Why Women MBAs Still Make Less Than Men
Maria |
May 24, 2023

Welcome to our thought-provoking episode of Business Casual! Join hosts John, Maria, and Caroline as they shine a spotlight on the persistent gender wage gap among women pursuing MBA degrees. They will embark on a journey of exploration, delving into the intricate web of societal, cultural, and structural factors that contribute to this disheartening disparity. Through deep analysis and insightful conversations, we aim to understand the root causes behind women MBAs facing lower salaries compared to their male counterparts.

Episode Transcript

[00:00:07.130] – John

Well, hello, everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co hosts Maria Wich Vila and Caroline Diarte Edwards. We just received a report from the Fortuna Admissions, which is taking a look at women in leadership roles after they get the MBA degree. And there’s sort of mixed news here. I mean, there’s on one level, what happened is that Forte found that there’s been an increase in women’s enrollment in MBA programs that we are well aware of and we’ve talked about in the past, and that when it comes to pay, the gap between the genders has, in fact narrowed from 2016 to 2022. But unfortunately, it still persists, and it persists fairly significantly on a number of levels in terms of promotions, leadership roles, obviously compensation. We’ll get into some of the details here and it’s a pretty good study. I mean, the researcher surveyed nearly 1500 MBA alumni and over 60 elite MBA programs and really got a good view of where women are once they get an MBA degree. Maria, what do you make of this?

[00:01:26.460] – Maria

I wish I could say that it was completely shocking to read this result, but unfortunately, it isn’t. It’s funny. I graduated from college 25 years ago. My 25th college reunion is coming up, and I started thinking about how when I graduated in 1998, I went into the workforce completely naive, and I was like, Woah, it’s such a good thing to be a professional woman in today’s world. Not like back in the where women had to deal with sexism. I’m so glad that that’s behind us now. And that lasted all of, what, three days until I had people making inappropriate comments or all kinds of that was just my beginning foray into the wonderful world of sexism in corporate America. And I just think it’s everywhere. I don’t think it was just my particular employer. I think it’s literally everywhere. And so I’m not surprised to see that women are often penalized professionally. I think one of the biggest things that does contribute to the pay gap for professional women is the I think I quipped right before we started recording that the elephant in the room is actually a small seven pound baby that once women decide to have children, even if they have a very willing partner, even if they have gender equity in terms of intended division of labor in the home, a lot of the tasks with child rearing and family management does tend to fall stereotypically, typically to the woman.

[00:02:54.050] – Maria

And then making things even more complicated. Then 15 years, 1015 years later, then we enter what’s called the sandwich generation, which means that we’ve got both younger children at home, and now our parents are ailing, and so they may have health challenges. And again, I just think because there are these are just very deeply embedded systemic prejudices or biases, that the woman is the nurturing one the woman is the one who should take care of the child. The woman is the one who can probably cook better, even though in my relationship that is not the case.

[00:03:24.000] – John

Whoa, wait, that’s not the case in my house, right? Meals.

[00:03:29.110] – Maria

Yes. And I am very fortunate that my husband is amazing, but on average, and he’s way better at cooking, which, thank goodness for all of us. But it’s the truth that a lot of that burden does tend to fall to women and something has got to give, and that something does tend to be their careers.

[00:03:46.730] – John

Yeah, that’s really true. And it’s sad in a way. Before I have Caroline weigh in, I want to just give you some numbers out of the report, and they’re kind of interesting. I mean, what the report showed is that pre MBA, the men were making $83,524, which is pretty good income for a young person in their mid to late 20s before they even get an MBA. And the women were making 76,660. So the gender gap, essentially between men and women was 8.2% 1st job. Post MBA, the gender gap pay differential narrowed from 8.2 to 6.4, but still persisted. Men earned roughly $9,000 more than women. The men were earning 135,000 job out of post MBA and women, 127,000. And obviously this is for a wide range of schools because we know, obviously at the M seven that these numbers are much higher. But I think that they give a really good picture of MBA programs in general. And then what happens is the wage gap really increases substantially a few years after one gets the MBA. So it goes from 6.4% difference to a 17.2% difference when men report making 209,000 a year, and this is basic compensation, and women report making 173,000.

[00:05:27.270] – John

So the difference there after just a few years is $36,000. The difference post MBA was roughly $9,000 and the difference before the MBA was about $7,000. So that’s a big jump. You would think that the MBA did narrow it somewhat, but you would think that that would be a more sustainable advantage, but it turns out not to be. And Caroline, I’m imagining that you share Maria’s views on why that’s so.

