This session presents cross-country evidence from eleven countries on the role of firm-level wage premiums in driving the gender wage gap in the private sector, revealing how the firms workers sort into — and the wages those firms pay differently by gender — are a key piece of the puzzle. The findings shed new light on the structural drivers of pay inequality and offer concrete implications for policy design, particularly around family policies that shape how men and women engage with the labor market.

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Key takeaways 

• Firms are a universal driver of the gender wage gap — and the channel is mostly about where women work, not just how they are paid within firms. Across all countries studied, firm-specific wage premiums contribute meaningfully to the gender wage gap, and the dominant mechanism is sorting — women systematically ending up in lower-premium firms rather than being paid less within the same firm. This reframes the policy conversation: focusing only on within-firm pay discrimination addresses only part of the problem.
• The gap widens over the lifecycle — largely through constrained mobility across firms. The gender wage gap increases substantially with age, and this widening is largely explained by women becoming progressively less likely to move to higher-premium firms over time. The evidence points to parenthood and family responsibilities as key drivers of this divergence, making lifecycle-aware interventions — not just entry-level policies — essential to prevent persistent gaps in earnings trajectories.
• Flexibility and leave policies can create trade-offs if not carefully designed.  Firms offering part-time and flexible arrangements tend to pay lower wage premiums, and women are disproportionately concentrated in these firms. Similarly, maternity and parental leave, if not carefully designed, can reinforce sorting by removing women from the labor market precisely when career progression and firm mobility matter most. The policy challenge is to ensure that flexibility and leave support participation without creating long-term earnings penalties — with equal parental leave uptake being a key lever.
• The demand side matters: reducing firm-level wage dispersion can help narrow gender gaps. Firm wage premiums arise in part from firms’ market power and the rents they generate. These contribute to gender inequality through both sorting across firms and unequal sharing within firms. Policies that compress wage dispersion across firms — such as stronger product market competition, limits on non-compete clauses, and improved worker outside options — can help reduce the gender wage gap, even without changes in worker allocation.
• Institutions shape both sorting and pay-setting — and policy effectiveness is context-specific. Countries with stronger childcare systems tend to show smaller sorting gaps, while broader collective bargaining coverage is associated with smaller within-firm pay gaps. No single policy is sufficient: the appropriate mix depends on country context, including labor market participation, wage dispersion, and institutional structure. This points to the need for a diagnostic-first approach to tailor interventions to country-specific constraints.