Women CEOs Don't Close the Gender Pay Gap. But Unions Do.

Collective problems require collective solutions.

This post is for premium subscribers. You can access it and support my work by upgrading your membership for any amount, even as low as $1. Premium supporters ensure I can continue writing my free and exclusive content, so if you appreciate my work, please consider upgrading.

Thank you! In Solidarity — Joe

Perhaps the most visible business trend in recent years has been corporations’ interest in elevating women and minority employees to leadership positions. Doing so is a win-win for companies, as they appear socially progressive to customers and gain talented leaders. According to McKinsey’s 2023 Women in the Workplace Report, women are still underrepresented in corporate America but have increased their presence in the vice president, senior vice president, and C-Suite roles. The report calls this the “Broken Ladder Rung” effect, as women reach the top of the corporate hierarchy but are still overlooked at the middle level, indicating corporations want women in visible leadership positions but are still deprioritizing them for less visible (but more obtainable) promotions.

“Over the past nine years, women—and especially women of color—have remained underrepresented across the corporate pipeline. However, we see a growing bright spot in senior leadership. Since 2015, the number of women in the C-suite has increased from 17 to 28 percent, and the representation of women at the vice president and senior vice president levels has also improved significantly.” — McKinsey’s 2023 Women in the Workplace Report

While female representation is a cultural positive, appointing female CEOs has been drastically oversold as a victory for women everywhere. In reality, there’s little evidence that having a female CEO brings gains for women workers. There’s even some evidence it could negatively impact them. A 2016 National Bureau of Economic Research study found that while high-salary workers experience a pay bump under a female CEO, lower-paid female workers see their wages fall under female leadership. The study states:

“Female workers at the top of the wage distribution receive higher wages when employed by a female CEO than when employed by a male CEO. Female workers at the bottom of the wage distribution receive lower wages when employed by a female CEO.”

But even women at the top of the corporate ladder can’t be sure having a woman CEO will benefit them. A more recent study from The Journal of Applied Psychology found that companies with female CEOs decrease the average wages of their high-paid female managers.

“Using over 20 years of data on the top management teams of the largest 1,500 U.S. firms, we find that women (but not men) in top management earn significantly less with a female CEO than what they would have earned with a male CEO in a given year within a particular firm.”

The authors of the Applied Psychology study theorize this upper-level pay decrease is due to companies feeling less pressure to retain or pay female managers once they already have a woman in leadership. This pattern hints female leaders aren’t a sign of corporate America’s true commitment to gender equity, but rather an attempt to hide their lasting biases. (Shocking!) To be fair, some studies and theories provide alternative views. One management professor stated women could be paid less under a woman leader because corporations fast-track women to leadership positions, meaning they earn less than their male counterparts at the same level, as they have less experience. I also found this study from the World Economic Forum that found female CEOs bring modest wage increases for the lowest quartile of female workers and massive increases for the highest quartile. However, it was conducted in 2015 with only Italian companies, so its findings are dated and country-specific.

Italian M\male and female pay differences under a woman CEO, broken up by quartile. (Source)

While the various studies are somewhat contradictory, none indicate that female leaders significantly increase the wages of their lowest-paid female workers. Data on the gender pay gap also shows that increased female leadership brings little gain for the most marginalized of their organization. Over the nine years McKinsey has been running their Women in the Workplace study, they recorded an 11% increase in the number of women in leadership roles, a gain they call “significant.” If women leadership increased the wages of female workers, we should see a comparable decrease in the gender pay gap across this period. According to the Bureau of Labor Statistics, the pay gap has only decreased by 3.4% during this time. Unlimited factors contribute to the gender pay gap, so it’s impossible to determine how much increased female leadership drove the closure. But, given the outstanding differential between the influx of women leaders and the gender pay gap, I can confidently say promoting more women to the C-Suite is not the key to solving gender inequities in American workplaces.

As progressive and feminist movements aim to bring equality to all women, not just those who control society’s most powerful corporations, we should dedicate our time and efforts to solutions proven to improve the lives of the entire female working class, not just corporate leaders. Fortunately, there is a data-backed solution shown to raise the wages and living standards of all women workers, regardless of which rung they occupy on the corporate ladder.

I’ll give you three guesses what it is. (Hint: it rhymes with “smunionize.”)

An incredibly bad-ass sweatshirt worn by a woman I met on a picket line in 2022.

Hear me out: What if Women and Men Bargained Together?