At Elite B-Schools, the Gender Wage Gap Grows

At Wharton, female MBA graduates earned 86¢ for every dollar earned by their male counterparts Photograph by David Paul Morris/Bloomberg

Exclusive new research by Bloomberg Businessweek has found that the pay gap among graduates of elite business schools, virtually non-existent a decade ago, is widening. On average, women now earn a nickel less than they used to in their first post-MBA jobs for every dollar earned by men.

At about a third of the top 30 U.S. business schools, they earn less—sometimes far less. Female MBA graduates from the graduating class of 2012 at Wharton earned 86¢ on the male dollar, while those at Stanford earned 79¢ on the dollar. In the U.S. workforce overall, women earn 82 percent of what men earn, according to the U.S. Bureau of Labor Statistics.

The B-school wage gap data is based on surveys of more than 24,000 recent business school graduates that Bloomberg Businessweek conducted as part of its biennial rankings of full-time MBA programs starting in 2002. The study tracked the wage gap at the 30 top U.S. business schools in the magazine’s most recent ranking in 2012.

Overall, the study found that the wage gap at the top 30 schools, excluding those that lacked an adequate response rate, was just 2 percent in 2002, when women earned 98 percent of male earnings. That proportion fell to 94.1 percent in 2004 and never really recovered, rising in 2006 and 2010 and falling in 2008 and 2012, when it bottomed out at 93.2 percent.

The numbers varied greatly, both among schools and from year to year at individual schools. In 2012, female MBA graduate earnings as a percentage of male earnings ranged from 79 percent at Stanford to 103 percent at Southern Methodist University’s Cox School of Business. Attempts to reach Pulin Sanghvi, director of Stanford’s Career Management Center, were unsuccessful. A spokesman at Wharton, where female earnings fell from 99 percent of male earnings in 2002 to 86 percent a decade later, declined to comment.

The growing pay disparity may be partly explained by shifts in the career choices women MBAs are making today, compared to those they made a decade ago, according to a Bloomberg Businessweek analysis of 114 MBA programs surveyed in 2012 and 88 in 2002. One such shift involves finance jobs. Fewer MBA graduates of either gender are pursuing finance careers this year, when pay cuts and headcount reductions have made Wall Street jobs less attractive to some. But women have fled finance in substantially larger numbers, driving down average female salaries.

In 2002, 29 percent of women went into finance positions; 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 today. The number of men heading into finance has dipped too, but not so precipitously. A decade ago, 32 percent of men went into finance, vs. 23 percent this year, while 9.4 percent went into investment banking, vs. 6.9 in 2002.

With women making up about a third of the graduating class at most top business schools, even small changes that involve just a handful of women are enough to open up a wage gap, according to Bloomberg Businessweek‘s calculations. In a hypothetical class of 1,000, just five fewer women entering a lucrative field like investment banking is enough—even without factoring in male-female wage differences—to take the entire class from male-female wage parity to men out-earning women by a small percentage.

At the McCombs School of Business at the University of Texas, Austin, women earned 102 percent of male earnings this year—in large part, the school says, because of the large number of women entering the lucrative consulting field. Stacey Rudnick, director of career services at McCombs, says 31 percent of women went into consulting, up from 14 percent in 2010. According to Bloomberg Businessweek survey data, consulting jobs at all schools paid an average of $116,661.

One 2012 McCombs grad among the MBA women entering consulting is Julie Corvo, who left a pre-MBA career in corporate finance to become a senior consultant at Ernst & Young. She says she chose consulting as her post-MBA career because it has more benefits for working women. “I feel like consulting is a field that is more friendly to women,” she says. “The attitude and stereotype of banking is that it is still really male-dominated.”

In addition to career choices, demographic factors may also play a role in the compensation disparity between men and women, said 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 said, 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 said.

A 2009 study of more than 2,000 female and male MBAs who attended the University of Chicago’s Booth School of Business between 1990 and 2006 points to more subtle reasons why the gender gap originates. The authors of that study found that women start out at a deficit, earning about $15,000 less than their male counterparts.

One reason cited by the authors is that the Booth men in the study frequently had different training and background than women before entering business school. As a result, they tended to take a greater number of  finance classes—training that resulted in “large labor market returns,” the study found. Booth women, on the other hand, took relatively fewer finance and accounting classes, but more marketing classes.

Men also tended to have higher GPAs than their female classmates, the study found. For example, men had an average GPA of 3.31 in finance, compared to 3.04 for women, it determined.

Of even greater concern is that the pay gap at graduation, which starts out not being very significant statistically, becomes sharply pronounced 10 years later, widening to about 50 percent even when female graduates who dropped out of the work force are not included, says Marianne Bertrand, an economics professor at Booth and a co-author of the study.

“The gap numbers at the beginning are not very large and can be mostly accounted for by a differences in grades, course selection, and the fields people are starting in,” says Bertrand. “What is much more striking is how much that gap grows over time.”

Editor’s Note: Over the next few weeks, we’ll be publishing a series of follow-up stories exploring the wage gap at individual business schools.

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