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The Sustainability Wage Gap

Author

Listed:
  • Philipp Krueger

    (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute)

  • Daniel Metzger

    (Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); European Corporate Governance Institute (ECGI); London School of Economics & Political Science (LSE) - Financial Markets Group)

  • Jiaxin Wu

    (Stockholm School of Economics - Department of Finance)

Abstract

We document a new channel through which a firm’s sustainability policies can contribute positively to its bottom line, by reducing labor costs and by enabling firms to recruit and retain workers that are highly skilled. Using detailed administrative employer-employee matched data from Sweden and a novel measure that quantifies the environmental sustainability of different economic activities, we document that workers earn about 10% lower wages in firms that operate in more sustainable sectors. We refer to this empirical regularity as the Sustainability Wage Gap. Exploiting heterogeneities in workers’ preferences for sustainable jobs, we show that the wage gap is larger for high-skilled workers, especially those with high non-cognitive skills, and increasing over time. We argue that our results are difficult to reconcile with many alternative interpretations suggested in prior research.

Suggested Citation

  • Philipp Krueger & Daniel Metzger & Jiaxin Wu, 2021. "The Sustainability Wage Gap," Swiss Finance Institute Research Paper Series 21-17, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2117
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    Citations

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    Cited by:

    1. Serge Darolles & Gaëlle Le Fol & Yuyi He, 2023. "Who can better push firms to go "green"? A look at ESG effects on stock returns," Post-Print hal-04462749, HAL.
    2. Wassim Le Lann & Gauthier Delozière & Yann Le Lann, 2023. "Greenwashing the Talents: attracting human capital through environmental pledges," SciencePo Working papers Main hal-04140191, HAL.
    3. Wassim Le Lann & Gauthier Delozière & Yann Le Lann, 2023. "Greenwashing the Talents: attracting human capital through environmental pledges," Working Papers hal-04140191, HAL.

    More about this item

    Keywords

    Sustainable Finance; ESG; CSR; Sustainability; Allocation of Talent; Millennials; Non-monetary Preferences; Wages;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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