The disability pay gap: distinguishing between within-firm inequality and worker allocation across firms

This article provides the first decomposition of the extent to which the UK disability pay gap is a consequence of within-firm inequality and the allocation of workers across firms. We use linked employer–employee data which matches high-quality information from employer payroll records to Census data on disability. Our findings indicate that the distribution of disabled and non-disabled employees across firms acts to reinforce within-firm disability-related pay inequality. However, both the raw and unexplained disability pay gap predominately exist within rather than between firms. The finding that the disability pay gap is driven primarily by within-firm wage-setting provides support for the introduction of employer-level disability pay gap reporting in the UK.