Short summary
The gender pay gap is often attributed to broad differences in education, experience, or career choices. However, even when men and women hold the same positions within the same firm, a pay gap often persists. Our recent study (Skans and Olsson, 2026) identifies a critical, yet often overlooked driver of this inequality: the specific rules governing wage bargaining.
Using data on Swedish blue-collar workers, we examine how the “rigidity” of collective bargaining agreements affects pay equity. We distinguish between “rigid” contracts which guarantee every worker a specified minimum annual raise and “flexible” contracts, where increases are left to local discretion.
Our study finds that these rules affect the difference in pay between men and women working at the same firm and occupation. In jobs with rigid contracts, the within-job gender pay gap is 2.3 percentage points smaller than in those with flexible arrangements. This reduction is meaningful, representing approximately two-thirds of the average within-job gender pay gap. The effect is, in relative terms, largest for the lower-paid segment of the labor market.
Why does this happen? Our research shows that when wage increases are left to local discretion, men are significantly more likely to receive discretionary “top-up” raises. Where contracts include a guaranteed individual floor, that unequal drift is weaker. This effect is particularly pronounced in male-dominated environments and in low-productivity firms where resources are limited.
We also test alternative explanations, including worker sorting and broader firm differences, and find that the main pattern remains. Taken together, the results show that bargaining design is not a technical detail but can meaningfully effect on the gender pay gap.
Key Findings
- Rules for local wage bargaining matters: Contracts that guarantee a minimum individual pay raise reduce the within-job gender pay gap by 2.3 percentage points.
- A major impact: This reduction accounts for roughly two-thirds of the total gender pay gap within the same job. In relative terms, rigid contracts matter most for workers at the lower end of pay within each job.
- Where the rules matter the most: Rigid contracts have a large effect on the gender pay gap in male-dominated and low-productivity firms.
- Not sorting: Results remain after checks for worker sorting and other firm-level differences.
Relevance Today
As labor markets move toward more decentralized and individualized pay, these findings show that the design of local bargaining institutions matters for gender differences in pay. While greater flexibility can help firms reward individual performance, it can also unintentionally widen the gender pay gap. This is particularly relevant for low-wage workers in low-productivity firms where women are underrepresented
Author Quote
“Socioeconomic background is rarely considered in DEI efforts in either academia or other elite US occupations. Our findings suggest researchers and practitioners should consider socioeconomic background as another important axis of advantage in elite career progression, and demonstrate a need for more research to document and understand the class gap in career progression.”
Reference: Based on RFBerlin Discussion Paper: Olsson, Maria and Skans, Oskar Nordström (2025). The Rules of the Game: Local Wage Bargaining and the Gender Pay Gap.
Research summary
Despite decades of progress, the gender pay gap remains a stubborn feature of modern labor markets. While debates often focus on causes on the supply and demand sides, such as education and career choices, the rules governing how wages are set may also influence how large these gaps become (Blau and Kahn, 2017). On the policy front, international organizations like the OECD, labor unions, and gender equality advocates highlight collective bargaining as a structural remedy for excessive pay disparities, with influential studies demonstrating that gender pay gaps tend to be smaller in settings where wages are determined by collective bargaining (Blau and Kahn, 2013).
However, evidence on how the design of local bargaining institutions affects the gender pay gap remains limited. Some recent research has begun to shed light on this; for example, Biasi and Sarsons (2021) found that increased wage flexibility widened the gender pay gap among teachers in the US context. Furthermore, evidence from various settings suggests that women and men behave differently in interpersonal bargaining situations (Exley et al., 2019; Säve-Söderbergh, 2019; Cortes et al., 2024). This raises an important question: Does the contractual structure of local negotiations—specifically, how much flexibility is left to managers to distribute annual wage increases—affect the within-job gender pay gap?
Key Findings
Our research leverages administrative microdata and survey data on blue-collar workers in Sweden to study this issue. The Swedish labor market offers a highly tractable environment for this question: collective agreements are widespread, and a single agreement typically covers workers across different blue-collar occupations within each firm. However, contract rigidities vary across firms, meaning that blue-collar workers performing the same tasks in different firms are subject to distinct, firm-specific bargaining regimes.
We distinguish between two main types of local wage agreements. “Flexible” contracts do not include any specified individual guarantee, allowing local partners to flexibly distribute wage increases based on local negotiations. “Rigid” contracts, on the other hand, guarantee each individual worker a specified minimum annual wage increase.