[00:06:00.340] – Caroline

Yes, it is sadly unsurprising. And as I mentioned earlier before the podcast, I looked at this data at INSEAD and somewhat similar to what Forte is showing here, we did see that there was a bit of a gap, so slight gap in the salaries of men versus women coming into the program. But what we saw was that there was no gap when they came out of the program. So that’s different to this Forte data. So perhaps INSEAD is a better option for women, but I don’t know how that evolves over time. So I have to qualify that. I don’t know how the trend evolves over time, and I wouldn’t be surprised, honestly, if there is a similar trend for the reasons that have been mentioned so far. So I think it’s a very complex mix of factors with embedded prejudice, right. That we’re inheriting thousands of years of gender prejudice and then it is difficult for mothers, I think, to juggle life in a corporate career with having a small child. And I think that’s particularly true in the US. Maria was mentioning before we started recording that you do not have the advantages in the US.

[00:07:22.140] – Caroline

That you do have in some, at least some European countries where when I had my four children while I was working at INSEAD in France, I benefited from very generous maternity leave, paid maternity leave, which you do not have guaranteed at all in the US. And several benefits. Right. We were given money from the government for having children.

[00:07:48.010] – Maria

Right.

[00:07:48.310] – Caroline

And that was not even me tested. So regardless of how much you earn, we got nice benefits paid to us because we had children. And so it’s much more difficult, I think, in the US. I don’t know. I frankly do not know how people manage to have children here because you don’t get the paid in terms you leave, and you have so little paid vacation.

[00:08:12.260] – Maria

Right.

[00:08:13.170] – Caroline

When I had young children, I was working in France, I had six to seven weeks a year of paid vacation. In the US. You’re lucky if you get two weeks. Well, how are you supposed to manage school vacations with two weeks parental vacation? It just doesn’t work.

[00:08:31.140] – Maria

Right.

[00:08:32.210] – Caroline

And all of the summer camps and so on, they cost an absolute fortune. At least they do here in California.

[00:08:39.820] – John

Yes.

[00:08:40.470] – Caroline

So I’m amazed that people have as many children as they do here in the US.

[00:08:47.130] – Maria

Because I’m not sure I would have.

[00:08:48.910] – Caroline

Done it if I started out having a family here. So I think that there’s a lot that could be done to support families and make it put the structures in place, have much more support for childcare in France. You can send your child to I mean, there’s subsidized nurseries and then there’s free public education from the age of three years old for every child. Right. And it’s so much harder here. I’m not sure that people quite realize how hard up they are in the US. Compared to many other developed countries. It doesn’t have to be like this. There are different ways of doing things that could make it much easier for families. And so it might not solve everything, but I think it could go a long way to making lives for working parents easier, because at the end of the day, if you’ve got two demanding careers, something’s got to give, right? Unless you’re both earning vast sums of money and then you’re outsourcing all of your parental responsibilities. And not everyone wants to do that either.

[00:09:59.360] – John

True. And even if you choose to work, childcare siphons off most of your earnings in this country. So that when you actually sit down and you calculate what you’ve made, the numbers are nothing like what your gross income is on your w two form it’s a fraction because you’re really working for personal growth and fulfillment and not real income when you’re a woman and you have children in this country. Now, one of the things in the past I know Sally Blout, who had been the dean, very distinguished dean at Kellogg School of Management, often said that many women prefer not to enter two of the most lucrative post MBA fields, and that would be finance and consulting, in part because of the demands that the consulting industry places on people for travel. The common sort of timetable is you leave on a Sunday night and you come back on Thursday and you spend Friday in your local office, but you’re essentially away for five nights a week. And then investment banking, where we know the demands on you, are, frankly, unrealistic. It is a client service business, and people routinely work 80 hours a week in it.

[00:11:19.320] – John

It’s a young person’s game, pretty much, unless you really are wanting to stay and deal with that and become a partner. And Sally’s point was that more women need to go into these two fields, but these two fields are so demanding and so unforgivable in terms of the time that’s consumed by the roles that people play in them that I would think that makes it very difficult for women to take these jobs. Maria, comments well, I think that’s why.

