More Than Just a Pay Gap: Women Face Higher Risks from Company Downturns, Study Finds

Nov. 26, 2024

Much has been said about the gender pay gap, but a new study shifts the focus to how sudden changes in a company’s performance impact women’s wages and job security more than men’s. The study finds that women’s wages are 25% more sensitive to company downturns, and they are 34% more likely to lose their jobs compared to men during tough times.

In an era of constant economic disruptions—from geopolitical conflicts to rapid technological shifts—companies are increasingly facing shocks. A new study by SHoF’s Ramin Baghai, along with Rui Silva and Margarida Soares from Nova School of Business and Economics, reveals that these challenges do not impact all employees equally: women’s wages and job security are more vulnerable during company downturns than men’s.

The study shows that when firms experience internal challenges—such as sudden drops in sales or financial difficulties—women tend to face steeper wage cuts and are more likely to be dismissed compared to their male counterparts.

The Gender Pay Stability Gap

Based on data from Sweden between 1990 and 2011, the study found that women’s wages are 25% more sensitive to company performance changes, and they are 34% more likely to lose their jobs than men when firms struggle. These results indicate that when businesses face disruptions, women experience deeper financial impacts and are at a higher risk of job loss.

“Previous studies have consistently highlighted a gender gap in the level of pay, with women typically earning less than men,” the authors note. “The stability of pay and employment is also highly valued by workers.”

The gap is even wider for women with children, those employed at smaller firms, or in organizations without female executives, the authors add. While both men and women are affected by company downturns, women are hit harder, exacerbating gender inequality in the workplace.

Impact of Company Size and Leadership

The study found that the disparity in how men and women are affected by company downturns is more pronounced in smaller firms and those led entirely by men. In contrast, larger firms and companies with women in senior leadership positions showed less of a gap, suggesting that corporate policies and leadership diversity play a crucial role in protecting workers during tough times.

Smaller firms, which often have fewer formal human resource (HR) policies, may rely more on managerial discretion, potentially allowing biases to influence decisions about wage cuts and dismissals. Larger organizations, with more structured processes, tend to offer more stability across genders, while female-led firms provide a more equitable response to company shocks.

The Role of Family and Household Constraints

The study also highlights the role of family dynamics in widening this disparity. Women with children, particularly young ones, are more vulnerable to job instability when firms experience downturns. Caregiving responsibilities further contribute to the gender gap in job security, as women often face additional challenges balancing work and family life during periods of economic uncertainty.

“Women take almost triple the amount of parental leave than men in Sweden, and they take about 22% more time off than men to care for sick children,” the authors explain, emphasizing how these responsibilities can increase women’s exposure to job and wage instability during tough times.