The MBA Mommy Track: The True Cost Of Having A Baby by: John A. Byrne on September 18, 2013 | 12,622 Views September 18, 2013 Copy Link Share on Facebook Share on Twitter Email Share on LinkedIn Share on WhatsApp Share on Reddit At the starting gate, when MBAs first get their degrees and fan out to their first post-MBA jobs, men and women have nearly identical paychecks. But it doesn’t take all that long, for their earnings to sharply diverge, with men pulling down 60% more on average than women nine years after graduation. A study of MBA graduates from the University of Chicago’s Booth School of Business shows that nine years later men were on average making $400,000 a year compared to just $250,000 for women. Yet, at graduation, women earned $115,000 while men landed jobs paying $130,000 in the first year (see graphic below). For the highest paid of Booth alums, the differences are even greater. A man in the 90th percentile earns over $1 million at 10 to 16 years out as compared to $438,000 for the 90th percentile women. MBA MOTHERS PAYING A MASSIVE WAGE PENALTY FOR HAVING CHILDREN The study’s researchers–University of Chicago and Harvard University economists Marianne Bertrand, Claudia Goldin, and Lawrence F. Katz–say that a large part of the difference between male and female earnings comes from job interruptions, and most job interruptions are due to children. A female MBA with at least one child is 20 percentage points less likely to work in a given year than the average man, whereas a woman without children is only 3 percentage points less likely to be employed than the average man. There are some other factors involved as well, from pre-MBA work experience (men generally have more), the kinds of courses MBAs take in business school (women take more marketing and less finance), the industries MBAs choose to work in (more men go into higher paying finance jobs), and then how many hours MBAs put in at work (men tend to log more hours than women at every stage of their careers). But time off from work extracts a severe penalty on a business career. “Any career interruption—a period of 6 months or more out of work—is costly in terms of future earnings, and at 10 years out, women are 22 percentage points more likely than men to have had at least one career interruption,” the researchers discovered. “Deviations from the male norm of high hours and continuous labor market attachment are greatly penalized in the corporate and financial sectors.” The study–one of the largest ever of female MBAs in the world of work–tracked University of Chicago MBAs from the graduating classes of 1990 to 2006. The researchers used a web-based survey to gather the views of 1,856 men and 629 women who formed the basis of the sample. The academic paper–“Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors“–was actually published three years ago but more recently received new life when the New York Times published a graphic on the wage disparities among MBAs. The graphic, accompanying a story on gender inequality at the Harvard Business School, led some readers to assume that the differences in pay were largely the result of unfair pay practices. But the study showed that the reasons for the wage gap are far more complicated than a corporate bias. The study was also cited today in a New Yorker opinion piece by a former Wall Street analyst who argues why women shouldn’t get an MBA degree. But if the value of the degree needed validation, it gets plenty in this study. Earnings (expressed in 2006 dollars) advance substantially with time after graduating with the MBA degree. The growth is a hefty 8.9% average annual rate for all MBAs. The average MBA earns $126,000 at graduation (median is $122K) and close to $370,000 nine years out (median is around $190K). “Both the level and rate of change are greatest for those starting in investment banking, which attracts a substantial number of recent MBA graduates,” the study found. “Those starting their careers in investment banking earn more than $170,000 at graduation (median is $160K) and close to $700,000 nine years out (median is $470K), whether or not they are still employed in investment banking. Earnings levels and growth are similar for investment management. The consulting track, the other most prevalent career option among MBAs, is less remunerative than investment banking and investment management.” Despite the lucrative rewards that can come with a top-flight MBA degree, having children and caring for them seems to trump the day-to-day grind of an MBA job for many women. The study also discovered that the share of female MBAs not employed rises substantially in the decade following MBA completion with 13% of the women not working at all at nine years after MBA completion, compared to 1% of the men. And when women with MBAs return to the workforce after having their children, they are less likely to get back to work full-time–another reason average pay is so low. Fifteen years after obtaining their undergraduate degrees, women who earned an MBA had the lowest labor force participation rates, the lowest share working full-time and full-year, and took the greatest amount of time off from employment compared with others having professional degrees and PhDs. Employment rates 15 years out for MDs exceeded 95%, for PhDs they were greater than 90%, for JDs they were around 90%, but they were 85% for MBAs. The researchers found that female physicians take the briefest non-employment spells after having a child, followed by PhDs, then lawyers, and finally MBAs who take the greatest amount of time off for family reasons. Continue ReadingPage 1 of 2 1 2