The Workplace Dynamics of Wage Inequality: Exploring the Impact of Organizational Demography

Abstract

This article examines the gender-ethnic wage gaps in diverse Israeli workplaces, focusing on the impact of workplace demographic composition. Using linked employer-employee longitudinal data covering the entire Israeli private sector from 1996 to 2015, I demonstrate the importance of distinguishing between the representation of marginalized groups in the total workforce and their presence in high-status positions. Increased representation in high-status roles strongly benefits same-group members in lower-status positions, consistent with theories of tokenism and relational inequality. In contrast, total workforce representation shows a nonlinear pattern: slight gains at low levels, followed by wage declines as the shares of Arab men and Jewish women rise—supporting threat and competition theories. Essentially, the study introduces a ‘relational measure’ of workforce composition, demonstrating that the compositions of the total workforce and high-status positions intersect, influencing income distribution at work. This measure illustrates how wage effects differ across demographic regimes, with nuanced group-specific pay outcomes that traditional composition measures cannot capture. Cross-group dynamics and integrated workplaces employing Arab women are analyzed in the final part of the paper. The findings have important practical implications, as they highlight the role of workplaces in generating and mitigating wage inequality and call for better-targeted diversity policies.

Keywords

Organizational demography ethnic diversity gender diversity linked employer-employee data wage gaps in workplaces

Promoting workforce diversity has become a top priority for governments and organizations. This shift reflects growing recognition that inclusive environments foster economic growth, support organizational success, and improve the position of marginalized groups in the labor market (Herring 2009; Kalev et al., 2006). In response, various policies have been implemented to strengthen minority incorporation. These initiatives draw on demographic and economic stratification research. Historically, demography—which links group size to socioeconomic status—has evolved separately from organizational research, while stratification studies have focused mainly on occupational composition, constrained by data limitations.

With the advent of new structuralism and increased organizational data availability, research in organizational demography have emerged. Scholars have linked minority representation in firms to their relative achievements, focusing mainly on between-workplace wage disparities (Bruns 2019; Card et al., 2016). However, empirical evidence on how workforce composition influences within-workplace wage inequality remains limited and yields mixed results (Bell 2005; Hellerstein & Neumark 2002; Stojmenovska 2019; Tomaskovic-Devey et al., 2015).

The current study joins this literature, delving into the role of the workforce composition of ethnic-gender groups in the distribution of rewards within Israeli workplaces. Specifically, it explores how the representation of marginalized groups¹, Arab men and Jewish women, affects their wages relative to the dominant group, Jewish men.

Essentially, the study identifies a notable gap in previous research: the neglect of organizational hierarchy in composition measures. Most studies have concentrated on only one aspect of workforce composition—minorities’ representation in the general workforce or in managerial positions—applying similar theoretical predictions to both composition types. This approach is problematic for two reasons: first, theoretical frameworks overlook organizational power differences; second, empirical studies show distinct wage effects for minorities in the workforce versus high-status positions. I suggest that when building theoretical frameworks regarding the workplace-level composition effect, we should take into consideration that the total workforce and the highest-status positions differ in organizational power. Accordingly, this necessitates the use of suitable composition measures.

A second gap is the minimal exploration of how these two composition types interact to affect marginalized groups’ earnings (see Cardoso & Winter-Ebmer, 2010 for an exception). Drawing on intersectionality, which views social hierarchies as context-dependent (Acker, 2006), I hypothesize that the composition of top workplace positions defines distinct local settings, influencing the relationship between total workforce composition and workers’ wages.

To examine this argument, I introduce and empirically test a novel indicator of workforce composition, referred to here as ‘relational composition.’ This measure captures the interplay between the overall workforce makeup and the composition of top positions, influencing the distribution of rewards within the workplace—effectively combining numerical presence with positional power, a dimension absent in prior empirical work. It enables an examination of whether the size of marginalized groups within the organization impacts economic outcomes, particularly when such groups are highly represented in the top organizational tiers. In a nutshell, it enables us to identify the demographic contexts in which marginalized groups fare better.

The findings underscore the need to distinguish between overall workforce composition and the makeup of high-status positions, as each affects wages differently. A higher percentage of marginalized groups in top roles significantly improves wages for members of the same group in lower positions. In contrast, a greater presence in the general workforce exhibits a nonlinear effect—initially positive, then adverse as the shares of Arab men and Jewish women increase. Essentially, applying the relational composition measure shows that the detrimental wage effect shifts to a positive one for Jewish women once they reach a critical mass in positions of power: they benefit most when a high workforce presence is paired with high status. Arab men, however, tend to gain the most when they hold top roles yet remain a minority in the workforce.

The relational composition measure thus enhances our comprehension of the dynamics surrounding wage disparities within the workplace. It follows that increasing the representation of marginalized groups without advancing their authority may fail, or even backfire, in improving economic outcomes. This conclusion highlights the crucial role of workplaces in generating and reducing wage inequality, as well as the need for more effective resource allocation in diversity and integration policies.

To further unpack the role of demography in understanding wage disparities, the analysis extends in two directions. First, I analyze integrated firms employing Arab women. Second, I examine how the representation of one marginalized group influences the wages of another. Together, these additions provide a more comprehensive understanding of how organizational demography influences outcomes for marginalized groups and lay the groundwork for future research.

Organizational Demography and Within-Workplace Inequality

A substantial body of research has explored how demographic composition of work units (like occupations and teams) affects labor market outcomes. Demography influences sex and race discrimination (Assari & Moghani Lankarani, 2018; Hirsh & Kornrich, 2008), hiring and advancement (Taber & Hendricks, 2003), organizational attachment (Stainback & Irvin, 2012), and wage inequalities (Abendroth et al., 2017; Tomaskovic-Devey et al., 2009; Tomaskovic-Devey et al., 2015). Traditionally, the literature has primarily focused on occupational composition, neglecting workplaces. Moreover, within organizational research, most studies examine minorities’ representation and between-firms inequality, showing workplaces with high shares of women and ethnic/racial minorities pay lower wages (Groshen, 1991; Baron & Newman, 1990; Browne et al., 2001; Bruns, 2019; Catanzarite, 2003). The link between workforce composition and the distribution of rewards within workplaces is less clear.

This scarcity stems from challenges as regards accessing employer-employee data. Recent decades’ improved data availability sparked a renewed interest in workforce composition studies, documenting connections between marginalized groups’ shares in workplaces and their hiring, promotion, and access to high-status roles. However, empirical evidence on how organizational demography affects within-workplace wage inequalities is extremely scant and inconsistent. Some studies report wage premiums for increased marginalized group shares in workplaces (Tomaskovic-Devey et al., 2015) and managerial roles (Bell, 2005; Cardoso & Winter-EbmTer, 2010; Stojmenovska, 2019), while others find no effect or negative wage impacts (Hellerstein & Neumark, 2002; Shenhav & Haberfeld, 1992).

Nonetheless, there is consensus that workplace composition is crucial for understanding organizational inequalities as it reflects power relations within organizations. The following section briefly reviews key theoretical approaches linking demography, power, and inequalities, with supporting empirical evidence.

Group Composition, Power Relations and Inequalities

One of the classic theories explaining the relationship between the representation of groups within work units and their employment outcomes is Kanter's (1977) tokenism theory. It posits that women's negative workplace experiences stem from their ‘token’ status, where their underrepresentation results in substantial disadvantages. Since women are perceived as less suitable for management roles, they face greater gender-biased stereotyping. Kanter suggests that addressing the numerical imbalance by increasing the representation of women can enhance their power, reduce stereotyping, and improve employment opportunities—a concept known as the ‘strength in numbers’ hypothesis.

