Business School Alumni Aren’t Escaping the Gender Pay Gap

Female MBA and related specialized master’s graduates across the world make an average of US$400,000 less than their male counterparts in earnings over the course of 20 years following graduation, according to GMAC.

This troubling gender pay gap figure comes from an extension of GMAC’s latest Alumni Perspectives Survey Report, for which some 14,000 alumni of postgraduate business education were surveyed. That report concluded that b-school alumni stand to earn about US$500,000 more than those who hold no such qualification even if the latter acquire a 5% rise in salary each year – a gap, we might note, just US$100,000 more than the gender wage inequality GMAC finds.

Total earnings for female graduates, by GMAC’s 20-year estimation, came to an average of US$2.2 million, as compared to US$2.6 million for male graduates. Just under half of the respondents are graduates of a full-time MBA, with much of the remainder instead qualifying with an executive MBA or MBAs offered in part-time or online formats.

Comparing the alumni experience with wage inequality found by Glassdoor 

It’s a finding like this that puts the constant flurry of wage inequality information into a better context for anyone with a particular interest in postgraduate business education. Last month for example, Glassdoor found that female workers in the US earned an average of $0.76 for every $1 earned by men. However, this is an unadjusted gender pay gap – one that doesn’t take into account controls of industry, location, job title etc. in a sample that stretches to half a million salary reports and around 68,000 different employers in the US. When these are factored in, the gap is said to narrow to the point of women earning US$0.95 for every US$1 earned by men. If we apply the same format to GMAC’s b-school specific calculations, female graduates are essentially receiving US$0.85 for every US$1 earned by male graduates – putting the gap midway between the unadjusted and adjusted level found in the US by Glassdoor. Of course, not all GMAC’s respondents are working in the US, but a majority of 71% (as of last year) are.

Perhaps this isn’t all that surprising. When separating for job titles, Glassdoor did find that c-suite roles (CEO, CFO and COO etc.) gave rise to one of the highest wage inequality levels – US$0.72 for every US$1. This problem is exacerbated by the fact that female professionals remain outnumbered in the c-suite. Among those in the GMAC survey who had studied full-time two-year MBAs, 4% of the men had reached the c-suite, yet only 1% of the women, causing its report to draw the now all-too familiar conclusion that, “Women aren’t advancing at the same rate as men to higher levels (and higher paying jobs) in upper management that their educational credentials and job tenure would seem to warrant.”

More women are taking the GMAT and applying to programs says GMAC

There is some brightness amid this gloom, however. A record-high 44% proportion of GMAT takers between the summers of 2013 and 2014 were women, according to GMAC – an increase, albeit moderate, of five percentage points in nine years. A year on and 40% of full-time applicants to two-year MBA programs at the 300 schools reporting to GMAC were female, up from 35% in 2011. For one-year programs, the equivalent proportion was 37%, up from 34% four years ago. Again, moderate rises but ones that were reflected in a number of top US business schools’ class profiles this year.

Presently, however, the gender pay gap doesn’t look like being fixed by female enrollment rates alone. Although both sexes picked up an average pay rise of US$20,000 (all postgraduate programs), there is already a greater return on the educational investment made (ROI) among men after three years. The wage inequality in median salary levels then proceeds only to get wider as the job roles get more senior – the median salary level for women holding the report’s top-level executive roles is US$165,000, compared to US$205,000 among men.

Much of the discrepancies in salary by gender, in the opinion of Glassdoor’s Demystifying the Gender Pay Gap, can be attributed to the ways in which greater proportions of men and women are found in differing industries, roles and job levels. The level of education held by individuals is seen as a smaller, albeit important, contributory factor.

Areas in which schools can help combat the gender pay gap

In the higher education and specifically business school context, Kellogg School of Management’s dean, Sally Blount, talked recently about the need for institutions to grant greater recognition to subject areas that rely on aspects of behavioral economics or psychology in order to increase the chances of female academics ascending to the highest levels – and pay bands – of tenured faculty positions. Positions from which they might be better able to exert an influence on any prevailing notions of the limits to which high-potential female MBAs can rise.

Describing this as “key to breaking the deanship glass ceiling,” Blount argues in an article for the FT that the related “management and marketing departments have long led the field in the proportion of female academics they employ,” and calls for an end to “the implicit bias that studying finance and economics is serious, but studying management or marketing is less so.”

While the Kellogg School dean believes that these subject areas are underrepresented considering their worth to today’s business leaders, it is surely going to be equally important to work on any tendencies that men or women may currently have to specialize in certain fields. This, in turn, may just be the root cause of the way in which they find themselves sorted into industries and roles in which men continue to be paid more than women, as Glassdoor’s chief economist, Andrew Chamberlain, a PhD graduate of UC San Diego, explains:

“Women and men tend to pursue different career paths early in life and then sort into different industries and occupations, which, in large part, is due to a variety of societal expectations and traditional gender norms. This is the single largest factor we see contributing to today’s gender pay gap.” Therefore, while the level of education held by men and women may not be as significant, the type of education they choose to pursue can have a huge bearing on their resulting career paths and therein lies an opportunity for business schools.