Study: Gender pay gaps are not just unfair, they cost companies

Two women looking at post-it notes on a board titled "company values"

When employees are paid unequally, it can affect how an entire company performs, according to new research.

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Companies with wider gender pay gaps tend to be less productive, according to the study, which measured productivity as net income per employee.

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“It makes sense that companies with bigger gender pay gaps have lower productivity,” said��Stefanie Johnson, a professor of organizational leadership and information analytics at the Leeds School of Business and co-author of the study. “If you treat me fairly, I’m going to treat you well too. We see less of that when people don’t feel supported.”

Stefanie Johnson

The financial consequences add up. The study, published in�� in March 2026,��found that companies with smaller gender pay gaps generated more net income per employee than those with wider gaps.��

On average, every 10 percentage-point reduction in a company's gender pay gap was associated with about $16,300 more net income per employee. That benefit was even greater in companies with stronger work-life balance policies, where the increase climbed to about $34,100 per employee.

“When you can get these two systems working together—gender wage equality alongside work-life balance—productivity tends to thrive,” said co-author��, management professor at �鶹��Ѱ��Denver.

Why pay equity matters

The researchers argue that pay equity shapes how employees work together. Modern workplaces depend on people sharing information, collaborating and building on each other's ideas. When employees see compensation as unfair, those dynamics can break down.

“We all come to work with a basic set of knowledge, skills and abilities,” Sitzmann said. “When we all come together, are we showing up with all of our knowledge, skills and abilities? Or maybe I leave some of that behind...because I don't trust you, or I don't trust that my organization will reward me for it.”

The focus on organizational performance is what sets this study apart, the researchers say. Most discussions of the gender pay gap focus on its impact on women. This study instead asks whether unequal pay changes how companies function and whether it affects their bottom line.

The researchers, who also included Shoshana Schwartz of Christopher Newport University and Priyanka Dwivedi of Texas A&M University, analyzed data from 611 publicly traded companies in the United States and more than 6,000 organizations in the United Kingdom. They compared companies' gender pay gaps with labor productivity, measured as net income per employee.

Traci Sitzmann

The relationship between larger gender pay gaps and lower productivity showed up in both countries. While the United Kingdom requires large employers to publicly disclose gender pay gaps and the United States generally does not, companies with wider pay gaps tended to be less productive on both sides of the Atlantic.

The researchers also found that companies with larger gender pay gaps were more likely to experience declines in productivity over time, while productivity remained relatively stable at organizations with smaller pay gaps.

What companies can do

Start with transparency, the researchers say.

“Crunch the numbers,” Sitzmann said. “First, tell me your gender wage gap. And then why? And then let’s talk to our employees.”

Johnson added that companies often overlook parts of compensation beyond salary that can widen gaps.

“Even when companies are good at matching salary, bonuses and stock options often aren’t added into the equation,” she said.

The findings suggest organizations should view pay equity as more than a compliance issue or a recruiting tool.

“When pay’s more equal, productivity per employee is higher,” Johnson said.

“It’s not a marketing tool,” she added. “It’s a productivity tool.”

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