The Shift to Stock-Based Compensation and Gender Inequality in Wealth in the United States


Angelina Grigoryeva, University of Toronto

Wealth inequality in the United States is now higher than in any other rich democracy (Pfeffer and Waitkus 2021), and disparities by gender are particularly stark (Killewald et al. 2017). Existing literature argues that gender differences in earned income (i.e., the flow of money) play a key role in explaining gender gaps in wealth (i.e., the stock of money) (ibid.). Reflecting classical sociological theories (Simmel [1900]1978; Weber [1946]1971), this view assumes that only the amount of earnings matter. However, the financialization of the U.S. economy (Krippner 2011) saw an emergence of novel types of compensation beyond regular wages. As Zelizer (1997) put it, “not all dollars are the same,” and not only differences in how much men and women earn, but also what kind of compensation they earn may contribute to gender disparities in wealth. This study is among the first to examine stock-based compensation and its implications for gender inequality in wealth. Stock-based compensation became increasingly prominent in recent decades, and that 23 percent of U.S. workers, or 29 million Americans, now receive some of their compensation in employer stock (Kruse, Freeman, and Blasi 2010). Thus, in the course of the financialization of the U.S. economy, American firms increasingly turned to the stock market not only for profit generation (Lin and Tomaskovic-Devey 2015), but also for employee compensation. Correspondingly, Americans became increasingly invested in the stock market not only directly (Fligstein and Goldstein 2015) and through defined-contribution pensions (Hacker 2006), but also through stock-based compensation. I argue that stock-based compensation promotes greater wealth accumulation than regular wages, but its wealth benefits are higher among men than women. Because stock-based compensation by definition is directly linked to the stock market, employees can benefit from its value appreciation over time, while cash wages are subject to inflation (Hayes and O’Brien 2020). Also, workers with stock-based compensation can enjoy capital income from dividend payments and share buybacks in addition to their labor income (Nau 2013). Furthermore, the U.S. tax system treats stock-based compensation more favorably than wage earnings (Spilerman 2000). Thus, one might expect that employees who receive stock-based compensation will accumulate greater wealth than employees without stock-based compensation, at the same level of total income. However, as I argue, stock-based compensation is not a gender-neutral, but inherently gendered labor market mechanism that benefits male workers more than their female counterparts. Specifically, women are more likely to lose on stock-based compensation because it usually requires a vesting period and women are more likely to leave the labor force before they get vested due to competing family responsibilities (Blair-Loy 2001). Also, for some types of stock-based compensation, employees have to take deliberate steps to enjoy financial gains, and male employees might be more likely to do so, reflecting differences in stock market participation between men and women. Finally, I examine the gender gap in stock-based compensation. I argue that despite well-documented gender gaps in wages (McCall and Percheski 2010), nonwage components of compensation (Kristal, Cohen, and Navot 2020), and nonpecuniary job characteristics (Kalleberg 2011), there will be no gender differences in stock-based compensation because many companies provide it on a broad basis or at the group level (e.g., based on a job title) rather than individually determined. Using the Survey of Consumer Finances, the only nationally-representative data with detailed information on both stock-based compensation and wealth, and supplementing it with the NBER survey of employees with stock-based compensation, I report three main findings. First, employees with stock-based compensation accumulate greater wealth than employees without stock-based compensation, but its wealth benefits are concentrated primarily among male employees than female employees, particularly at the top of the wealth distribution. Second, I find no gender gap in the probability of receiving stock-based compensation or its amount, after accounting for job characteristics and sociodemographic attributes. Finally, as a possible mechanism underlying the gender differences in the wealth benefits of stock-based compensation, I show that men are more likely to utilize its wealth-building potential than women, thus contributing to gender inequality in wealth. In short, men and women are equally likely to receive stock-based compensation, but men are more likely to enjoy the associated wealth gains than women.

This paper will be presented at the following session: