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Even an MBA may not save women from gender pay gap

Gender pay gap for women after MBA
On a Tuesday every April (on April 4 in 2017), fair-pay activists gather all over the US for “Equal Pay Day” to raise awareness about gender pay gap. A day in April was selected to symbolize how many additional months women have to work into the new year to earn the same pay that men earned the previous year. The campaign was initiated by the National Committee on Pay Equity in the US in 1996.

Studies have found that a significant pay gap exists between men and women, when all workers across the board are taken into account. Researchers say that a woman worker in the US earns only 76 cents (different studies quote slightly different figures) to every dollar that a man takes home, or 24 percent less, according to PayScale’s report “Inside the Gender Pay Gap.” But research also suggests that when certain variables such as choice of profession and working hours are taken into account, the wage gap is 5-7 percent.

Big or small, a gender wage gap does exist, even among specialist professionals. A GMAC (Graduate Management Admission Council) study in 2016 found that women MBAs earned $400,000 less than their male counterparts over 20 years after their graduation.

The study, which involved 14,000 b-school graduates, revealed that the salary gap was smallest in the first few years after graduation, when graduates worked entry-level jobs. The gap increased as the MBAs’ careers progressed, and was the widest when they reached executive positions, when women earned 80 cents to each dollar a man earned, or annually about $165,000 to men’s $205,000, on average. Clearly, they may have made more thanks to their MBA, but they were unable to wipe out the substantial pay gap even with the degree.

A 2015 Bloomberg survey of MBAs who graduated between 2007 and 2009 found that female MBAs took home $98,000 and male MBAs $105,000 upon graduation. But by 2014, the men got $175,000 and the women only $140,000. The pay gap existed among individuals from the same industries, job functions, and even graduates of the same business school.

Surprisingly, big gender pay gaps are also found among elite-b-school graduates. Women who graduated from the Columbia Business School during 2007-09 earned a median pay of $170,000 in 2014, 2.7 times their pre-MBA salary, while men made $270,000, four times their pre-MBA compensation. The main reason for the difference was the big year-end bonuses that men got.

Choice of sectors

One explanation for the gender pay gap is a bias against women workers, with employers considering work done by them as being of lower value—researchers have found that pure discrimination may account for 38 percent of the wage gap. But there are other reasons, too. The Bloomberg survey, which received responses from 2,500 companies, found that more men chose better-paying sectors more than women. Among the alums surveyed, 43 percent of men worked in the five most lucrative industries, including real estate and consulting, against 32 percent of women.

In the top-paying industries, the wage gap was significant. In finance, women earned a median of $53,200 less than men. Women in marketing at one bank earned $7,000 less, and women in investment banking earned a whopping $115,000 less. Roles and outcomes also seem to reveal a gender gap: women MBAs managed fewer people (three, against five by men) and were less happy with their career progress than men.

The gender wage gap is prevalent across businesses. Even top MBA employers such as Google wrote lighter pay checks to women. Google paid the 21 female MBAs surveyed $36,000 less than the 68 male alums, on average. The 14 women MBAs surveyed at the Bank of America made an average of $61,000 less than the 81 men at the company. The nine women MBAs polled at McKinsey earned $100,000 less than the 47 men at the firm.

But at Deloitte, which has programs that encourage mothers to remain in the workforce, women were paid $169,000, $4,000 more, on average, than the 65 men at the firm.

In 2009, three economists surveyed 2,500 of the alumni of the Chicago Booth School of Business who graduated between 1990 and 2006. These researchers asked them about their jobs since graduation, the number of hours they worked, where they worked, and the salaries they earned. Their objective was to study how gender affected their careers.

Marianne Bertrand, an economist at the University of Chicago who led the study, said that MBAs were made the focus because women seemed to have a particularly difficult journey to the top echelons of the corporate world. Just after graduation, the difference between male and female MBAs was not too big—$130,000 to $115,000—which could be put to the men having more work experience and working longer hours. But about nine years into their careers, the median average salary for women was $250,000 and for men $400,000—60 percent higher.

More hours, more pay

One of the researchers, Claudia Goldin, an economist at Harvard University, explained a subtle reason for the gender pay gap, speaking at a conference in 2014: the highest-paying jobs disproportionately compensated people who could work longer and do less flexible hours. But because women tended to shoulder most of the caregiving responsibilities at home more often, they were unable to work longer hours or do less flexible hours, thus foregoing higher salaries and widening the wage gap. Industries with larger wage gaps tend to penalize employees who take a break of a year or more, for example, for managing parental duties.

