MBAs can boost pay. But they can’t eliminate the pay gap, a study found.
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April 2nd is Equal Pay Day, so named because it’s how far into 2019 it takes for a woman, on average, to earn what a man made by the end of 2018.
For many people, getting a master’s degree in business administration is one way to narrow that pay gap. In fact, MBAs do help to increase salaries, according to new research from the Forté Foundation, a nonprofit group of businesses and business schools seeking to advance women in business leadership.
Among the findings: Women get a 63 percent pay bump on average after receiving their MBA. Women of color get a 70 percent post-MBA salary bump.
“[The MBA] is a huge economic mobility engine for women and for minorities in terms of where they end up in their compensation,” said Elissa Sangster, the Forté Foundation’s CEO.
But the question of whether an MBA can eliminate the pay gap is another story.
“Our expectation was that we would find that the MBA was a great equalizer in terms of salary,” Sangster said. “But what we found was that [the pay gap] did exist, post-MBA, and as men and women progressed in their post-MBA careers.”
For people of color, the gap narrowed but persisted, moving from 24 percent to 16 percent. For women, the gap widened, moving from 3 percent pre-MBA to 7 percent post-MBA. For women, that gap continues to widen over time. Women of color see the biggest pay gap over time, receiving 52 percent less than their white male counterparts.
“I wouldn’t say I was surprised at all,” said Londyn Gage, an MBA student at the University of Michigan’s Ross School of Business.
Gage, 28, spent four and a half years in the private sector before business school. She is black and just wrapped up a big round of summer internship interviews. She said finance internships mostly went to white men.
“It’s even harder as women try to break into these male-dominated spaces,” Gage said. “And those male-dominated spaces tend to be not as diverse, either.”
The Forté Foundation study, which was led by Michelle Wieser at St. Catherine University, also found that minority MBA graduates reported lower satisfaction in salary and career progression. Women with MBAs reported that they were less likely to win promotions than men. They had fewer direct reports.
Claudia Goldin, professor of economics at Harvard University, has also studied the gender pay gap among MBA holders and said the pay gap widens more for women who have kids. Plus, the flexibility required to raise children requires controllable working hours, and often fewer of them.
“Some MBA women move into self-employment, which would allow the most controllability,” Goldin said. “Some leave altogether. Those who remain in the corporate and the financial sectors get heavily penalized by shifting into somewhat lower-hour jobs, relative to the individuals who stay in investment banking, and work their way into management positions.”
Finance companies have made efforts to make their workforces less white and male. Goldman Sachs recently said it would interview two diverse candidates for each job opening.
Gage said she’s seen a lot of companies tout their diversity programs during on-campus recruiting sessions.
“I know that it says kind of all this on paper,” Gage said. “But if I do get in the door as a black woman, what is my career progression going to look like? Is my bonus structure going to be the same as my white male counterparts?”
She said as MBA students approach the job market, the impetus falls on women and students of color to interview the interviewers about how their companies’ pay and promote their employees.
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