Similarly, Pfeffer's (1983) ‘minority power’ argument also focuses on the importance of numerical advantage for marginalized groups. It builds on the assumption that subordinate and superordinate groups compete over the organizational resources. The outcome of this competition is determined by the numerical balance between these two groups: the larger the relative share of the subordinate group the higher their relative earnings.

Finally, a more contemporary theory, termed the relational inequality theory (RIT) (Avent-Holt & Tomaskovic-Devey, 2010; Tomaskovic-Devey, 2014), also assumes a positive link between the numbers and the relative power of marginalized groups. According to RIT, the standing of status groups in the workplace influences their rewards through the claims-making process. Low-status groups, like women and ethnic/racial minorities, make fewer claims on organizational resources and face challenges as regards gaining legitimacy and recognition by powerful actors. As the relative numbers of subordinate groups increase, status-based distinctions diminish, reducing the legitimacy of the dominant group's status-based claims.

As to the empirical evidence, the findings are mixed. Some studies find a positive association between the size of marginalized groups in a workplace and their relative position, in terms of job status, advancement, earnings, etc. (Bloch et al., 2021; Cohen et al., 1998; Fuller & Kim, 2024; Kmec & Skaggs, 2014; Soener et al. 2023; Stainback et al., 2016; Taylor et al., 2019; Tomaskovic-Devey, Hällsten & Avent-Holt, 2015). Likewise, increased numbers of subordinate groups in leadership positions were found to improve the relative earnings for those demographic groups (Bell, 2005; Shenhav & Haberfeld, 1992; Tomaskovic-Devey et al., 2015). However, other studies haven’t found a clear positive association or reported a negative association between the size of marginalized groups and their employment achievements (Hellerstein & Neumark, 2002; Kraus & Yonay, 2000; Penner & Toro-Tulla, 2010; Penner et al., 2012; Shenhav & Haberfeld, 1992; Zatzick et al., 2003).

Contrary to the ‘tokenism‘ and ‘minority power‘ arguments, threat/competition theories (Arrow, 1972b; Blalock, 1967) predict adverse outcomes for marginalized groups as their numbers grow. Rooted in ethnic and racial competition literature, these theories hold that ‘numeric surges threaten the majority‘ (Yoder, 1991, p. 184), prompting the dominant group to enact discriminatory practices and social closure to preserve its power. Empirical support comes from studies such as Baldi and McBrier (1997), Kraus and Yonay (2000), and South et al. (1982). Nelson and Johnson (2024) show that defensive reactions can emerge even before minorities reach numerical parity, especially when they begin occupying high-status roles and challenge established hierarchies, revealing a pre-discriminatory phase of exclusion triggered by perceived threats to symbolic dominance.

Importantly, while most studies have assumed a linear relationship between numbers and inequalities (in wages, promotions, etc.), some researchers have suggested a nonlinear correlation (Pfeffer & Davis-Blake, 1987; Shenhav & Haberfeld, 1992; Zatzick et al., 2003). For example, Shenhav and Haberfeld (1992) showed that the proportion of women within the workplace has a curvilinear effect on their rewards: a positive impact at the beginning of the distribution, but negative consequences when the share of women within the workplace becomes greater. These studies have demonstrated that the mechanisms linking minority representation and inequalities may differ in certain representation segments.

To summarize, theories diverge on how workforce composition shapes reward allocation, and empirical results remain inconclusive. This inconsistency suggests that the existing theories and measurement strategies need to be further elaborated. The present study highlights a significant gap in organizational demography research: the neglect of the within-workplace hierarchy dimension. I aim to bridge this gap both theoretically and empirically.

Organizational Demography: Adding Hierarchy to the Picture

Organizational demography, which has emerged from the evolution of demography and organizational research, investigates how workforce composition shapes organizations and employees. There is a significant gap in our understanding of organizational hierarchy, as prior studies have focused on either general workforce or managerial/supervisor positions, applying similar theoretical predictions to both. This approach is problematic because in this case theoretical frameworks overlook organizational power differences.

In this article, I suggest that the representation of marginalized groups in high-status positions may affect the power dynamics within a workplace differently, as compared to their representation in the total workforce. The main reason for this assumption is that increased group numbers within the overall workforce don’t necessarily mean increased ability to influence decision-making processes. Rather, workers at the top of the organizational hierarchy are the most powerful actors within the workplace and are commonly involved in organizational decisions, including wage-setting practices (Hultin & Szulkin, 2003; Nelson & Bridges, 1999; Zimmermann, 2021). Therefore, when developing theoretical frameworks about the composition effect at the workplace level, it is important to recognize that the overall workforce and those in the highest-status positions occupy different levels of organizational power.

As Shenhav and Haberfeld (1992) note, Kanter's theory is more applicable at the highest levels of organizational hierarchy. Echoing this view, several studies have found that increased representation of subordinate groups improves their position only if managerial positions go together with high status in the organization (Cardoso & Winter-Ebmer, 2010; Cohen & Huffman, 2007).

Similarly, the threat/competition mechanism may operate differently for the general workforce than for high-status positions. Theoretically, an increase in the representation of subordinate groups makes the dominant group feel threatened, resulting in strategies of closure and discrimination (Arrow, 1972b; Blalock, 1967). This mechanism is supposed to apply to both high-status positions and the total workforce. But, as we know, hierarchies are context-contingent and are produced locally (Acker, 2006; Avent-Holt & Tomaskovic-Devey, 2010; Tomaskovic-Devey, 2014). The outcomes of the hypothesized competitive relations may therefore be a function of the relative power of the marginalized group within the workplace. If subordinate workers have at least some representation in power positions, it might be challenging for the dominant group to promote discriminatory practices against them. Moreover, the social interactions between marginalized and dominant groups that accompany employment in positions of power may reduce stereotyping and negative attitudes toward the former (Ely, 1995; Kanter, 1977), making the threat mechanism less tangible.

Empirical studies (Abendroth et al., 2017; Cohen et al., 1998; Ely, 1995; Han & Tomaskovic-Devey, 2025; Huffman et al., 2010; Shenhav & Haberfeld, 1992; Skaggs et al., 2012; Stainback & Kwon, 2012) consistently link management's demographic makeup with the labor market outcomes of marginalized groups. Though limited, the literature also supports the favorable impact of leadership composition on marginalized groups’ pay within specific workplaces (Cardoso & Winter-Ebmer, 2010; Cohen & Huffman, 2007; Hultin & Szulkin, 1999, 2003; Soener et al., 2023). In contrast, studies focusing on general workforce composition often find that increased representation is associated with lower relative wages, supporting threat/competition theories (Baldi & McBrier, 1997; Kraus & Yonay, 2000; South et al., 1982).

Drawing on this evidence, I hypothesize that an increased share of the marginalized group in the total workforce will decrease their relative wages due to threat/competition dynamics (H1). In contrast, I suggest that tokenism, minority power, and RIT arguments should be applied to the highest ranks of organizational hierarchy. I expect that increasing the participation of underrepresented groups in key positions will boost their negotiating power and, as a result, their relative wages (H2).

To test these hypotheses, I use a conventional measure of workforce composition—the shares of ethnic-gender minorities—and a categorical measure to account for potential nonlinear effects (see Method for details). I also introduce a relational composition measure to capture the intersection of group representation in the workforce and high-status positions, outlined in the next section.

A Relational Measure of Workforce Composition

Intersectional and relational perspectives offer valuable insights into how group demographics, influenced by varying relational power, impact organizational processes. Relational inequality theory emphasizes that organizations develop distinct social meanings within local contexts, making categorical distinctions critical in bargaining (Avent-Holt & Tomaskovic-Devey, 2010; Tomaskovic-Devey, 2014). The composition of the authority position in the organization is one of the important dimensions of such an organizational context. We should therefore consider the possibility that the wage effect of the demographic composition of the total workforce is contingent on the composition of top organizational positions within the workplace.