[00:11:52.310] – Maria

We end up seeing women who do pursue those fields immediately after business school end up being, quote unquote, mommy tracked, where they end up working in recruiting or professional development or something that isn’t client facing, something that is more a support role within the organization. Now I’m hoping. I do think that several of the firms are trying to create more on ramp programs so that a woman can sort of step aside or step away from the very intense day to day client facing work. Maybe take more of a support role for a few years and then get back into being a consultant later. But it’s tough, right? It’s a competitive field. It’s not as competitive to get those jobs, which is what I think most of the listeners here who are applying to business school, they’re more focused on getting the job. But then once you get the job, you have to do well in the job. You have to keep getting promoted in a highly competitive it’s not just highly competitive to get a job in a bank or consulting firm, but once you’re there, it’s highly competitive to get that next coveted spot.

[00:12:47.680] – Maria

And so if you’re like, well, I haven’t really worked in front of a client for five years, but I want to be on the partner track. I don’t know how that doesn’t really go over well. Those are five years. Let’s just say it’s five years. Those are five years where you’re not building those client relationships and therefore you can’t become the rainmaker later who brings in that big project. And then that’s all those dominoes that need to fall into place for someone to become a partner or managing director, even if the person is still employed at the firm, those dominoes are not being set up for them in the same way right now.

[00:13:20.820] – John

And Caroline, you chose consulting after you got your MBA at INSEAD initially. What was that like for you?

[00:13:27.990] – Caroline

Actually, I was a management consultant before I went to business school.

[00:13:31.060] – John

Oh, that’s right.

[00:13:31.970] – Caroline

And then I worked for the World Bank. So I do think that the travel can make a big difference and I wonder now if things may change a bit. We learned during the Pandemic to do so many more things online than we did before. And I do see some people who are traveling, friends and acquaintances who used to travel much more pre Pandemic, who have learnt to dial that back and are traveling less now and are still able to do their jobs just as efficiently. People have realized that you don’t necessarily have to always be face to face to get everything done. So I do wonder if perhaps things may change a bit and travel may be less a requirement and perhaps that sort of grueling schedule that you described, John, may be less the norm. I don’t know. Of course, when you’re client facing, you don’t get much of a choice about how things about your own schedule. It’s more when you get to the more senior levels, when you can decide if you’re going to travel or not. And by then it may be too late. You might not have got to that senior level.

[00:14:38.890] – Maria

Right.

[00:14:39.130] – Caroline

If you haven’t been through all that, through all of those years of travel beforehand. So it’s tricky. But I do hope that with increased use of virtual communications, that might perhaps favor women and make it easier for women to get their hands on responsibilities, that might have been more difficult in the past.

[00:14:58.450] – John

Right? I think one of the things about this report that’s very interesting is the detail in it. For example, the study found that women MBAs are less likely to be promoted. They averaged 1.8 promotions post MBA by the time they were responding to this survey, compared to men who averaged 2.2 promotions. Minority women incidentally, averaged only 1.5 promotions. Women have on average 1.1 fewer direct reports than men do. Women were much more likely to cite a lack of female leaders or role models and a lack of confidence. More women also pointed to leadership barriers, such as a lack of formal or informal sponsorship in the organization and their own hesitancy to share their ambition with leaders. Also, there was this other interesting thing that more women than men are looking at mid management levels of manager through director. More men than women. Aspire to partner clevel executive President, CEO and Owner which goes to the point that both Maria and Caroline are making in regards to how if you want a family and have children, the burden falls on you. And that affects also your aspirations at work, which then leads to even a bigger pay gap as a result.

[00:16:23.450] – John

On the other hand, let me just try to put a more positive spin on some of this at least. The increase in pay once you get your MBA, if you’re a woman, is roughly the same as a man. In fact, it was 65% versus increase for men with 62%. Also, interestingly enough, minority women had a salary gain of 57% lower than both white men and women. Non minority women had a 68% pay jump compared to that 57%, which is, again, that’s another issue here. If you’re an underrepresented minority, it looks like the gender pay gap is even greater for you than it is for a white woman. But on the other hand, I think this is such a good study that it does call more attention to the fact that companies need to do more to give women who they hire more support, more mentorship, more acceptance, and value them in a way that gives them the kind of responsibilities that’s going to lead to more promotion and more money. That’s clearly to me, the message that comes from this report. Caroline, what do you think a company looking at this report might make of it?

[00:17:45.580] – Caroline

Well, it’s a very complex issue and I don’t think any individual company can resolve it. But I think everyone needs to take some personal leadership here. So companies and business schools and government, it needs everyone to be pulling in the same direction, to really make a big difference and hopefully we are moving in a positive direction, but I don’t know.

