Ten years ago, the wage gap between men and women graduating from top MBA programs appeared to have been nearly erased. That suggested that women would launch their careers on an equal footing with men and then experience a gender-blind sprint up the corporate ranks. A decade later, a far more sober picture is emerging: The pay gap among graduates of elite business schools is widening, according to new research from Bloomberg Businessweek’s biennial survey of MBA graduates. On average, female grads from top MBA programs now earn 93¢ for every dollar paid their male classmates. At about a third of the top 30 U.S. business schools, women earn less than men—sometimes far less. Female MBA graduates from the class of 2012 at the Wharton School of the University of Pennsylvania, for instance, earned 86 percent of male wages, while those at Stanford Graduate School of Business earned 79 percent.
That’s a dramatic turnabout. In 2002, women at the top 30 MBA programs earned 98 percent of what males earned. That fell to 94.1 percent in 2004 and never really rebounded. In 2012 the figure was 93.2 percent. “The gap numbers at the beginning are not very large and can be mostly accounted for by differences in grades, course selection, and the fields people are starting in,” says Marianne Bertrand, an economics professor at University of Chicago Booth School of Business, citing results of studies on compensation among female MBA graduates from her school. “What is much more striking is how much that gap grows over time.”
The pay gap is especially wide for women heading to finance jobs. A study of 2010 census data by Bloomberg found that among the six categories with the largest gender gap in pay were insurance agents, personal advisers, and securities sales agents. Women in those jobs earned 55¢ to 62¢ for every $1 men pulled in, the census data showed. In 2010, research from Catalyst, a nonprofit group that focuses on expanding opportunities for women in business, found that women MBAs were being paid, on average, $4,600 less in their first job than men, a disparity that grows to $30,000 by mid-career, says Anna Beninger, a senior associate in Catalyst’s research department. Even women placed in high-potential leadership development programs often miss out on the so-called hot jobs, or projects most critical to career advancement, Catalyst found. Says Beninger: “Women’s careers lag behind men from day one.”
The growing disparity may be partly explained by shifts in career choices women MBAs are making, according to a Bloomberg Businessweek analysis of 114 MBA programs surveyed in 2012 and 88 in 2002. Fewer MBA graduates of either gender are pursuing finance careers, where salaries are at the far end of the curve, as pay cuts and layoffs have made Wall Street less attractive. But women have fled finance in substantially larger numbers, driving down average female salaries. In 2002, 29 percent of women MBAs surveyed by BusinessWeek went into finance; by 2012 that number had dropped by nearly half, to 16 percent. The portion of women taking high-paying investment banking jobs slipped even more, from 6 percent in 2002 to 2 percent in 2012.
Those findings don’t surprise Janet Hanson, chief executive officer of 85 Broads, a global networking group of 30,000 women, including many who have worked in finance. “There’s a tremendous realization among women MBAs that you don’t have to march lockstep into banking,” Hanson says. “The industry is changing, and I think a lot of people are overwhelmed by the regulatory environment and the uncertainties in the industry. That perhaps makes the risk-reward tradeoff very different.”
Women MBAs are drawn increasingly to careers in technology, consumer products, consulting, and entrepreneurship, say placement officers. At Stanford, a higher percentage of MBA women (25 percent) than men (13 percent) went into Internet technology careers, says Pulin Sanghvi, director of Stanford’s Career Management Center. In contrast, 16 percent of men in the 2012 MBA class were drawn to private equity and leveraged-buyout companies, compared with just 5 percent of women. “If you saw a lower representation of women going into those industries, you’d also expect the median and mean average salaries to be affected by that, and that’s exactly what we saw,” Sanghvi says.
Maryellen Lamb, director of MBA career management at Wharton, says a larger proportion of women at the school are going into fields such as retail and consumer products, industries that generally don’t offer the payouts they might see in investment banking or private equity. “The inequity is not necessarily gender-specific, it is more industry-specific,” she says.
Demographic factors may also play a role, says Michelle Sparkman Renz, director of research communications at the Graduate Management Admission Council—which administers the Graduate Management Admission Test (GMAT)—in an e-mail. Women who take the GMAT, she says, are on average a year younger than their male counterparts; they are more likely to leave business school at a younger age, with less work experience, and thus fetch lower salaries. “The results can have a cascading effect in the wage gap furthered by differences in job level and supervisory duties,” she says