Evidence on the intersectional effect of the total workforce composition and top positions composition is lacking (but see Cardoso & Winter-Ebmer, 2010). We don’t know, for example, whether the size of the marginalized group in the organization matters for its wages if this group is highly represented in the top organizational hierarchy. Specifically, we can ask whether the threat (or tokenism) mechanism becomes less or more prominent if a marginalized group is highly represented (or underrepresented) in positions of organizational power. Finally, an intriguing question is in which demographic settings (or regimes, in Acker's terminology) marginalized groups benefit most.

The relational measure of workforce composition proposed in a recent study allows for the examination of these and related questions. Technically, it was constructed as a categorical variable that simultaneously combines (1) the representation of the specific status group in the total workforce and (2) the representation of this group in the top decile of wage distribution. A 50 percent cutoff was adopted for both, with representation of 50 percent or more defined as high, and below 50 percent as low or medium. This relatively high cutoff is a theoretical choice, reflecting marginalized groups’ potential to meaningfully counterbalance the dominant group in shaping workplace dynamics and decisions. A similar cutoff was adopted by Zatzick et al. (2003). Nonetheless, given the relatively low representation of Arab men in the workforce, I conducted a robustness check using an alternative 30 percent cutoff for the relational measure (see Robustness Checks section).

Figure 1 presents the relational composition measure.

Figure 1.

The Relational Composition Measure Scheme.

Intersectional Dynamics of Ethnicity, Gender, and Class in Israeli Workplaces: Applying A Relational Measure

As discussed, I propose different predictions for the relationship between workforce demography and wages depending on workers’ positions within the organizational hierarchy. However, the mechanisms underlying these effects may also vary by ethnicity and gender. The intersectional approach suggests that stratification systems, such as race, gender, and class, interact to create unique patterns of privilege and disadvantage for different social groups (Acker, 2006; McCall, 2001). This perspective emphasizes the importance of examining how multiple social axes intersect within specific institutional contexts, supported by growing empirical research (Browne et al., 2001; Nelson & Johnson's, 2024; Sprengholz & Hamjediers, 2024; Tomaskovic-Devey et al., 2015). Building on this, I posit that the distinct labor market positions of each status group in Israel shape their capacity to challenge existing power structures and affect wage distribution.

The Israeli labor market is characterized by both ethnic and gender stratification, deeply institutionalized through competition and discrimination. Ethno-national stratification, rooted in the Jewish-Palestinian conflict, strongly shapes Arab workers’ structural positions. Arabs occupy the lowest economic and social tiers, facing significant wage gaps (Bental et al., 2017). These disparities stem from differences in human capital (Okun & Friedlander, 2005), geographic residency influencing occupational opportunities (Lewin et al., 2006), and employer discrimination (Lewin-Epstein & Semyonov, 1994; Khattab & Miaari, 2013). Gender inequality is similarly entrenched, with women earning less despite comparable qualifications, driven by factors such as part-time employment, occupational segregation, and discrimination (Kraus, 2002; Mandel & Birgier, 2016; Stier, 2006). Arab women, particularly in the private sector, occupy some of the most precarious positions in the labor market. The gender wage gap in Israel is substantial and comparable to levels observed in the United States and several European countries with similarly high levels of inequality. Notably, these wage disparities persist even after accounting for variation across firms, occupations, and specific jobs within the workplace (Kristal, 2017; Penner et al., 2023).

A key question is which axis of stratification—ethno-national identity or gender—dominates in shaping the demography-wage relationship, particularly when class position is considered. Given that ethno-national split is the dominant force shaping labor market inequalities in Israel, I am expecting to find evidence of more pronounced backlash against Arab men compared to Jewish women when they form a workplace majority.

The backlash mechanism reflects negative consequences for minority workers who challenge established power hierarchies (Blalock, 1967; Kalev et al., 2006; Rainey & Melzer, 2021). Literature suggests that this effect intensifies when minority representation reaches a critical threshold, while modest increases can be beneficial. Jewish women, sharing the dominant group's ethno-national identity, may not trigger the same threat response as Arab men. Their significant numerical presence in the workplace, stemming from (1) lower workplace segregation and (2) a higher share in the population compared to Arab men, makes them less prominent as a distinct minority. Thus, in workplaces with high minority representation but low bargaining power (Type 2 of the relational measure), I expect wage declines for Arab men and stagnation or milder decline for Jewish women.

Similarly, Arab men may struggle to translate high-status representation into wage gains, particularly when their majority in leadership coincides with large workforce representation. While high-status representation enhances bargaining power, its effect may be moderated by intra-group competition and backlash. As noted, Jewish women may not experience strong backlash, given their ethno-national alignment with the dominant group. Consequently, while I expect wage gains for all marginalized groups when they hold high-status positions, Arab men may see only moderate increases. The strongest wage boost for Arab men should occur when they dominate leadership but remain a workforce minority. Based on the theoretical considerations elaborated above, I summarize the research hypotheses for the wage effect of each composition measure in Table 1.

Table 1.

Summary of the Research Hypotheses.

Measure of workforce composition			Mechanisms
I. Continuous measure
H1: An increase in the representation of marginalized groups in the total workforce will decrease their relative wages.			Threat/competition
H2: An increase in the representation of marginalized groups in high-status positions will improve their relative wages.			High bargaining power (Tokenism/RIT)
II. Categorical measure
H3: The wage impact of total workforce representation follows a nonlinear pattern: initially, as the representation of marginalized groups rises, so do their wages. However, once their presence in the workplace becomes substantial, their relative wages decrease.			Increased bargaining power (Tokenism/RIT) and backlash
III. Relational measure
Demographic Regime	Arab men	Jewish women
Type 1	(Reference)	(Reference)	Low bargaining power
Type 2	Decline (H4-a)	Modest decline/Stagnation (H4-b)	Threat/competition and low bargaining power; backlash for Arab men
Type 3	Increase (H4-c)	Increase (H4-d)	High bargaining power (Tokenism/RIT)
Type 4	Modest increase (H4-e)	Increase (H4-f)	High bargaining power (Tokenism/RIT); backlash for Arab men

Effect on Other Subordinate Groups

While research on organizational demography is limited, even less is known about how one marginalized group's representation affects the wages of other subordinate groups. I explore this issue in the paper's final part, using both the main sample and a subsample of workplaces that employ Arab women in addition to all other groups.

The theoretical mechanisms previously discussed apply here as well. Tokenism theory and RIT suggest that a larger share of minorities across subgroups can blur categorical boundaries and foster fairer pay structures. Conversely, the combined presence of multiple minority groups may heighten threat perceptions among the dominant group, leading to wage suppression for all marginalized employees.

In workplaces employing Arab men and Jewish women (alongside the dominant group of Jewish men), no single shared status unites the subordinate groups. Class-based solidarity might bind them in opposition to the majority, or ethnic and gender divides could spur competition.

Beyond these broad patterns, the intersection of ethnicity and gender can further shape outcomes—an effect I investigate in fully integrated workplaces that include Arab women. Due to space constraints and the broader scope of the paper, I do not formulate specific hypotheses regarding the mutual inter-group effects, outlining here possible outcomes.

If ethnicity plays a dominant role, we might expect that shared ethnic identity will promote mutual wage gains among Arab men and women. However, because male authority in Arab culture is particularly strong, and Arab men in Israel may perceive Arab women's professional achievements as a threat to their social status and roles within the family and society (Abu-Baker, 2002), the gender-related aspect of dominance may be especially influential. In this case, Arab men may compete with women from both groups, especially if women attain high-status positions. Complementarily, Arab and Jewish women might benefit from increased representation of women in positions of power, regardless ethnicity.