No wonder then that the wage gap is bigger for MBA women with children than for MBA women without children. The wage gap for women MBAs with kids is as high as 45 percent and those without kids as small as 15 percent, according to the study of Booth graduates. Companies also penalized

Wage gap affects women according to their ages, educational levels, and occupation choices. For example, women in their 30s suffer significantly bigger gender wage gaps compared with women in their 20s. The business sectors have larger wage gaps compared with tech and science industries. In the financial and insurance sectors, women make 29 percent less than men. Women draw 7 percent less than men when all job titles in the business and support services sectors are considered.

‘Opportunity gap’

But PayScale researchers call the pay gap of around 25 percent the “raw,” or “uncontrolled,” gender pay gap, a figure that is based on the median pay of all men and women, regardless of job type or seniority. They say it is pointer to a “gap in opportunity” between men and women. The gap becomes much smaller when men and women who hold the same jobs are compared (the “controlled gender pay gap”). In the US, the controlled gender pay gap, where men and women who have the same job title, job level, and years of work experience are compared, is just 2 cents. That is women earn 98 cents to each dollar that comparable male workers earn.

The opportunity gap is one of the main reasons that PayScale cites for the gap in earnings. Its data shows that men and women start their careers at similar job levels as individual contributor levels and move into supervisor-level roles such as manager and later into director-level and executive-level roles. But a higher rate of men more than women appear to advance to these higher posts.

Men are 85 percent more likely than women to be VPs or C-level executives and 171 percent more likely to hold such positions by mid-career. But by the time they are 60 years old, more than 60 percent of women continue to hold individual contributor level jobs whereas only 45 percent of men work at these levels at the same age. Workers in higher positions are likely to earn higher salaries, and therefore fewer women in higher posts would pull down the average wage of women below that of men.

Salary negotiation

Another reason, though a marginal one, for the gender wage gap is supposedly that women may be poor at negotiating their salaries. According to research by Carnegie Mellon University and Harvard Kennedy School, women tend to think that asking for a realistic raise, rather than a raise they feel they deserve, is a good idea. Therefore, they ask for smaller raises and get what they asked for. Also, some hiring managers are biased against women who assert themselves to ask for the salary they think they deserve.

In the book Women Don’t Ask, the authors Linda Babcock and Sara Laschever say that a study of MBA graduates from a top b-school in the US found that men negotiated an average salary increase of 4.3 percent above their initial offers while women managed only a 2.7 percent increase. Over the course of a career, if women continued to make salary-raise requests at the same level, they would make very much less than men.

Perception of bias

The more educated a woman is the more likely she is to be sensitive to the effect of gender bias in a promotion or a raise, according to the PayScale report. While 36 percent of female MBAs and 32 percent of women doctorates thought they suffered on this count, only 13 percent women with high-school degrees thought so. Only 5 percent of male MBAs felt they had suffered. Overall, 18 percent of women and 3 percent of men thought they had been denied a raise or a promotion because of their gender.

PayScale found out the perception of male and female workers about whether their employers are addressing the salary gap problem. About 17 percent of men believed that there was an issue and their employer was addressing it, while 10 percent of women believed so.

Higher the education level of female workers the less they were likely to be satisfied with how their employers were addressing the issue. While 37 percent of women MBAs and 36 percent of female PhDs were dissatisfied, only 24 percent women with a high-school degree were unhappy. Male MBAs and PhDs were most likely than other workers to be happy with their employers on this score, with 35 percent and 37 percent expressing satisfaction.

But, surprisingly, male workers of all backgrounds were more likely to leave their current jobs (74 percent) than women (71 percent) if they thought that their employers were not taking action to address the gender wage gap.

Slow progress

In the World Economic Forum’s Global Gender Gap Index 2016 of 144 nations, Iceland, Finland, Norway, Sweden, and Rwanda make up the top five that have the narrowest wage gaps. Germany secures rank 13, UK 20, Canada 35, US 45, Australia 46, and UAE 124. India is ranked 87th.

In no country in the world do women earn more than men, reports Business Insider. Globally, between 2011 and 2014, women earned $76 to every $100 that men made.

