High-achieving business women do not typically make 78 cents for every dollar their male peers earn. They make 62 cents for every dollar.
The authors studied MBAs who graduated from the University of Chicago’s business school between 1990 and 2006. They found that the further out of school people got, the more the gender gap widened.
The reason? It’s almost entirely penalty for women having children.
The study finds that recently-graduated MBAs start out with roughly the same incomes, regardless of gender ($US115,000 for women and $US130,000 for men at the median*). However, as time passes, income levels diverge, with men gradually pulling ahead. Nine years out, women at the median were earning $US250,000. Men were earning $US400,000, a 60% premium.
There are three reasons the authors list for why women might make less: men tend to have slightly higher grades (and take more finance courses) when they graduate, women take more time off (hello, children!), and women work shorter hours.
It is the last point that seems to be the most important: “The relationship between income and time off is highly nonlinear for those in our sample. Any career interruption — a period of 6 months or more out of work — is costly in terms of future earnings.” The authors find that 10 years after graduating, women are 22 percentage points more likely to have had one of those pay-stalling career interruptions. (Tangentially, it’s interesting to note that the wage penalty for men who elect to take time off appears to be more severe than for women, men just do it less often.)
The important point here is the non-linear nature of the gaps once they begin to form. As you go up the income ladder, equal pay for equal work (per hour) ceases to exist. One of the paper’s authors, Claudia Goldin, has previously written about why these non-linear gaps come about: mostly because of the work cultures at the types of places that employ business school grads, which reward those who are available at the drop of a hat and punish those who need to do things like pick children up from school or be home by dinner.
A banker who misses a late-night client conference call because she’s home with a sick child is going to see her career hurt, whether it’s explicit or not. It’s not right, but it’s currently the way the world works in finance, law, consulting — basically any high-priced service industry. And that’s what makes the pay gap at the top so huge.
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