The relational composition measure enables an examination of these complex intergroup dynamics, capturing the intersections of class, ethnicity, and gender.

Method

Data

This study utilizes the Linked Employer-Employee Panel (LEEP) database provided by the Israeli Central Bureau of Statistics for the years 1996–2015. The dataset drew from multiple sources, including the Population Register, Tax Register, Education Register, ‘Degrees Recipients’ Register, Population Censuses, and Labor Force Surveys (see Table A1 in the Appendix for details on the data sources for each variable). This unique data has several important advantages for studying the link between workforce composition and within-workplace wage inequalities. Having demographic information on all the workers within workplaces makes it possible to accurately assess the workforce composition at the workplace level and focus on integrated workplaces. The panel structure permits the exploration of causality arguments.

This research focuses on gender- and ethnically integrated private-sector firms that, in each year, employ at least one Arab man, one Jewish woman, and one Jewish man. Arab women were not included in the main analysis for two reasons. First, the study examines workplaces that are simultaneously diverse in ethnicity and gender, and only a small share of Arab women work in such settings. Second, a key aspect of this research is the representation of status groups in high-status positions, where Arab women are largely absent. However, I extend the analysis to separately examine 14,027 mixed workplaces employing Arab women.

The study focuses on integrated workplaces because they offer a shared organizational context, enabling more meaningful comparisons across groups. These settings enhance internal validity by minimizing bias from structural differences between firms—for example, those employing only Arab or only Jewish men. Crucially, integrated organizations enable the simultaneous analysis of ethnic and gender dynamics, which is essential to the study's intersectional approach, and make it possible to examine how the representation of one marginalized group affects the wage outcomes of another.

The study includes all Israeli workers residing in one of Israel's six districts (Jerusalem, Haifa, Tel Aviv, Central, Southern, and Northern). As the administrative data cover only Israeli citizens, Palestinians from the occupied territories (West Bank) employed in Israel are not represented. Hence, I also exclude firms and any Israeli citizens residing in those territories. The primary analysis is restricted to workers aged 25–64. Excluded also were extremely marginal jobs (monthly wages below the 1st percentile). The total research population comprises 7,102,868 jobs in 48,321 workplaces. To address the correlation between representation in high-status positions and high wages, I focus on workers in the bottom nine wage deciles when examining wage gaps. Workplaces observed only once during the study period were excluded from the analysis. The final multivariate analysis includes 6,095,243 jobs in 48,200 workplaces.

Variables

Dependent variable

Wages are defined as individual real monthly income. To adjust for the skewedness of the earnings distribution, the natural logarithm of the monthly earnings was taken.

Main Explanatory Variables

Status Group

The status group is the individual-level variable constructed by combining gender (women and men) and ethnicity (Jews and Arabs). The Arab group includes those identified as Arabs by the Population and Immigration Authority, most of them being Muslim. Most of the Jewish category consists of Jews according to the Halakhic law, but it also includes individuals who are non-Jews according to Halakhic law but who immigrated to Israel under the Law of Return (as descendants of Jews and their family members).

Workforce Composition

The empirical analysis consists of three parts, each using a different workforce composition indicator.

The Continuous Measure (I)

In constructing the continuous measure of workforce composition, I differentiate between (a) the total workforce, the representation of each status group (Arab men, Arab women, and Jewish men) within the workplace in percentages, and (b) high-status positions, the percentage of each status group within the top decile of the workplace's wage distribution. This operationalization, applied at the workplace-year level, follows Cardoso and Winter-Ebmer (2010) and addresses data limitations, as managerial roles are not available in the data. While prior studies often use managerial or supervisory roles to indicate bargaining power, these positions may not reflect true influence (Abendroth et al., 2017; Reskin & Ross, 1992; Skaggs et al., 2012). In the operationalization of jobs in the highest decile of wage distribution as high-status (or high-power) positions, I draw on the conceptualization of power as access to scarce and valuable resources (DiTomaso et al., 2007; Weber, 1968).

The Categorical Measure (II)

The categorical indicator was devised for each status group, encompassing several representation categories: 0 to 10 percent as the reference category, followed by 10–20 percent, 20–50 percent, and 50–100 percent.

The Relational Measure (III)

The relational measure of workforce composition is a categorical variable combining two parameters: (1) representation of a status group in the total workforce and (2) its representation in high-status positions. Representation of 50 percent or more is defined as high; below 50 percent is low/medium. All workplaces were classified according to this scheme (Figure 1). For example, workplaces with high representation of Arab men in both dimensions fall into the ‘Type 4’ category.

This measure is constructed separately for each status group. It allows us to examine the effect of each workplace type while accounting for other groups’ representation by including all workforce types in the model. As the relational measure is categorical, demographic regimes with low representation in both dimensions serve as the reference group. The distribution of workplaces by relational composition type for each group appears in Appendix (Table A2).

Notably, as the reference category in the relational measure refers to the representation within each status group, it enables the inclusion of Jewish men's representation in the model. However, the current study focuses solely on the organizational demography wage effects of marginalized groups. This focus reflects critiques of tokenism and related empirical evidence, which suggest that the mechanisms linking organizational demography to rewards operate differently for marginalized versus dominant groups (Yoder, 1991). Consequently, the effects for dominant groups are reported only in the complete tables in the appendix and are not discussed in the main text of the paper.

Other Control Variables

In addition to the main explanatory variables, all the models include demographic and productivity-related individual-level controls: age, immigrant status, marital status, education, tenure, and part-time employment. Also, workplace size is controlled as a workplace-level (time-varying) variable. Education is a dummy variable indicating whether an individual has a university degree or not. Marital status indicates whether a person is married or not. Workers who immigrated to Israel after 1988 are defined as new immigrants. Applying this cutoff point allowed for the inclusion of the massive immigration wave from the former Soviet Union countries since 1989.

Tenure is defined by the number of years that a worker has been employed at a given firm. As neither part-time status nor hours are available in our data, a part-time proxy from information from Israel's Central Bureau of Statistics was imputed. I first utilize data from the CBS Labor Force Surveys on working hours to predict the probability of part-time employment by gender and ethnicity, accounting for age, marital status, education, industry (2-digit), working months, and workplace size. Jobs with less than 35 weekly working hours were defined as part-time jobs. Then the predicted probabilities matched to the job-level data were used as an indicator of part-time employment status. Finally, workplace size is operationalized as (the natural logarithm of) the number of employees in the workplace.

Table 2 provides descriptive statistics for the variables in the analysis for all the workers and by social group. There is a variation in employment characteristics among groups of workers. For example, a relatively large percentage of Jewish women are part-time employees, unlike Arab and Jewish men. Also, the percentage of highly educated Arab men is very low compared to the percentages of highly educated Jewish women and Jewish men. On average, Arab men are employed in smaller workplaces compared to Jewish workers, especially Jewish men.

Table 2.

Descriptive Statistics for Individual and Workplace-Level Characteristics, 1996–2015. Means, Standard Deviations and Percentage (for Categorical Variables).