[00:18:13.310] – Maria

Right.

[00:18:13.550] – Caroline

It’d be interesting to see what this data would have been 1020 years ago and whether there is a positive trend or not. But there is still an ongoing issue with feeling levels of management being male dominated. And it’s not an issue we have at junior levels. We have plenty of talented young women coming into the workforce. Business schools have done a pretty good job of attracting an increasing number of women to get an MBA. And in fact, if you look at college graduation stats, it’s very female dominated now, isn’t it? Switched, right. It used to be absolutely 40, 50 years ago. It used to be that men were in the majority and now that’s completely flipped it’s now women are in the majority. And so it’s not an issue with talented women coming into the workforce. And so companies need to look at the incremental biases that are affecting women over time. And I think, as you talked about, those careers that perhaps women are opting out of because of those 80 hours work weeks and because of those grueling travel schedules. I mean, to me, that smacks are quite a sort of macho work culture and is it really necessary to work those kind of hours?

[00:19:44.170] – Caroline

Or is that FaceTime is that sort of kind of proving a point that I can do it, I’m the toughest guy here, I can do I can pull the all nighter. To me, I don’t think that that’s necessarily about performance and results. That’s more about sort of beating my chest that I’m the hardest worker in the office and I’m proving to the boss that I can work the longest hours. And that’s probably a culture that appeals more to men than to women. And companies need to I think there’s a lot that they could do to address those practices, which are probably more likely to attract men than to attract women in the first place.

[00:20:33.370] – John

Yeah, that’s true. Maria, I wonder if you when you got out of Harvard, if you felt that pressure to be there all the time, to put in all those hours to try to match the men who were recruited alongside you.

[00:20:49.310] – Maria

I think I was working more than they were, probably it was at a startup and I was really committed to the startup success, so I was working a ton of hours. I just want to quickly point out, as a side note, and John, you brought this up when we were sort of pregame chatting before we started recording that this isn’t just about political correctness and performative wokeness. Study after study shows that women led companies tend to have better return on capital. Women led funds tend to do better. Women led teams tend to be less dysfunctional or have more healthy dynamics. So this isn’t just about like, well, let’s just pick an arbitrary statistic and put the flag down that it has to be gender gender equality. I mean, the data show that women led businesses or business units or business teams tend to outperform. So it is in everyone’s best interest that talented women are given these opportunities. Just now, Caroline, we were just talking about what can businesses be doing differently? But it really is such a big issue, as Caroline said, that it’s a little bit like I mean, I think some of it is like, hey, if you get mommy tracked, we’re not necessarily going to penalize you for that.

[00:22:07.160] – Maria

But I think it goes much deeper than that. I read in one of the articles that some of the suggestions were, well, let’s have more cases with female protagonists, or let’s have more male allies. And that’s all great, but that’s very indirect. As I was reflecting getting ready for today’s podcast, I was thinking, like, what would have been most useful for me? And I think for me, almost like a mini course or a workshop on the realities of things, because I don’t know that in business school. And maybe this is just my memory being wonky, which is very, very likely, but I don’t remember anyone ever pulling me aside and being like, look, it’s still going to be really sexist out there. Even a very pragmatic thing that I did not at all take into consideration. I went into work for startups after business school. I was working in the tech sector, and I didn’t realize, because it didn’t occur to me to ask her to look into this, that smaller companies do not have the same requirements to adhere to things like maternity leave and family leave offerings. So a very small company, if someone would have pulled me aside and been like, look, if you want to start a family one day, you should probably work at a bigger company because they will have things like maternity benefits.

[00:23:18.400] – Maria

They will have health insurance. That’s going to be really good. They might have for people who might have fertility issues, larger companies tend to have their health insurance plans, tend to cover fertility benefits. So there are all these very pragmatic things that I wish someone would have that I think business schools could have pulled people aside because I think it’s great. Look, I love where gender parity or almost gender parity, a lot of business schools, companies are doing more. That’s all great. It’s great to get more male allies involved. Yes, we definitely need the male allies involved, but on a pragmatic level, until those changes kind of ripple through the system, I also think we’re doing women a disservice by perhaps pretending that some of these issues aren’t really there or kind of glossing over them and therefore people are graduating. Fresh face and optimistic real life hits, and it’s like a ton of bricks. It’s like the anvil on the Wily coyote’s head of the reality of it all.

