The MBA Gender Pay Gap? $14K In Year One

The original TransparentMBA team. Pictured from left to right are Jeremy Selbst, Mitch Kirby, Alyssa Jaffee and Kevin Marvinac. Courtesy photo

Kirby then calculated the wage gap, a compensation index, and a female representation index by analyzing the “relative proportion of men and women, their average compensation, and the average compensation for that function as a whole” for each job function. “For the female representation index,” Kirby wrote, “a score of 100 would mean that women are equally represented relative to their overall prevalence in our data set.” A score of 150, for example, would mean women are represented at 50% more than men. The inverse would be a score of 50.

JOBS WHERE WOMEN UNDER-REPRESENTED PAY MORE

Private equity and venture capital stand out as functions where women are very under-represented. Meanwhile, human resources, marketing, and project management roles all have higher representation of women. Still, according to Kirby’s analysis, in order for role choice to play a large role in the wage gap, there must also be a specific pay difference in roles.

“Now, for this difference in role choice to drive the wage gap, the jobs in which women are under-represented must pay more on average, and vice-versa,” Kirby wrote.

And that’s exactly what they found. But, Kirby continued, after running multiple regressions, “roughly $4.5K of the gap was driven by this difference in job function choice, or about 33% of the total.”

‘SIGNIFICANT DIFFERENCE’ IN PAY

To go even further still, Kirby honed in on consulting, because of its “notoriously standardized compensation packages.” Yet, in the data, there was still a wage gap of more than $12,000. How could this be? First, Kirby posited, there could be a difference in positions and titles of roles men and women go into. So he decided to compare titles in consulting and investment management. In investment management, female associated reported making $144,000 in total compensation, while men made $158,813.

No women reported being an analyst in investment management, but the men that did reported a whopping average total compensation package of $334,598.

“For the exact same job title in the exact same job function, there was still a significant difference in total compensation,” Kirby concluded of investment management.

LARGER GAPS THAN EXPECTED IN CONSULTING

And for consulting?

“Within consulting, both genders were hired into the same exact roles, but again there were striking differences in compensation, with men making more,” Kirby wrote.

Indeed, women taking consultant titles earned on average, $184,962 in total compensation and men earned $198,932. For associates in consulting, the gap widened. Women reported a lower amount of $173,188 while men increased their total compensation to $199,390.

“After further analysis, it appears that hiring MBA students into different roles was fairly localized to Investment Management, both because of the scale at which it occurred and because of the absolute dollar difference in pay between these roles.” Kirby wrote.

Overall, Kirby concluded $1,300, or 9% of the total $14,000 gap could be a result of “specific positions” MBAs were hired into.

REPORTING BIAS ACCOUNTS FOR NEARLY HALF OF THE TOTAL WAGE GAP

With about 42% of the reported wage gap in their data somewhat explained, Kirby set his sights on reporting bias.

“We used data from a set of top consulting firms, which we know to offer completely standardized compensation to MBAs regardless of gender,” Kirby wrote of their methodology to examine the hypothesis. “We looked to see if there was a difference in how women and men reported these offers.”

While men and women both reported salaries around $144,400, men reported earning $8,000 more in “bonus” and “other compensation.” Of the $12,000 gap in consulting, Kirby reasoned at least two-thirds of it was due to men inflating their projected bonuses and overall compensation. According to the report, an additional 43% of the overall wage gap was a result of this phenomenon.

“What’s noteworthy here is that offered salary is an objective, immutable number,” Kirby wrote. “Performance bonuses and other compensation, however, can be interpreted more subjectively — based on a range candidates are given in an offer letter. Its likely that men are estimating they will achieve higher performance bonuses than women, which leads to a larger reported wage gap.”

Kirby also examined if women went to companies that paid less on average than other companies for the same function and concluded there was nothing in the data pointing to that playing a factor in the overall wage gap.

Photo from Transparent Career

So, Kirby was able to pinpoint three indicators of the gender pay gap that leads to an estimated 85% of the $14,000. The relatively homogenous dataset points to the complexities surrounding the gender wage gap within the United States.

“It’s clear that women should not be paid less than men for the same work,”was  Kriby wrote. “However, the complexity of this issue makes it difficult to separate when this is actually occurring, due to more nuanced variables that may be driving a gap. Nevertheless, each of these types of issues is a problem — from legal, ethical, and social perspectives — but each deserves understanding and better identification of when problems exist.”

DON’T MISS: COST OF BEING A SINGLE FEMALE IN BUSINESS SCHOOL or BY THE NUMBERS: ARE WOMEN REALLY MAKING PROGRESS AT BUSINESS SCHOOLS?

  • More facts

    Agreed – why should you need to control for firm/industry? Does that not point to an inherent bias, or do people honestly believe that women biologically just make different career choices?
    Not everyone who takes issue with the gender pay gap is inept at statistics.

  • Factual?

    I’m not sure why discussing industry averages are not valid “facts”? If industry average is factual enough when we’re discussing which school lands you better jobs, why isn’t it meaningful when discussing which gender gets paid more?

    Yes, different companies/ roles pay more than others but a difference in averages should inherently control for that unless your sampling of people is somehow skewed. (I.e. You surveyed all the women at unknown consulting firm and compared them against men at McKinsey). If you’re saying the difference is because women are, on average, at less pay-competitive firms, then there’s still a point there. Why are there not more women in firms that pay better? I find it hard to believe there is a systematic issue of self-selection or “opting out”. Do those firms need to adjust hiring practices? Or are companies across the board, on average, paying women less?

    I’m not sure when using aggregate data became meaningless or less “factual”. Yes, discussing specific companies might be useful in its own way, but discussing averages is a still great starting point for this discussion.

  • Give Me Facts

    This is the most disappointing article on the P&Q. Dissapointing not because of the wage gap, but because of this propaganda.

    I was hoping that you would provide evidence of wage gap in a SPECIFIC FIRM not just within the industry. Some firms pay more others pay less, Transparent MBA could be using their time to found multi-billion dollar companies instead of writing pointless articles without being able to back up their claims.

    Happy to hear if there are any real facts that would change my mind. So far, all the facts presented have not been properly analyses and the conclusions reached are very biased and inappropriate.