Why Top Business School Female Graduates Earn Less Than Their Male Colleagues

MBA Pay Research

On their websites, top business schools such as Stanford, Columbia and Wharton advertise their degrees as a great investment that guarantees a well-paid career future. And they price their services accordingly, with their tuition fees surpassing $170,000 for a two-year MBA degree. Stanford calculates the annual salary of its graduates for the first year after graduation at $154,713.

This means that a student loan can be repaid really quickly. But for female graduates, it might take some more time.

Surprisingly enough, the more expensive the MBA, the larger the salary gap between male and female graduates. A Bloomberg Businessweek article brought this issue to public attention this December, as it revealed the results of its research on MBA graduate wages.

Since 2002, every two years Bloomberg Buisnessweek presents a ranking of the <a href=”http://www.gmatpill.com/official-school-blog/top-business-school/”>top business schools</a>. The study was conducted by tracking the careers and respective wages of 24,000 fresh graduates of the 30 top business schools (as ranked in 2012).

The conclusion of the research is that male MBA graduates have a significantly higher income than women graduates of the same schools, with the only exception of one school on the top 30 list.

Stanford, Yale, Harvard and Wharton: The Gap is Growing

The average annual income of a fresh female <a href=”http://www.gmatpill.com/about/postgmatpremba-interview-blog-series-marquis-stanford/”>Stanford graduate</a> was $121,945 in 2012, while male graduates averaged an annual salary of $154,713. This means that women got paid about 21% less than men in the first year of their post MBA career. Yale is positioned second in the wage gap list, with its female graduates getting a first salary reduced about $13,400 compared to their male counterparts.

Female Wharton graduates got jobs that paid 14.3 % less than male graduates and in the case of Harvard, women managed to get jobs that reduce the wage difference with their former fellow students to 10.5%. These percentages seem pretty high and they are more striking if we consider the fact that they refer to salaries of more than $120,000 per year.

What is particularly thought-provoking is the fact that the gender wage gap seems to be growing. When the study started, in 2002, women earned 98% of what men did. In 2004 the percentage had already fallen to 94.1% and even though it became slightly higher in 2006, it dropped again in 2008, raised somewhat in 2010, to end up being 93.2% in 2012.

And a 2006 Booth Business School study highlights the fact that even after 10 years of career, the wage difference does not shrink. On the contrary, it becomes even greater with women earning as little as 50% of what men, who studied in the same business school, earn.

As Businessweek points out, there was a great variation of numbers not only among the different schools, but also among the same school when comparing different academic years. Stanford had the biggest wage gap with the female graduates earning 79% of what the male graduates did, but there was also one school at the other end of the spectrum. The Southern Methodist University’s Cox School of Business has an impressive – and rare – earning rate of female/male wages that reaches 103%.

Gender discrimination or career choices?

Once the study was completed, Businessweek tried to contact the director of Stanford’s Career Management Center and a Wharton spokesman, but the two men refused to comment on the findings. This could lead to the conclusion that gender discrimination is what is going on in the business market and no one wants to be involved in this tricky discussion. But there are also other facts that point towards the root of the gender wage gap issue. The aforementioned 2006 study conducted at Booth School of Business showed that the wage difference in the first years of the MBA graduate careers might have a lot to do with their study choices prior to the MBA. On average, women are a year younger when they enter the MBA school compared to men, and this means that they have less work experience, that is of course pays less in the market. The same Booth study showed that men often choose more finance courses during their first degree, while women focus more on marketing. And it is a fact that marketing experience is not as well paid as finance.

Different Ambitions Between Genders

Significantly fewer MBA graduates are pursuing finance careers in 2012 than was the case in 2002, including both genders. Even though Wall Street jobs are some of the most lucrative ones, there is a great pressure involved and significant cutbacks in wages and personnel have taken place the last two years. Only 16% of women graduates chose the finance field as opposed to 29% in 2002 and for men the numbers are 32% and 23% respectively.

The other well-paid field that one can commit to after an MBA is investment banking. In 2002 it was just 6% of women graduates that chose it but the percentage dropped even more to 2% in 2012. On the other hand, the percentage of men who started a post-MBA career in investment banking raised from 6.9% in 2002 to 9.4% in 2012.

A third sector that pays well is consulting. It is considered by some female MBA graduates as a more woman-friendly sector, contrary to the male-dominated banking world. The director of career services at McCombs told Businessweek that the high rate of its female graduates choosing consulting (31% in 2012) is the reason that the female graduates of the school earn as much as 103% of the male wages. An interesting point can be made when looking at Stanford’s graduate choices.

The vast majority (32%) chooses finance careers, as they are the highest paid ones with an estimation of $152,743. Internet services and e-commerce offer a starting salary of $116,092 and are chosen by 18% of the male and female graduates. A 6% chooses to get employed in the consumer products sector and start with a salary of about $108,750, while a 4% gets absorbed in the media and entertainment sector with a salary of $109,125. Women do show a preference for these last three categories, that have a significant wage gap as sectors, when compared to banking and finance.

Last, but not least, when MBA students are asked about their ideal employer company, men often choose large, highly competitive financial organizations, such as Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase, while women are more attracted to the lifestyle and media sector and companies such as Facebook, Johnson & Johnson, Procter & Gamble, Starbucks, Walt Disney and Nike. Again, the wage difference in these companies is significant and is another way in which career choices influence the wage gap numbers.

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