The Earnings Effect of Sexual Orientation: British Evidence from Worker‐Firm Matched Data

Using the British Workplace Employment Relations Study (WERS) with its preferred self‐identified measure of sexual orientation as well as its organizational‐level variables, we find that gay men earn about the same as heterosexual men and lesbians earn significantly more than heterosexual women. Working in an organization with a diversity and equity management (DEM) policy generally has a positive effect on the earnings of gay men and lesbians, especially if they are single. Implications for theories of diversity management, discrimination and market versus household production are discussed.