[00:24:15.700] – John

Yes, well, that’s very true. And I wonder too, if in fact this is probably going to be a controversial question, but I’m going to ask it nonetheless. If you graduate from a top 25 school, right, not a second tier school, are you more likely, less likely to see a gap? And here’s why I asked this, because the McKinsey Bain BCGS, they’re not paying women less than men when they hire them, and neither would Goldman Sachs or J. P. Morgan or Morgan Stanley or Microsoft, Apple or Google. And yet even this survey shows that there is a difference in pay between men and women even right after graduation. And I wonder if that’s a function of the companies that don’t have all the greatest resources and don’t have all the money and aren’t the glamour companies. And it may be that the pay differential in those types of companies or jobs is greater than at the elite level that we more often than not talk about. Caroline, do you think there’s anything to that or am I just trying to get into a can of worms here?

[00:25:31.290] – Caroline

Yeah, I don’t know. Or is it that or is it that men are more likely to go into those finance private equity jobs with a super high salaries, and women are perhaps not going into those. I don’t know whether it’s the difference in positions and companies or whether there are actually substantial differences within companies for similar positions. I don’t know. I suspect that the gender pay gap reflects some differences in career path and positions that the women have versus the men.

[00:26:13.190] – John

Yeah, one of the points in the studies is that men are more likely than women to hold line jobs, which come with profit and loss responsibility and higher pay than women at at a pace of 47% to 42%. So not a big difference, but a difference nonetheless. And obviously, the mean compensation for a line role was about 207,000, and for a staff role, it was more like 181. So there is some of that. But even when women do hold line roles, incidentally, they still earn less than men anyway. The study found that women earn an average of about $34,000 less than men even in line rolls. So there’s still a problem, obviously, and I don’t know, it’s something that’s not going to go away. But I think as more women are in MBA programs today and will have positions of responsibility and power and leadership, I’m hopeful that they’ll help to change things by getting companies to pay for child support so that women can actually come to work and not worry about their children and how their children are faring at home and not siphoning off half or more of their pay to take care of their kids, which is a big problem.

[00:27:37.140] – John

I think a lot of women don’t go back to the workforce because just the economics of it just do not work in this country for many women. And it’s a real sacrifice that you have to make, particularly if you don’t have a mom, a grandparent nearby who would gladly care for your children when you’re at work and be totally supportive and enthusiastic about you’re wanting to have a fulfilled professional career. So for all of you out there, we’re hoping that someday we’ll see this gender gap truly narrow. If you want to read about the study, it’s on the Poets and Quant site. It’s called New Forte Study. MBA boosts wages for women and minorities. But gender pay gap persists. Caroline, you make a really good point about how Europe treats women so differently with children than in the United States, and how it’s much more conducive to encourage women to go back to work. I wonder if you ever could foresee some of that happening in the US.

[00:28:43.590] – Caroline

Well, there’s a very long way to go, right? I mean, I think it might happen sorry, going to happen on a state by state basis. I think getting some federal laws through that would be more aligned with European regulation could be very difficult in this country. But honestly, the gap is just so enormous. When I think back, I had such generous maternity leave. Our nanny you were talking about the cost of childcare. I think we had tax deductions for the nanny. We got benefits from the government because we had children. I mean, it was just one thing after the other. It made so much difference to me. It’s astonishing how little support there is in this country. And I’m amazed that the birth rate is as high as it is, quite frankly, given how little support there is here for families. Hey, any progress would be great. Progress, right? So there’s a lot of progress we made that, I think, at least on a state by state basis. If we could start making some progress, that would be wonderful.

[00:29:51.070] – John

Very true. And I say if there’s a miracle in life, it’s the miracle of birth. I don’t think there’s any other real miracle in life. And maybe that’s the reason why so many people want children, even in the United States, where the government policies might not be too friendly to parents and children. All right. This is John Byrne with Poets and Quants. You’ve been listening to Business Casual.

Why Women MBAs Still Make Less Than Men
Maria |
May 24, 2023

Maria

New around here? I’m an HBS graduate and a proud member (and former Board Member) of AIGAC. I considered opening a high-end boutique admissions consulting firm, but I wanted to make high-quality admissions advice accessible to all, so I “scaled myself” by creating ApplicantLab. ApplicantLab provides the SAME advice as high-end consultants at a much more affordable price. Read our rave reviews on GMATClub, and check out our free trial (no credit card required) today!