom Villadsen,Justin M. Stritch
Date01 December 2018
Published date01 December 2018
The gender wage gap and the moderating effect of
education in public and private sector employment
Justin M. Stritch
| Anders Ryom Villadsen
School of Public Affairs, Arizona State
University, Phoenix, Arizona, USA
Department of Management, Aarhus
University, Aarhus, Denmark
Anders Ryom Villadsen, Aarhus University,
Department of Management, Fuglesangs Allé
4, Building 2628, 435, 8210 Aarhus V,
Funding information
Independent Research Fund Denmark (Grant
no. DFF 4003-00179)
In many countries, the rules and statutes governing public employ-
ment promote both transparency and accountability in employee
hiring, promotion, and wage setting. These aspects of public
employment might mitigate the pay inequalities women face in the
public workplace relative to the private sector. At the same time,
these formal aspects of public sector employment and payment
systems might also limit the ability of women in the public sector
to leverage human capital increases as a means of reducing pay
inequalities. Utilizing 25 years of employee-level data from Den-
mark, we find that women professionals in the Danish public sector
face a smaller wage penalty than their private sector counterparts.
However, our findings also suggest that public employment may
place structural limits on their ability to leverage educational attain-
ment to close the gap even further.
Normative notions of fairness and horizontal equity in public organizations suggest that employees with the same
skills, level of experience, and training, and performing the same job, should receive equal remuneration and benefits.
Organizational equity and perceptions of fairness in the workplace may also have important managerial implications.
Perceptions of fairness in the workplace are related to employee job satisfaction and job involvement, employee
turnover (and turnover intention), levels of intrinsic motivation, the quality of employee relationships with managers,
and employee misbehaviours (e.g., Rubin 2009; Choi 2010; De Schrijver et al. 2010; Kim and Rubianty 2011).
Recognizing both the normative and managerial importance of equity, fairness, and organizational justice in the
workplace, the persistence of pay inequalities among men and women is even more striking. Persistent pay inequal-
ities, where women earn less than men with the same level of qualifications, have long been observed in labour mar-
kets in numerous countries and cultural contexts (Fuchs 1971; Malkiel and Malkiel 1973; Oaxaca 1973; Frank 1978;
Blau and Kahn 1992, 1994; Arulampalam et al. 2007). At the macro level, evidence demonstrating pay inequality has
accrued despite countries taking legislative steps to mitigate and eliminate gender-based inequalities in the work-
place. At the micro level, organizational efforts to centralize and formalize HR practices over the past 50 years have
not resulted in equal pay among men and women (Kalev et al. 2006; Dobbin and Kelly 2007).
DOI: 10.1111/padm.12533
690 © 2018 John Wiley & Sons Ltd Public Administration. 2018;96:690706.
In this article, we consider the role that public institutions might play in mitigating gender-based pay inequality
among professional employees. Formal rules and statutes govern public employment, promoting both transparency
and accountability with respect to employee tenure, promotion, and wages relative to the private sector labour mar-
ket. There is also a considerable body of research suggesting that formalized pay and reward structures can mitigate
gender-based outcome inequalities (Pfeffer and Cohen 1984; Baron et al. 1986; Elvira and Graham 2002; Abraham
2017). In this article, we ask: Does public sector employment limit the pay inequality among men and women profes-
sionals in the Danish public sector compared to the Danish private sector? Previous research conducted in the United
States finds that gender-based wage inequality persists in public sector employment (e.g., Meier and Wilkins 2002;
Alkadry and Tower 2006; Llorens et al. 2008; Reese and Warner 2012; Lewis et al. 2018). However, there have not
been widespread investigations of public and private sector differences in gender-based wage inequalities among
comparable employees.
Furthermore, this research contributes to existing knowledge by considering factors that might mitigate pay
inequality among men and women. Research on pay inequality has indicated that the gender-based wage gap is smal-
ler among highly educated employees (England et al. 2012). Educational attainment is a key variable as it reflects
skills, training, accrual of social capital, and is positively correlated with individual self-esteem and self-efficacy
(Zimmerman 2000; Pajares and Schunk 2001). However, a comparison of civil service systems governed by statutes
and labour markets governed by private sector principles generates a paradox. In this article, we investigate whether
women in private sector employment might, in fact, be able to leverage education to close wage gaps in ways that
might not be possible in more formalized and statute-bound public sector employment.
Our article proceeds as follows. First, we provide a brief overview of gender-based wage inequalities. Second,
we discuss how the statutes and institutions governing public sector employment might mitigate the gender-based
wage inequalities in the Danish labour market. Third, we consider the role of human capital development in the form
of educational attainment as a potential moderator of gender-based wage inequality in both public and private sector
employment. Fourth, we test our hypotheses with more than 25 years of data from the Danishnational labourregis-
ter. Finally, we conclude with a discussion of the studys limitations, implications for theory, and directions for future
2.1 |Gender-based wage inequality
The gender-based wage inequalities faced by women have long been observed in many countries (Blau and Kahn
1992; Arulampalam et al. 2007; Ugarte et al. 2015). However, there is considerable variation in the extent of inequal-
ity across industrialized countries. According to OECD data, female earnings ratios, relative to their male counter-
parts, were 92 per cent in Denmark, 94 per cent in Norway, 82 per cent in the United Kingdom, 81 per cent in the
United States, and 67 per cent in South Korea (Kahn 2015).
Several theories have been put forward to explain these inequalities in pay. Scholars have argued that occupa-
tional segregation occurs among men and women (England 1992; Barón and Cobb-Clark 2010; Alonso-Villar
et al. 2012; Blau et al. 2013)generally with men selecting into higher wage occupations, such as engineeringand
the underrepresentation of women in high-paying occupations widening the observed wage gap. While these theo-
ries might explain some differences, they fail to explain why pay inequalities persist when accounting for factors such
as vocation or job type, educational attainment, and years of experience. It has also been proposed that the remain-
ing gaps in pay may be explained by differences in returns to skills(Rubery et al. 2005). Such differences are
observed when a manager (or organization) rewards the same skill differently depending on whether it belongs to a
man or a woman (Harmon et al. 2001). The differences in returns to skillsmay be driven by a number of managerial,

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