Women MBAs - Why do they lag behind the Men Counterparts?

Recently I read a Wall Street Journal article titled “Women MBAs Continue to Lag in Pay, Promotions”.

The article is based on the “Pipeline’s broken promise” research by Christine Silva published in Catalyst, a New York City-based nonprofit focused on women in the workplace,  and argues that despite having similar educational backgrounds and experience, female MBA holders are still not getting the same pay, positions, or promotions as their male colleagues.

Study
The study, which had more than 9,000 respondents who graduated from 26 MBA programs between 1996 and 2007, found that starting from the first job post-MBA women lagged behind male respondents. For example, 60% of women respondents reported that their first job was at an entry-level position, as opposed to 46% of male respondents.

First Salary:Women also earned an average $4,600 less than men in their first job, even if they had the same amount of previous work experience, the study found.

According to the article, Ilene Lang, president and chief executive officer of Catalyst, attributes the disparity to something she calls “bad first boss syndrome.” The experience sours the potential for raises and promotions later on, Ms. Lang says.

“From the start, women start in lower positions, and they aren’t getting the right support from their management,” the study results indicate, she says.

Ann Bartel, an economics professor at Columbia Business School who studies labor economics and human resource management, says women may lag behind men for two reasons. In some cases, companies anticipate female employees will have children and do not include them in succession planning. The other reason is not driven by corporations, but rather by women themselves, who, anticipating the time commitment of a potential family do not lobby hard for plum positions.

Despite potential bias toward working mothers, Ms. Lang says the results showed no real difference for women without children. The study also found that men were twice as likely to be a CEO or senior executive in their current job.

ZoomInterviews sought to understand this phenomenon deeper and took a look at additional research explaining reasons for women’s lag in pay.

“Dynamics of the Gender Gap for Young Professionals in the Corporate and Financial Sectors,” research paper published in January 2009 by Marianne Bertrand (University of Chicago), Claudia Goldin (Harvard) and Lawrence F. Katz (Harvard) provides excellent analysis of how career dynamics differ by gender. The paper assesses the relative importance of various explanations for the gender gap in career outcomes for highly-educated workers in the U.S. corporate and financial sectors. The careers of MBAs, who graduated between 1990 and 2006 from top U.S. business schools, were studied to understand gender differences in this respect.

The research states that although male and female MBAs have nearly identical labor incomes at the outset of their careers, their earnings soon diverge. The research identified three proximate factors that explain the vast majority of the large and rising gender gap in earnings: differences in training prior to MBA graduation; differences in career interruptions; and differences in weekly hours. The presence of children is the main contributor to the reduced job experience, greater career discontinuity and shorter work hours for female MBAs. Across the first 15 years following the MBA, women with children have about an eight month deficit in actual post-MBA experience compared with the average man, while woman without children have a 1.5 month deficit. Similarly women with children typically work 24 percent fewer weekly hours than the average male; women without children work only 3.3 percent fewer hours.

The careers of MBA mothers slow down substantially within a few years following the birth of their first child. This contrasts with almost no decline in labor force participation and only a modest decline in hours worked in the two years leading up to having their first child.

The share of female professionals not employed also rises substantially in the decade following MBA completion, with 13 percent of women not working at all nine years after completing their MBA as compared with 1 percent of the men.

Although hours of work are long for most MBAs, a substantial share of MBA women work part-time. The incidence of part-time work among employed MBA women increases with years since graduation, from 5 percent during the first year to 22 percent at 10 to 16 years out.

The reason such a large share of MBA women 10 to 16 years out can work part-time is because they are self-employed. In fact, of the 20 percent who are self employed at 10 to 16 years out, 57 percent work part-time. When MBA women want to work part-time, they disproportionately employ themselves.

Mean earnings by sex are comparable directly after receiving an MBA, but they soon diverge. Women earn $115K on average at graduation and $250K nine years out; men earn $130K on average at graduation and $400K nine years out. The median female MBA starts her career at the 34th percentile of the male distribution but after 15 years falls to the 19th percentile.