	All	Arab men	Jewish women	Jewish men
Individual-level
Monthly wage	9,038 (7,505)	6,931 (4,175)	7,177 (6,098)	10,262 (8,234)
Demographic characteristics
Age	38.33 (10.63)	35.13 (8.67)	37.62 (10.19)	40.01 (10.93)
% Immigrants	12.91	0.11	13.83	14.51
% Married	66.62	79.27	60.54	67.50
Productivity-related
% Highly educated	27.15	6.01	35.32	26.63
Tenure	4.29 (6.49)	3.10 (5.12)	3.61 (5.35)	4.80 (7.09)
Part-time employment	0.14 (0.16)	0.04 (0.06)	0.28 (0.17)	0.09 (0.12)
Workplace-level
Workforce composition
% Arab men	9.76 (14.03)	29.95 (22.10)	6.86 (10.59)	7.93 (10.89)
% Jewish women	29.11 (19.20)	20.44 (15.19)	41.78 (20.57)	24.46 (15.96)
% Jewish men	61.12 (19.91)	49.61 (21.06)	51.36 (19.94)	67.61 (16.72)
% Arab men in the top decile	6.64 (17.31)	19.67 (30.02)	5.81 (16.16)	4.96 (13,86)
% Jewish women in the top decile	15.92 (19.72)	11.15 (29.50)	23.57 (23.49)	13.03 (16.33)
% Jewish men in the top decile	77.44 (24.17)	69.17 (32.67)	70.62 (26.21)	82.01 (20.10)
Other workplace characteristics
Workplace size	573.88 (1744.74)	245.10 (1198.08)	428.36 (1244.91)	695.62 (1992.57)
N jobs	7,102,868	692,130	2,068,660	4,342,078
N individuals	1,616,887	138,501	598,943	879,443
N firms	48,321

Data source: Israeli linked employer-employee panel data. Sample: Israeli resident, age 25–64, private sector, integrated workplaces, without residences in the West Bank.

Analytic Strategy

The analysis is based on linear models with the year and the firm fixed effects, as was applied in previous research to address workplace-level inequality dynamics in general (Huffman et al., 2010) and within-workplace wage inequalities in particular (Cardoso & Winter-Ebmer, 2010; Stojmenovska, 2019; Tomaskovic-Devey et al., 2015; Zimmermann, 2021). The analytical strategy is to examine the effect of workforce composition as it changes over time within workplaces on individuals’ wages, net of observed individual characteristics. Applying workplace fixed effects makes it possible to control for all (observable and unobservable) time-constant variables at the workplace level that may affect workers’ wages. The panel structure of the data makes it possible to track causal effects.

While workplace fixed effects help control for time-invariant workplace characteristics, they do not account for time-varying changes that may affect both workforce composition and wage outcomes, such as outsourcing or shifts in production methods. Due to data limitations, the study cannot fully address these potential sources of bias. However, I conducted a robustness test distinguishing between workers who changed workplaces (movers) and those who remained (stayers), allowing compositional effects driven by internal change to be separated from those resulting from worker mobility.

As noted, I examine the effect of workforce composition on workers from the bottom nine deciles of the organizational wage distribution. The analysis consists of three steps. Initially, I conduct a regression analysis using the continuous composition measure—the percentage of status groups in both the total workforce and high-status positions—while adjusting for workers’ demographic and employment traits and workplace size to predict individual wages. Next, the nonlinear relationship between minorities representation and wages is examined applying a categorical composition measure. In the final part of the analysis, the effect of the relational composition on individual wages was estimated. Throughout the regression analysis, the primary focus is on the interaction term between specific status groups and composition.

The equation takes the following form:

l n (w)_{i t} = β_{0} + β_{1} S G + β_{2} W C + β_{3} W C * S G + β_{4} D E + β_{5} S_{w} + γ_{w} + γ_{t} + ε

$l n (w)_{i t} -$ (ln) wage individual wage in a current year (t)

$β_{1} S G -$ status group (Jewish women, Arab men, Jewish men)

$β_{2} WC$ – vector of workforce composition measure

$β_{3} WC * S G$ – the interaction between status group and workforce composition

$β_{4}$ DE – vector of demographic and employment characteristics for worker s

$β_{5} S_{w}$ – vector of workplace size $γ_{w}$ and $γ_{t}$ – workplace and temporal fixed effect s

Standard errors are adjusted for within-workplace clustering.

Since the analysis uses the full population rather than a sample, the main text does not report significance levels. However, the appendix includes them for the full models to ensure transparency and allow readers to assess the robustness of the results. As the dependent variable is log-transformed while the composition variables are not, the relevant regression coefficients are interpreted in exponential form.

Extensions

Beyond the main analysis, I propose two extensions. First, I include Arab women by focusing on workplaces that employ all four groups of workers and examine how organizational demography affects their wages. Second, I demonstrate how the representation of one marginalized group influences the wages of another, using both the main sample and the fully mixed sample that includes Arab women.

Results

Wage Disparities in Integrated Workplaces

I began by mapping wage differentials across and within integrated workplaces. First, I estimated annual OLS regressions (1996–2015) with status group as the sole predictor, capturing unadjusted gaps between Jewish women and Arab men versus Jewish men. Negative coefficients indicate lower earnings. Subsequently, the wage gaps within workplaces were assessed using OLS models incorporating workplace-level fixed effects. Figure 2 depicts the estimated wage ratios of marginalized groups to Jewish men (models available on request). For example, in 2015, Jewish women earned 85 percent of Jewish men's pay in the same workplace, a 15 percent gap.

Figure 2.

Wage disparities in integrated workplaces.

Predictably, Arab men and Jewish women tend to earn less than Jewish men. Notably, although the average wage gaps between Arab and Jewish men range from 23–29 percent, the wage differentials within workplaces are lower, hovering around 4–7 percent. This suggests that most of the wage inequalities between these groups of workers occur between workplaces. Conversely, Jewish women face considerable earning gaps compared to Jewish men, both on average (24–31 percent) and within specific workplaces (with gaps between 15–19 percent).

How Workforce Composition Affects the Wages of Marginalized Groups

Turning to the hypotheses, I use an OLS model to estimate the effect of workforce composition (measure I) on individual wages, controlling for demographic, employment, and workplace characteristics. To assess how a group's share of the total workforce and high-status positions affects marginalized workers, I include interactions between status groups (Arab men, Jewish women) and their workplace representation (Table 3², Model 1).

Table 3.

OLS Regression Estimates for the Effect of Workforce Composition—Continuous Measure (I) and Categorical Measure (II)—on (ln) Individual Wages.

Model 1	Dependent variable: (ln) monthly wage
Workforce composition: a continuous measure
Representation status group*
% Arab men * Arab men	−.0007(.0002)
% Arab men in the top decile * Arab men	.0019 (.0001)
% Jewish women * Jewish women	.0001 (.0002)
% Jewish women in the top decile * Jewish women	.0026 (.0001)
Adj R-squared	0.6138
Model 2
Workforce composition: a categorical measureª
% Arab men in total workforce Arab men*
10–20%	.0026 (.0053)
20–50%	−.0198 (.0063)
50–100%	−.0630 (.0099)
% Jewish women in total workforce Jewish women*
10–20%	.0038 (.0178)
20–50%	−.0515 (.0194)
50–100%	−.0373 (.0219)
% Arab men in high-status positions Arab men*
10–20%	.0462 (.0069)
20–50%	.0699 (.0056)
50–100%	.1031 (.0063)
% Jewish women in high-status positionsJewish women*
10–20%	.0191 (.0086)
20–50%	.0762 (.0089)
50–100%	.1503 (.0088)
Adj R-squared	0.6136
Individual-level covariates	Yes
Workplace-level covariates	Yes
FE firms	Yes
FE year	Yes
N jobs	6,095,243
N firms	48,200

Data source: Israeli linked employer-employee panel data. Sample: Israeli resident, age 25–64, private sector, integrated workplaces with at least 3 employees, integrated firms, without residences in the West Bank.

Standard errors are adjusted for within-firm clustering. ª The reference category of the workforce representation for Model 2 is ‘below 10%’.

