Does White Male Privilege Shape MBA Pay?
Imagine you’re poised to run a race. You’re standing along the same starting line as everyone else. When the gun goes off, everyone bunches up, with only a few brave souls setting the pace. By the ten mile mark, you’ve broken free from the pack. Maybe you attribute this to training, focus, and strategy. In reality, you were running free while your peers were dragging a weight behind them.
That metaphor reflects the reality of MBA pay. Everyone starts on equal footing (for the most part) at graduation. Over time, some groups tend to distance themselves from their fellow graduates. As you’d expect, the winners tended to be white and male.
This probably sounds like political correctness – a scolding intended to provoke guilt. Actually, it is a fact grounded in research. Alas, there are no real losers here. MBAs, regardless of race and gender, are cashing enviable paychecks within 5-10 years of graduation. But some are doing better than others. Question is, why?
What’s the headline? According to data collected by Bloomberg Businessweek from over 12,700 MBAs, there is a major wage gap between whites and Asian graduates and other underrepresented minorities (i.e. Hispanics, African Americans, and Native Americans). How big is the gulf? Within 6-8 years of graduation, the former earned $172,000 compared to $150,000 for the latter. To add insult to injury, both groups averaged $105,000 after graduation. In other words, underrepresented minorities make $22,000 less per year, with the gap growing bigger each year.
The same trend follows with the compensation between men and women according to Bloomberg Businessweek. Technically, there is already a wage gap here at graduation, with men earning $105,000 against $98,000 for women. However, the difference grows to $35,000 within 6-8 years of earning an MBA – $175,000 vs. $140,000.
In fact, women fare the worse in post-graduate compensation. Think white women hold an advantage? Guess again, as men from underrepresented populations pulled down $163,500 after 6-8 years – $13,500 more than white women ($150,000). And women from underrepresented populations are shortchanged even worse, earning $132,500. That’s $48,750 less than white and Asian men at $181,000. Oh, and it’s $31,250 less than men from underrepresented populations and $17,500 less than white women.
And you’ll find this discrepancy across the spectrum in Bloomberg Businessweek’s research – even at elite MBA programs. During the 6-8 year timeframe, underrepresented minorities make $97,800 less than their white and Asian counterparts. And the difference wasn’t much better at Columbia ($80,400) and Wharton ($65,000). And you’ll find a similar discrepancy involving gender, with Columbia Business School, for example, with women earning a media of $170,000 in 2014 against $270,000 for men.
So what lies behind these pay gaps? For one, according to Bloomberg Businessweek’s research, the differences are embedded in various industries. For example, underrepresented minorities made $48,000 less in finance than their white and Asian counterparts (with women making $53,200 less compared to men). And there’s a $41,000 gap in consulting. Another reason, particularly in banking, stems from year-end bonuses. “When we examined base salaries of alumni and excluded all other forms of compensation,” writes Bloomberg Businessweek’s Natalie Kitroeff and Jonathan Rodkin, “the disparity between men and women shrank significantly.”
Authority and industry also play a role in the gap for women according to the data. On average, women were responsible for three employees, compared to five for men. Bloomberg Businessweek also cites that 43% of men work in the five most lucrative fields (i.e. finance, consulting, and real estate) compared to 32% of women. However, women still make less in these fields, most notably $115,000 less than men in investment banking.
For women, parenthood also impacts earnings, with Bloomberg Businessweek citing a 2014 Harvard Business Review study showing that 28% of women took six or months away to raise children compared to 2% of men. Alison Davis-Blake, the dean of Michigan Ross School of Business, tells Bloomberg Businessweek that this is just part of business. “When you return, you don’t get paid at the same level as your peers. It’s not gender-based. It would happen to anyone who stopped out, but women stop out a lot more.”
No doubt, there are many complex and interplaying factors behind these numbers. As Bloomberg Businessweek notes, the MBA is still a great investment regardless of race or gender. On average, MBAs are making $169,000 within 6-8 years of graduation, roughly $20,000 less than a doctor. However, they also carry $105,000 less in debt ($65,000 vs. $170,000), which nearly evens things out…unless, of course, you are a woman or an underrepresented minority.
To get more in-depth coverage of this issue, click on the Bloomberg Businessweek links below.
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