Private Equity and Pay Gaps Inside the Firm

Using two decades of French administrative data, the authors find that post-leveraged buyout, target firms reduce within-firm pay gaps while increasing profitability relative to control firms. Employee turnover drives the pay-gap reduction. In target and control firms alike, turnovers reduce average pay more at the top of the wage distribution than at the bottom because separated employees are paid more - new joiners less - than similar employees, especially among skilled employees. LBOs amplify this effect through increased turnover among managers. Post-buyout, p90/p10, gender, age, and managers/non-managers pay gaps decline by 3%, 9%, 21%, and 4% and the employee pool becomes younger.