The results confirm the first hypothesis (H1) for Arab men but not for Jewish women: an increase in the share of Arab men within a workplace decreases their wages compared to Jewish men. To illustrate, a 10 percent increase in Arab men's representation leads to a one percent³ wage decline, supporting threat/competition-related expectations. Jewish women's wages do not appear to be affected by their workforce representation.

In contrast, higher representation in high-status positions substantially improves marginalized groups’ earnings, confirming the second hypothesis (H2). A 10 percent increase in the representation of Jewish women/Arab men in high-status positions will increase Jewish women/Arab men's wages in other jobs by 3 and 2 percent, respectively.

Model 2 in Table 3 presents the findings from the OLS regression, which utilizes the categorical composition measure (II). Compared to the previous model, it offers a more nuanced view of the relationship between representation and wages.

When Arab men and Jewish women exceed marginal representation (below 10 percent, the reference) in the total workforce, it slightly increases their relative wages. However, as their representation in the workplace grows past 20 percent, this lowers the wages of the same group. The wage decrease happens also when the subordinate groups become the majority in the workplace. Note that these effects were undetected when the continuous composition indicator was used. Figure 3 illustrates the results outlined in Table 3 (Model 2).

Figure 3.

The Estimated Effect of the Workforce Composition (the Categorical Measure) on Marginalized Groups’ (ln) Individual Wages.

Thus, the findings support theoretical arguments concerning the nonlinear relationship between the representation of marginalized groups and their wages (H3), highlighting the complexity of the association between group size and relative rewards—an issue noted in several prior studies. Consistent with the results obtained using the continuous measure, the analysis reveals a positive wage effect associated with increased representation of subordinate groups in high-status positions, with the strongest effect observed when these groups constitute a majority in such roles.

In the final stage of the analysis, I examine the role of the relational composition measure (III). The results are presented in Table 4.

Table 4.

OLS Regression Results for the Effect of Relational Workforce Composition Measure (III) on (ln) Individual Wages of Same-status Group Members (Panel A) and Other Marginalized Groups (Panel B).

	Dependent variable: (ln) monthly wage
Panel A. Effect on the same-status group
Representation of Arab men Arab men*
Arab men: Type 2	−.0280 (.0092)
Arab men: Type 3	.0740 (.0063)
Arab men: Type 4	.0315 (.0088)
Representation of Jewish women * Jewish women
Jewish women: Type 2	−.0068 (.0102)
Jewish women: Type 3	.0746 (.0068)
Jewish women: Type 4	.1125 (.0098)
Panel B. Effect on the other-status group
Representation of Jewish women Arab men*
Jewish women: Type 2	.0258 (.0097)
Jewish women: Type 3	.0020 (.0061)
Jewish women: Type 4	−.0244 (.0114)
Representation of Arab women Jewish women*
Arab men: Type 2	.0635 (.0133)
Arab men: Type 3	0.0310 (.0061)
Arab men: Type 4	.0432 (.0123)
Adj R-squared	.6135
Individual-level covariates	Yes
Workplace-level covariates	Yes
FE firms	Yes
FE year	Yes
N jobs	6,095,243
N firms	48,200

Data source: Israeli linked employer-employee panel data. Sample: Israeli resident, age 25–64, private sector, workplaces with at least 3 employees, integrated workplaces, without residences in the West Bank.

Notes: Standard errors are adjusted for within-workplace clustering. Categories of the relational measure: Type 1: Low workforce, low top positions (reference) | Type 2: Low workforce, high top positions | Type 3: High workforce, low top positions | Type 4: High workforce, high top positions. The full results are presented in the Appendix (Table A5).

When interpreting the results, it is important to remember that the reference category is a workplace regime characterized by a low to medium presence of the specific group in both the overall workforce and high-status positions (Type 1). Research Hypotheses 4a–4f proposed that the wage impact of group representation in the total workforce is shaped by the composition of top organizational roles, and that Arab men would face certain wage penalties due to a backlash effect, particularly in comparison to Jewish women. The findings support these propositions. Figure 4 illustrates the results presented in Table 4(a).

Figure 4.

The Estimated Effect of the Workplace's Relational Composition (Measure III) on Marginalized Groups’ (ln) Individual Wage.

On the one hand, having a substantial number of Arab men and Jewish women in top positions within the organizational hierarchy positively impacts wages for other members of the same group who do not hold such high-rewarding positions. This effect exists whether the group's representation in the workplace is low (Type 3) or high (Type 4). However, for Jewish women, the improvement is significantly stronger when they are highly represented in both high-status positions and the total workforce (Type 4). In this demographic regime, Jewish women receive 11.9 percent higher wages (Figure 4(a)). Consistent with the previous results, Jewish women are penalized for being highly represented in the total workforce, experiencing a wage decrease of 0.7 percent when they lack significant representation in positions of power (as evidenced by the interaction effect of the Type 2 regime).

Arab men fare best when well represented in high-status positions, albeit in small numbers overall (Type 3), and gain a 7.7 percent wage advantage (see Figure 4(a)). Also, as expected, workplaces where Arab men are concentrated in lower-tier roles but underrepresented in leadership (Type 2) substantially disadvantage them, resulting in a wage reduction of about 2.8 percent. These findings suggest that both threat and backlash mechanisms shape the link between organizational demography and the earnings of Arab men, with threat effects weakening when they hold significant power.

The results offer a compelling rationale for using a relational indicator of workforce composition alongside the conventional approach. They also lend support to the intersectionality approach by revealing that the mechanisms connecting workforce representation and wages vary between Arab men and Jewish women.

Organizational Demography in Workplaces Employing Arab Women: An Additional Analysis

To complement the primary analysis, I examined mixed workplaces that employ Arab women, with the results presented in Table 5. These workplaces differ from those that do not (Table A7, Appendix), primarily in terms of mean wage, which is substantially lower than in workplaces that do not employ Arab women. Jewish men are less likely to work in fully integrated firms; however, their representation in high-status positions within these settings is relatively high. As expected, Arab women earn substantially lower unadjusted wages compared to all other groups and are minimally represented in top organizational roles.

Table 5.

Results from OLS Regression for the Effect of Workforce Composition—Continuous (I), Categorical (II) and Relational (III) Measures —on (ln) Individual Wage of Arab Women.

	Dependent variable: (ln) monthly wage
Workforce composition: a continuous measure (I)
Representation status group*
% Arab women * Arab women	−.0018 (.0016)
% Arab women in the top decile * Arab women	.0117 (.0010)
Adj R-squared	.6189
Workforce composition: a categorical measureª (II)
% Arab women in total workforce* Arab women
10–20%	−.0117 (.0275)
20–50%	−.0913 (.0372)
50–100%	−.0361 (.0635)
% Arab women in high-status positions* Arab women
10–20%	.1572 (.0270)
20–50%	.2304 (.0325)
50–100%	.3038 (.0474)
Adj R-squared	.6184
Workforce composition: a relational measure (III)
Representation of Arab women * Arab women
Type 2	.1690 (.0649)
Type 3	.1741 (.0432)
Type 4	.1252 (.0621)
Adj R-squared	.6174
Individual-level covariates	Yes
Workplace-level covariates	Yes
FE firms	Yes
FE year	Yes
N jobs	10,331,257
N firms	14,027

Data source: Israeli linked employer-employee panel data. Sample: Israeli resident, age 25–64, private sector, integrated workplaces employing Arab women⁵, without residences in the West Bank.

