We study how women and men working in the same minimum-wage supported job respond to, and benefit from, a minimum wage increase. Our workers are employed by a large US retailer, work in many store locations, and are paid based on performance. By means of a border-discontinuity analysis, we document that, compared to male workers in the same working conditions, female workers become more productive, and are terminated less often, in response to a minimum wage increase. Consistent with an efficiency wage model where productivity reflects endogenous effort, these gender differentials only arise when the outside option (market wage) is much lower for women than men. We compute an index of the welfare gain due to the minimum wage which, in our calibration, suggests that, caeteris paribus, female workers benefit less than males from the minimum wage. This paper demonstrates that disparities outside the firm (gender differences in the outside option) beget welfare disparities inside the firm – in our case, disparate welfare impact of a gender-neutral policy (the minimum wage) – even among workers who operate under the same working conditions.
Co-authors: Decio Coviello (HEC Montréal) and Nicola Persico (Kellogg School of Management)