The effect of motherhood on the likelihood that a woman is not working is more than twice as large if the woman has a spouse with high-earning power versus a spouse with lower earning power.

These mothers are 30% less likely to work than the average man. Mothers with a medium-earning spouse also work less than those with a lower-earning spouse, but the difference is smaller and not statistically significant. Similarly, mothers with high-earning spouses spend an additional six-plus months in non-employment than mothers with low-earning spouses following the completion of their MBA completion and, even when employed, have a workweek that is shorter than mothers with low-earning spouses.

What motivates mothers to choose their current job largely differs from what motivated them before they had children. Post-birth, women are 20 to 26% more likely to be in a job chosen for family-related reasons than in the pre-birth base period, and 13 to 21%  less likely to have chosen their job for career-related reasons.  These changes in career orientation are not limited to when their children are infants but persist five or more years after the first birth.

The results presented in the “Dynamics of the Gender Gap for Young Professionals in the Corporate and Financial Sectors” paper significantly contradict the Catalyst’s arguments that there is no real difference in what? for women without children and that corporations discriminate women MBAs because of gender reasons. While Ms. Lang states that “bad first boss syndrome which sours the potential for raises and promotions later on”, is the reason for the gap,  the “Dynamics of the Gender Gap for Young Professionals in the Corporate and Financial Sectors” paper attributes the lower pay and promotion of female MBAs to motherhood.

It’s also a well known fact that all MBA graduates start their career with the same standard salaries and the argument that female MBA graduates start with lower salaries is not valid. The finding that women earned an average $4,600 less than men in their first job, even if they had the same amount of previous work experience is explained by the fact that on average women choose post-MBA careers which allow for better work life balance (i.e. jobs in marketing and corporate positions versus high demanding finance and investment banking jobs) and which historically pay less.

We hope that female MBA candidates will find this information interesting and that it will provide them with some additional facts about their career perspectives than that presented in the Wall Street Journal article.

There is a big difference in explaining the pay gap by deliberate discriminates against women on the part of corporations versus as a woman’s conscious choice to have a family, to become a mother and to reduce her work load. We think that it is important to present different views on this much debated topic and hope that women choosing to pursue their MBA will make that choice based on facts and not on biased statements which may discourage them from taking that next step in their career.

In the end we would like to mention a particularly fitting post from a female top MBA graduate on the New York Times’ Freakonomics blog, based on best-selling author Steven Levitt’s book by the same name:

“This is a strange twist. Many of the best and brightest women in the U.S. get an MBA so they can earn high wages, but they end up marrying the best and brightest men, who also earn high wages — which affords these women the luxury of not having to work so much. … Perhaps they never would have met such husbands if they hadn’t gone to business school.”

Many of us — here’s the surprise — got our MBAs precisely because we wanted to have children and work, and we knew we wouldn’t be able to recover from the economic hit nearly as well unless we had an MBA to accelerate us back up the speed ramp when we re-entered the workforce post-child-raising! In fact, one could argue that having an MBA helps on the pregnancy end too, with presumably higher skills and therefore occasionally higher leverage to negotiate a better childcare leave than we might have otherwise.

I was raised in the 1970s, with the expectation from the feminist movement that I would work, in addition to the expectation from my mother’s own modeling that I would mother. Many of my well-educated friends with advanced degrees have stepped down to part-time work during their child-raising years. And it will be extremely interesting to see what we do as our kids get to college and out of the nest. I can only speak for myself: I dropped down to part-time when my oldest was born. I have further dropped back to a sole-practitioner consultancy for the flexibility. Some days it feels like I have only my little toenail in the workforce, but nonetheless it is there. And I feel more confident that I will be able to ramp back up in whatever capacity I choose once my kids have left — because I have the MBA qualification and resulting experience. The degree has enabled me to have credentials as a consultant and I will build on those as I re-enter the workforce.