Focusing on the relational composition measure,⁴ I found that Arab women benefit from being the majority in the workforce, especially when accompanied by high representation in high-status positions. In contrast to Arab men and Jewish women, who face a wage penalty for being in the majority in the total workforce while lacking representation in positions of power (Type 2), Arab women experience a significant advantage in this setting. One possible explanation is that Arab women, as the most vulnerable and disadvantaged group in the Israeli private sector, may not be perceived as a threat in the same way that more empowered marginalized groups, such as Jewish women and Arab men, are. As a result, they may be able to exercise a form of ‘power in numbers’ to improve their position without triggering resistance from dominant-group members. This interpretation is supported by the fact that Arab women often work under other women (see Table 2 and Table A7, Appendix), both Arab and Jewish, which may reflect a lack of social pushback from the dominant group. This explanation is directly supported by the finding that Arab women benefit when working under Jewish women's leadership, as reported in the section below.

To sum up, Arab women benefit from substantial representation in integrated workplaces, even without significant presence in leadership positions—findings that have important practical implications, which I address in the Discussion.

How the Representation of Marginalized Groups in the Workplace Influences the Wages of Other Groups

Although not the primary focus of this study, the impact of marginalized groups’ demographic composition on the wages of other marginalized groups offers important insights. Building on the theoretical expectation that intergroup dynamics among marginalized populations may involve either solidarity or competition, I apply the relational measure to unpack these patterns in Israeli workplaces. Specifically, I assess whether shifts in the representation of Arab men, Jewish women, and Arab women yield mutual wage benefits or penalties across these groups. Several findings point to the presence of gender-based competition dynamics (Table 6).

Table 6.

OLS Regression Results for the Effect of Marginalized Groups’ Workforce Composition on Other Groups’ (ln) Wages, Using the Relational Measure (III).

	Dependent variable: (ln) monthly wage
Workforce composition: a relational measure (III)
Representation of Arab women * Jewish women
Type 2	.1094 (.0502)
Type 3	.0167 (.0217)
Type 4	.1330 (.0597)
Representation of Arab women * Arab men
Type 2	.3076 (.0718)
Type 3	−.0045 (.0323)
Type 4	−.1674 (.0786)
Representation of Jewish women * Arab women
Type 2	.0405 (.0460)
Type 3	–.0911 (.0806)
Type 4	.0509 (.0372)
Representation of Jewish women * Arab men
Type 2	−.0086 (.0189)
Type 3	−.1389 (.0616)
Type 4	−.0119 (.0311)
Representation of Arab men * Arab women
Type 2	−.1480 (.0603)
Type 3	−.0044 (.0266)
Type 4	−.0549 (.0421)
Representation of Arab men * Jewish women
Type 2	−.0281 (.0494)
Type 3	−.0378 (.0142)
Type 4	−.1757 (.0334)
Adj R-squared	.6174
Individual-level covariates	Yes
Workplace-level covariates	Yes
FE firms	Yes
FE year	Yes
N jobs	10,331,257
N firms	14,027

Data source: Israeli linked employer-employee panel data. Sample: Israeli resident, age 25–64, private sector, integrated workplaces employing Arab women, without residences in the West Bank.

Notes: Standard errors are adjusted for within-workplace clustering. The full results are presented in the Appendix (Table A6). Categories of the relational measure: Type 1: Low workforce, low top positions (reference) | Type 2: Low workforce, high top positions | Type 3: High workforce, low top positions | Type 4: High workforce, high top positions.

A high presence of Arab men in the workplace, in either the workforce or high-status positions (Types 2–4), tends to suppress wages for both Arab women and Jewish women. This effect is consistent across most compositional regimes, suggesting that Arab men's numerical and positional dominance may reinforce gendered power hierarchies. An exception emerges in workplaces that do not employ Arab women: Jewish women are not penalized when Arab men dominate leadership. This may be because the absence of a joint multiethnic female presence reduces perceptions of gendered competition or threat or because Jewish women hold relatively strong positions in these settings.

In contrast, Arab men themselves are typically penalized when Arab women or Jewish women hold high representation in either the workforce or leadership positions. These patterns imply that Arab men's wage advantage is undermined when women, regardless of ethnicity, gain influence. However, one notable exception stands out: when Arab women hold a majority only in the total workforce but not in high-status roles (Type 2), Arab men's wages increase substantially. This suggests a possible dynamic in which gendered occupational segregation may allow Arab men to benefit from a female-majority, male-led structure—an interpretation that warrants further investigation using relevant data.

Finally, Jewish and Arab women tend to positively affect each other's wages when they are well represented. Mutual wage gains are particularly evident when both groups are highly present in the workforce (Type 2), and even more so when this presence extends into top positions (Type 4). The only divergence from the general pattern of mutual gains occurs in Type 3 regimes: Arab women are penalized when Jewish women hold a majority in high-status positions but not in the overall workforce, and although Jewish women are not penalized under a similar representation of Arab women, their wage gains in that context are minimal compared to Types 2 and 4. Such a pattern indicates that the Type 3 setting, where women have authority without broad numerical presence, provides weaker support for cross-ethnic female wage advantages.

This finding may reflect the absence of a “critical mass” effect. When women are highly represented only in leadership but not in the broader workforce (Type 3), their ability to shape organizational culture and promote wage equality is limited. Research has shown that women in power do not continually improve outcomes for other women, especially when their bargaining power is constrained. The results suggest that Type 4, where women are highly represented in both the workforce and leadership, provides the most substantial leverage to influence wage structures. In contrast, in Type 3, women may focus their efforts on improving conditions for their ethnic group, with less capacity or incentive to support women from other ethnic backgrounds. It is also likely that workplace norms become more egalitarian only when women are well-represented in the general workforce, reducing the salience of gender status and enabling broader gains across marginalized groups.

Overall, despite some exceptions, the findings strongly suggest a dual dynamic: gendered competition between Arab men and women of both ethnic groups and mutual support or shared gains between Jewish and Arab women. The exceptions highlight important complexities in the observed patterns, warranting closer examination in future research.

Robustness Checks

Several robustness checks were conducted (available upon request). To account for possible delayed effects, I re-estimated an OLS model using a lagged continuous measure of workforce composition (t-1), yielding consistent results. Second, given the relatively low representation of Arab men in the workforce, I examined an alternative 30 percent cutoff for the relational measure. The results were very similar, with slightly stronger effects for the 50 percent threshold, which aligns with my theoretical predictions.

Finally, to distinguish compositional effects driven by an internal organizational change from those resulting from workers transitioning between firms, I conducted a robustness test differentiating between workers who switched workplaces (movers) and those who remained in the same workplace (stayers). This distinction was implemented by interacting the mover/stayer indicator with social group and workforce composition. Several important observations bear mentioning. First, the wage advantages associated with minority representation are consistently stronger for stayers, suggesting that relational inclusion depends on long-term workplace embeddedness and is not automatically granted to newcomers. Importantly, while both groups earn more as stayers, the penalty for being a mover is sharper for Arab men. Specifically, for Arab men, the wage advantage associated with being a majority in the general workforce (Type 3) hold only for stayers but not for newly hired workers. In contrast, Jewish women movers still derive some benefit from working in demographically favorable firms (Type 4), but their wage gains are smaller than those of stayers. These findings imply that the wage value of relational representation is more portable for Jewish women, while for Arab men, it must be accumulated through longer-term presence and legitimacy within the firm.

Discussion and Paths Forward

Workplace diversity is increasingly recognized as vital to organizational and economic success. However, research on the numerical presence of marginalized groups has long been disconnected from organizational studies. While recent work has begun to bridge this gap, empirical findings remain mixed, reflecting competing theoretical perspectives on how workforce composition shapes wage distribution. Moreover, the role of within-workplace hierarchy has been largely overlooked. This study addresses these gaps by analyzing how the placement of marginalized groups within organizational hierarchies affects wage disparities, employing an intersectional framework to uncover nuanced dynamics within workplaces.

