Equal Pay, Better Performance: The Organization‐Level Impact of Gender Pay Equality and Work–Life Balance

ABSTRACT The popular press and consulting reports claim that organizations with gender equity are rewarded with a more productive workforce. Nevertheless, despite extensive research on the antecedents of the gender pay gap, we know little about how the organization‐level gender pay gap relates to labor productivity, particularly when considered alongside other interrelated human resource systems such as the work–life balance practices of the organization. Drawing on scholarship on multilevel strategic human resource processes that shape labor productivity, we theorize that organization‐level gender equity is positively associated with labor productivity such that in firms with gender‐equitable pay, alongside work–life balance, employees (regardless of gender) collaborate and collectively deploy human capital, increasing labor productivity. Data from 611 US firms and 6,255 UK firms suggest that the gender pay gap is negatively related to labor productivity, regardless of whether the country permits pay‐gap secrecy (US) or requires organizations to publicly disclose their gender pay gaps (UK). Organizations' gender pay gaps are also associated with the labor productivity trajectory: labor productivity decreased over time in organizations with greater gender pay gaps, but did not change significantly over time in organizations with moderate or lower gender pay gaps. Furthermore, organizations' gender pay gap and work–life balance interact, such that labor productivity is greatest in organizations with lower pay gaps and higher work–life balance. The results support the business case for gender equality—organizations with lower gender pay gaps and higher work–life balance exhibit higher labor productivity.