Our data reveal a clear pattern: the within-job gender pay gap is larger when local wage bargaining is more flexible. When agreements mandate a rigid minimum pay raise for each worker, the gender pay gap is substantially lower – it shrinks by 2.3 percentage points, equivalent to two-thirds of the average within-job gender wage gap in our sample. In relative terms, rigid contracts matter even more for the gender gap among the lowest-paid workers within each job.
To understand the underlying process, we highlight two key factors: firm-level productivity and gender representation. First, we show that the gap reduction provided by rigid contracts is most pronounced in low-productive firms where rents are limited. In highly productive firms, firms are always able to pay discretionary wages above the required minimum, which means that institutional constraints matter less. Second, we show that rigid contracts are especially important when women are in a clear minority, i.e. in male-dominated occupations and firms. This suggests that a strong female presence can help minimize the gap in flexible settings, whereas strict contractual guarantees remain important when women are a minority.
Letting our design compare men and women working in the same occupations but at different firms, helps isolate the causal effect of the bargaining rules. But we also provide a number of auxiliary exercises to support the causal interpretation. We use information from workers’ previous jobs to account for differences in underlying productivity. This allows us to rule out the possibility that the results simply reflect more productive women choosing to work at firms with more rigid contracts. Furthermore, we validate that the results are not driven by firms sorting into contract types.
Most notably, we conduct a “placebo test” by examining white-collar workers in the same firms. These workers are not covered by the blue-collar agreements. If our findings were driven by a generally “fair’” or “gender-equal” firm culture, we would expect to see smaller gaps for white-collar workers in firms with rigid blue-collar contracts. However, the data show that white-collar workers have gender pay gaps that are unrelated to the blue-collar workers’ collective agreements within the very same firms.
Policy Implications
These findings provide important insights that are relevant for the design of labor market institutions and corporate wage policies. A common trend in recent years has been a push toward decentralization and individualized pay, under the premise that local flexibility allows firms to better reward individual performance. However, our research highlights a hidden cost-side to this flexibility: discretionary wage setting institutions can unintentionally widen gender pay disparities, even among workers performing identical tasks.
For policymakers, union representatives, and human resource professionals aiming to close the gender pay gap, it is important to note that the architecture of the wage review process matters. The results show that this is particularly important for low-wage workers in low-productive firms where women are under-represented. It also highlights under which conditions local unions should be particularly observant on emerging gender disparities when agreements are made more flexible.
Conclusion
The rules governing how wages are negotiated play a pivotal role in shaping wage equality. Our study demonstrates that local bargaining protocols with guaranteed minimum individual wage increases substantially reduce the gender pay gap within jobs, especially in male-dominated and low-productivity settings. While our findings suggest that structured wage guarantees protect female earnings by limiting discretionary top-ups that favor men, future research should explore exactly how to best combine the local wage differentiation promoted by the employer side with provisions that help preserve gender equal wages at the local level.
References
Biasi, Barbara and Heather Sarsons (2021) “Flexible Wages, Bargaining, and the Gender Gap,” The Quarterly Journal of Economics, 137 (1), 215–266.
Blau, Francine D. and Lawrence M. Kahn (2003) “Understanding Differences in the Gender Pay Gap,” Journal of Labor Economics, 21 (1), 106–144.
Blau, Francine D. and Lawrence M. Kahn (2017) “The Gender Wage Gap: Extent, Trends, and Explanations,” Journal of Economic Literature, 55 (3), 789–865.
Cortes, Patricia, Jacob French, Jessica Pan, and Basit Zafar (2024) “Gender Differences in Negotiations and Labor Market Outcomes: Evidence from an Information Intervention with College Students,” Mimeo.
Exley, Christine L., Muriel Niederle, and Lise Vesterlund (2019) “Knowing When to Ask: The Cost of Leaning In,” Journal of Political Economy, 128, 816–854.
Olsson, Maria and Oskar Nordström Skans (2025) “The Rules of the Game: Local Wage Bargaining and the Gender Pay Gap,” Discussion Paper 128/25, RFBerlin.
Säve-Söderbergh, Jenny (2019) “Gender gaps in salary negotiations: Salary requests and starting salaries in the field,” Journal of Economic Behavior & Organization, 161, 35–51.
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