The findings demonstrate the pivotal role of conceptually and empirically separating total workforce demography from the composition of high-status positions, as these dimensions affect wages in distinct ways. Increased representation of marginalized groups in high-status positions has a strong positive effect on same-group members in lower-status roles. This supports theories asserting that power is embedded in organizational relationships and that upward group mobility can redistribute rewards (Avent-Holt & Tomaskovic-Devey, 2010; Kanter, 1977; Pfeffer, 1983). The fact that wage advantages are more pronounced among stayers than movers further supports this interpretation, as it suggests that prolonged exposure to favorable relational contexts, rather than simple numerical presence, is key to improving outcomes for marginalized workers. This also aligns with RIT's core suggestion that bargaining is a key mechanism by which marginalized groups improve their standing when the workplace structure allows them to negotiate from a stronger position. It also resonates with Kalev and Deutsch’s (2018) view that diversity in decision-making roles can institutionalize equity practices and transform opportunity structures. In contrast, total workforce representation relates nonlinearly to wages—initial gains give way to stagnation or decline as marginalized group shares grow—consistent with threat theories where dominant groups restrict rewards (Blalock, 1967; Arrow, 1972b).

A central contribution of this study is the development and application of the relational composition measure, which captures the intersection of workforce and leadership representation within workplaces. By simultaneously accounting for both numerical presence and positional power, this measure provides a more precise tool for understanding how organizational demography affects wage inequality. Unlike previous approaches that examine workforce or leadership representation separately, the relational measure identifies distinct demographic regimes, such as when marginalized groups are numerous but lack power or when they hold authority despite being underrepresented.

The findings show that wage effects vary across these regimes and groups: Jewish and Arab women benefit most when their high visibility in the overall workforce is matched by strong presence in decision-making roles. In contrast, Arab men experience wage gains primarily when they hold high-status positions but remain a minority in the general workforce, suggesting that greater visibility may trigger exclusionary responses from majority group members. This backlash likely reflects deep-rooted ethnic cleavage and documented discrimination in Israel's labor market, highlighting structural barriers to equality for Arab men.

Crucially, these nuanced group-specific patterns were not detectable using either the continuous or categorical composition measures. The relational approach thus reveals complex power dynamics within organizations and provides a more nuanced framework for analyzing inequality in stratified workplace settings.

Notably, Arab women are not penalized for being a majority, even without leadership dominance —findings that have important practical implications. As reported in this study, Arab women are concentrated in a small number of integrated workplaces, as a large share are employed in highly segregated local labor markets. Current evidence demonstrates that sorting into workplaces and jobs is a key mechanism in explaining wage disparities (Han & Hermansen, 2024). Therefore, understanding and addressing the mechanisms that sustain labor market segregation is essential for promoting the broader integration of Arab women, in light of the finding that substantial representation of Arab women in mixed workplaces improves their economic standing, even in the absence of positional power.

Taken together, the findings suggest that threat-based theories require refinement to account for how a group's structural positioning shapes the economic effects of representation. They also emphasize the value of an intersectional approach to comprehending wage dynamics, echoing prior research that indicates precarity often intersects with other forms of inequality. For instance, Fuller and Kim (2024) found that male supervisors reduced wage gaps mainly for women in vulnerable positions within specific representation contexts. As precarity intersects with gender (Dowd & Park, 2024) and other social categories, future research would ultimately benefit while incorporating additional class and employment status indicators.

Beyond intra-group dynamics, this paper contributes to the underexplored question of how one marginalized group's representation affects others’ wages. The findings reveal a dual dynamic: Arab men's increased presence appears to suppress wages for both Jewish and Arab women, suggesting competitive pressures. In contrast, Jewish and Arab women often experience mutual wage gains, indicating potential solidarity or shared advantage in specific configurations.

Although our understanding of how organizational demography shapes workplace dynamics is considerably improved by this study, much remains to be clarified about the underlying mechanisms. Qualitative and process-oriented approaches to understand workers’ experiences and perceptions would be especially valuable. Nelson and Johnson's (2024) work, showing how majority-group members react with exclusionary behavior when their symbolic dominance is threatened, exemplifies the process-oriented analyses we need. Understanding how different status groups perceive fairness in pay could also shed light on wage negotiation processes and reward expectations. Emerging evidence suggests these perceptions are shaped by numerical representation within occupations (Valet, 2018), but more organizations-oriented empirical work is needed. Future research should combine organizational data with workers’ experiences, perceptions, and narratives to uncover the processes through which diversity reshapes reward systems.

Conclusions

The study offers both theoretical insights and practical implications. A key conclusion is that ethnic and gender competition over workplace resources must be analyzed within the organizational context of class struggles. In this regard, the results underscore the utility of relational and intersectional approaches. While there is considerable consistency in how workplace demography relates to reward distribution, some effects are group-specific and vary by organizational context—evident, for example, in differences between firms that do and do not employ Arab women. The findings align with the RIT's notion that organizations, shaped by local demographic configurations, embody distinct social meanings and reinforce categorical distinctions in bargaining.

The current study highlights that representation in high-status roles can enhance marginalized groups’ economic outcomes. While prior research links leadership diversity to broader workforce integration (Han & Tomaskovic-Devey 2024), I demonstrate that it is also necessary for improving subordinate groups’ relative wages. Accordingly, the effectiveness of diversity efforts focused solely on numerical representation, without advancing individuals to decision-making roles, should be questioned, as they may not only fail to improve the economic status of marginalized groups but could even worsen it.

Finally, while the relational composition measure presented in the paper proves promising, its full potential warrants further exploration. It captures the intersection of class, ethnicity, and gender; future research should incorporate other categories—such as race, immigration status, and employment precarity —to deepen our understanding of workplace inequality. As labor markets become increasingly diverse, studying organizational demography as a tool of economic dominance becomes more relevant than ever.

Supplemental Material

sj-docx-1-wox-10.1177_07308884251377805 - Supplemental material for The Workplace Dynamics of Wage Inequality: Exploring the Impact of Organizational Demography

Supplemental material, sj-docx-1-wox-10.1177_07308884251377805 for The Workplace Dynamics of Wage Inequality: Exploring the Impact of Organizational Demography by Ludmila Garmash in Work and Occupations

Footnotes

Acknowledgments

The author is grateful to Tali Kristal, Hadas Mandel, and Yitchak Haberfeld for their encouragement and insightful comments. She also appreciates the feedback received on earlier versions of this paper from participants at the Research Committee on Social Stratification and Mobility (RC28) meeting in London in 2022, as well as from colleagues in the Department of Sociology and Anthropology at Tel Aviv University.

The author also thanks the editor and anonymous reviewers for their constructive feedback and the highly professional review process. This research was supported by the Israel Ministry of Innovation, Science & Technology through its support of the Archimedes Center for Applied Systems Analysis.

Data Availability

The data access was provided via on-site use at the Research Data Centre of the Central Bureau of Statistics (CBS). Due to its sensitivity, the data is accessible exclusively at CBS's Research Data Centres.

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Financial support for this project has come from Tali Kristal's European Research Council (ERC) Starting Grant Agreement n. 677739/2015.

European Research Council, (grant number 677739/2015).

ORCID iD

Ludmila Garmash

Supplemental Material

Supplemental material for this article is available online.

Notes

Author Biography

Ludmila Garmash, PhD, is a Postdoctoral Fellow in the Department of Sociology and Anthropology at Tel Aviv University. Her research focuses on labor market stratification, organizational demography, and the intersection of gender, ethnicity, and class in shaping workplace inequality.

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