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Unequal sorting of men and women into higher and lower-wage firms contributes significantly to the gender wage gap according to recent analysis of national labor markets. We confirm the importance of this between-firm gender segregation in wages and examine a second outcome of hours using unique employer–employee data from the service sector. We then examine what explains the relationship between firm gender composition and wages. In contrast to prevailing economic explanations that trace between-firm differences in wages to differences in firm surplus, we find evidence consistent with devaluation and potentially a gender-specific use of “low road” employment strategies.