The Real Payoff From an MBA Is Different for Men and Women
As far as investments go, business school is an unimpeachable bet for young professionals who can muster $100,000. MBAs, who are typically in their early 30s and have already spent a few years in the workforce, saw their salaries triple within eight years of graduation. They also report consistently high levels of job satisfaction and career growth, according to a survey of thousands of alumni conducted by Bloomberg Businessweek as part of the magazine’s annual ranking of business schools. But that general contentment hides a troubling divide: Within a few years of graduation, women with MBAs earn lower salaries, manage fewer people, and are less pleased with their progress than men with the same degree.
Each year, we rank business schools by polling students on topics such as academics, career services, and campus climate. We also ask employers about skills they seek in MBA hires and which schools best prepare their graduates. This year, for the first time, we surveyed alumni who graduated six to eight years ago, asking them how well their degrees had delivered on the promise of a fulfilling, well-paid job. The 12,773 responses we collected offer a wealth of salary information and other data on MBAs working in a variety of industries.
The inclusion of the alumni responses helped propel Harvard Business School to the top of the 2015 rankings. HBS alums reported the largest gains in compensation and many attributed their success to their alma mater. Last year’s No. 1, Duke Fuqua School of Business, slipped to eighth overall, partly because of a comparatively lackluster job placement rate of 86.1 percent, which is below the 87.9 percent rate overall.
Women and men start their post-MBA careers earning almost the same money—$98,000 for women and $105,000 for men—according to our survey of those who graduated from 2007 through 2009. But the gap then widens sharply. By 2014 men hauled in a median of $175,000 and women, $140,000. That means employers pay women 80 percent of what men with the same degree take home.
The inequities are especially stark among graduates of some of the most elite programs. At Columbia Business School, ranked No. 6, women who graduated from 2007-2009 earned a median of $170,000 in 2014, or 2.7 times their pre-MBA salary, while their male peers pulled in $270,000, four times what they made before they got their degrees.
Much of the pay gap is the result of the heftier yearend bonuses that men win. When we examined base salaries of alumni and excluded all other forms of compensation, the disparity between men and women shrank significantly. Among Columbia alumni, men made $30,000 more than women in median base salary. Regina Resnick, associate dean of career management at Columbia, calls the disparity “disturbing” but says the divergence “probably reflects what’s going on in the job market.” Says Resnick: “I frankly don’t think there is something unusually different that’s going on with our women.”
One explanation for the gender gap may be that women are less likely to be bosses. Women in our survey say they’re responsible for a median of three employees; men manage five. Twenty seven percent of women say they had no direct or indirect reports, vs. 20 percent of men.
Could it be that women are choosing less financially rewarding fields? It’s true that male MBA grads tend to gravitate toward professions that pay more. Among the alums in our survey, 43 percent of men work in the five most lucrative industries, such as real estate and consulting, vs. 32 percent of women. But even when women went into high-paying fields, they were underpaid relative to men. In finance, women earned a median of $53,200 less than men. The gap persisted regardless of the job they held—women in marketing at a bank earned $7,000 less than men. Women investment bankers earned $115,000 less than men.
Our alumni survey, which drew responses from MBAs at more than 2,500 companies, reveals that the gap is largely consistent across businesses. Among those writing women smaller paychecks are some of the country’s top MBA employers. Google paid the 21 female alums we surveyed a median of $36,000 less than the 68 male alums. A Google spokesperson calls the sample “narrow” and says the company “constantly analyzes performance, compensation, and promotion to ensure that there is no gender pay gap.”
The 14 women we polled at Bank of America made a median of $61,000 less than the 81 men at the company. Ferris Morrison, a spokeswoman for Bank of America, says: “Men and women MBA hires for our entry level programs start at the same compensation within a given line of business, and over time various factors such as job performance, career choices, and location will affect compensation.” At McKinsey, the group of women who responded to our survey was smaller—only nine. They earned $100,000 less than the 47 men at the consulting juggernaut. McKinsey spokeswoman Rachel Grant says the sample of its employees is too small, adding: “Variance in pay could be a consequence of differences in tenure, role, geographic location or performance.”
A company that bucks the trend is Deloitte, which is known for going to extra lengths to keep mothers in the workforce. For the 33 female MBAs at Deloitte who responded to our survey, the typical salary was $169,000—$4,000 more than the 65 men at the firm.
We didn’t ask the alumni we surveyed whether they had children, so we can’t infer what impact parenthood has on earning power. It’s worth noting that 6 percent of women in our sample were unemployed, compared with just 1.4 percent of men.
Research has shown that female MBAs are more likely than men to take time off to raise kids. A 2014 HBS study found that 28 percent of recent female alumni took off more than six months to care for children; only 2 percent of men did. That decision didn’t affect their likelihood of being top managers, the study found, but experts say it could stall salary growth. “When you return, you don’t get paid at the same level as your peers,” says Alison Davis-Blake, the dean of Michigan Ross School of Business. “It’s not gender-based. It would happen to anyone who stopped out, but women stop out a lot more.”
Our alumni survey reveals that almost a decade into their professional lives, male MBAs were happier with their work. Seventy percent of male respondents said they were “very satisfied” in their current job, vs. 64 percent of women. Pay and fulfillment were closely correlated for both genders, so those reporting the highest levels of satisfaction were also the top earners.
If women MBAs feel undervalued at work, they don’t blame their alma maters. Women and men were both likely to say their MBA boosted their earning potential and offered them a valuable alumni network. One reason alums universally praise their MBA programs is that their degree offers incredible value very quickly. Our data shows that six to eight years after graduation, the typical alum makes $169,000. The typical doctor made more—$187,000 in 2012, according to the Bureau of Labor Statistics—but was in school longer and was more likely to take out larger loans.
Business school graduates with student debt owed a median of about $65,000 upon graduation, our survey shows. Borrowers at medical school, by contrast, graduate with $170,000 in debt. By those measures, an MBA may be the professional degree with the quickest return on investment in the U.S. The payoff just appears to be greater if you’re a man.