In India, the gender way gap was 27 percent, with men earning an average gross hourly salary of Rs. 289 and women Rs. 208. Sector-wise, the gap was highest in manufacturing (34.9 percent), IT services (34 percent), and banking and finance, transport, logistics, and communication (all 17.7 percent), according to a survey by Monster India reported in The Hindu in May 2016.

In the US, women’s earnings have caught up with men’s wages considerably since the 1980s, though the gains have been more for female blue-collar than white-collar workers. Today, the gender wage gap has become a largely white-collar phenomenon, according to The Wall Street Journal.

Women’s groups and top politicians focusing on the gender wage gap have demanded legislation for further government intervention in employee-employer relationship, such as the proposed Paycheck Fairness Act. However, Donald Trump’s assertion, “You’re gonna make the same if you do as good a job,” may take years to be realized. According to the American Association of University Women, gender pay parity will perhaps dawn only by 2152.

Apples and oranges?

The findings of a substantial gender wage gap have been debunked by some analysts, points out a Forbes story. It refers to a 2013 article in Slate, by Hannah Rosin, author of The End of Men, who feels that saying that women are earning only 77 cents to a dollar that men earn gives the impression that a man and a woman standing next to each other doing the same job and working the same number of hours get paid different salaries. “That’s not at all the case,” Rosin writes. “Full time” officially means 35 hours a week, and we may be comparing the wage that men earn working 40 hours a week to women working 35 hours a week.

‘Earning gap, not wage gap’

A video by Professor Christina Hoff Sommers of the American Enterprise Institute for Prager University says that is an “earning gap” rather than a “gender wage gap.” She opens her video with a question: If businesses could get the same work out of women for less money than they would have to pay a man, then why would businesses ever hire men?

She points out that women’s median earnings of 77-cents-to-a-dollar statistic is arrived at by dividing the median earnings of all women working full time by the median earnings of all men working full time. This piece of data doesn’t take into account occupation, position, education, or weekly hours worked.

Sommers refers to a study by the American Association of University Women that found that when all these factors are taken into account, the actual wage gap falls to 6.6 cents. The US Department of Labor studied about 50-peer reviewed papers to conclude that a “big wage gap” may be “almost entirely the result of individual choices,” Sommers says.

She cites a Georgetown University study to show that the five best-paying university majors are packed with male students and the low-paying ones with women students. But how come men and women workers in the same field draw different salaries? For example, why do male nurses earn 18 percent more than female nurses on average?

The reason seems to be that male nurses go for better qualifications and the best-paying nursing specialties, they work longer hours, and they are willing to relocate to cities where their salaries would be higher. The Department of Labor has found that the unexplained gender wage gap could be only between 4.8 percent and 7 percent, Sommers says.

She says that this might be about career choices and the number of hours one might be doing at work. Generally, men seek out well-paying industries and work more hours, while women tend to gravitate toward less-paying careers.

Companies tend to pay more to a professional who is willing to be on call than to one who can only work regular hours. “This isn’t sexism, it’s just common sense,” she concludes.
Also read:
How business schools are luring female applicants
Women in investment banking on Wall Street getting a raw deal
Women candidates twice as likely to get selected for STEM jobs in universities

References: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 | Image for representation only: Credit IESE

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2 thoughts on “Even an MBA may not save women from gender pay gap”

  1. Hi Sameer,
    I am currently working as a Program Manager in one of the most leading NGO. I also have a CGPA of 9.07. During my stint as a Program Manager, I have also consulted with development and strategy of Grass root level organization. I am a female with 4 years of work experience in the Development sector. I want to apply for Harvard, Columbia, Yale and Tuck. In the long run, I want to work with public sector consultant particularly with the government. I am thinking of applying in 2018 after working with a consultancy firm(mostly on public sector consulting). What else could I do to make my profile stronger?

    • Good going so far, Piyali. Apart from the obvious steps like aiming for a high GMAT score, here’s what you can do.

      The level and scale of problems you will be tackling after your MBA will be possibly at a very different level. Think about how you will tackle that challenge.

      It isn’t obvious from your message if you have the public sector consulting role in hand, and how much time will you spend in it before you apply. There could be a range of questions that can come up based on your response.

      One of them being on the timing front, why not work for a few years more in the new job so you get enough time to build the necessary new skills as well as show impact in the new role.


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