What Can Business Schools Do To Reduce The MBA Gender Pay Gap?
Forté Foundation’s research finds male graduates earn 20% more than their female peers post-MBA. We find out why, and what business schools can do to fight the MBA gender pay gap
Business schools have seen a significant increase in female representation in the MBA classroom over the last decade, but despite progress there remains a pressing issue on the other side of school, after graduation.
Recent research from the Forté Foundation, a non-profit that supports women in business through education, shows that after graduating from their MBA, female students—particularly women of color (WOC)—earn less, are not promoted to the same levels, and have fewer direct reports than their male colleagues.
If business schools are seeing more balanced gender representation in the classroom, why is the MBA pay gap still an issue?
Forté’s Findings on the MBA gender pay gap
Forté Foundation surveyed more than 3,000 students and alumni across nearly 60 of their member schools.
The research finds that post-MBA a woman earns an average of $150,000, compared with the post-MBA salary of a man, which is roughly 20% higher at $180,000.
Once you compare this to women of color, the percentage depressingly doubles to more than 40%: women of color earn just above $120,000 after graduating.
Why the MBA gender wage gap exists
1. After their MBA, women don’t receive the same number of promotions as men.
Women are faced with what the 2021 McKinsey Women in the Workplace report calls the broken rung. They’re not promoted to the next step of their career as quickly as men.
“After graduation, the wage gap is quite small at 10%”, explains Elissa Sangster (pictured), CEO of Forté Foundation. “But as MBA graduates progress in their career, the gap widens.”
Women face both conscious and unconscious bias from their employer, which contributes to their lack of promotion, particularly in male-dominated businesses like venture capital, where they only make up 12% of the industry.
Hannah Riley Bowles (pictured), senior lecturer in Public Policy and Management at the Harvard Kennedy School, explains how in these environments, women are disadvantaged by their social networks and face Prove-It-Again bias. Their performance is continuously questioned, and they feel they have to repeatedly prove themselves.
Elissa highlights how this feeling is only exacerbated for women of color, who remain the most underrepresented group in the corporate pipeline.
2. Women favor their impact on an organization over their salary
When Forté’s survey asked students where they wanted to be in five years’ time, women leaned towards early leadership categories, like VP, whereas men aimed for C-Suite roles.
Elissa believes this could be down to women’s preference towards their impact on their organization, compared to their salary outcome.
“Men tend to run towards financial services where the dollar is high or tech where there’s a big pay-off,” she explains. “Women, on the other hand, are more interested in how they can make the largest impact on their organization—they want to see and live their value every day.”
3. Men tend to plan longer-term post-MBA than women
“For some reason, women get to graduation having not thought through their career path as much as men,” Elissa explains. “There’s a need for earlier career intervention to help women understand all the options available to them.”
Julia Bear (pictured), associate professor of management in the College of Business at Stony Brook University, puts this down to psychological and structural reasons.
“Men tend to have a more inflated sense of entitlement and deservingness, which has implications for where they’re setting their aspirations,” she says.
Julia notes, however, that once companies are clear about their flexibility in terms of work/life balance, gender differences in career aspirations disappear.
Can business schools fix the MBA gender pay gap?
Business schools are working hard to reduce these obstacles for female MBA students. The Wharton School of the University of Pennsylvania has set up allyship training for male students through their gender equality initiative, Wharton Male Allies.
“Men on campus need to be doing more to be part of the conversation and ultimately be better allies in the workplace,” says Thomas Rokholt (pictured), co-chair of Wharton Male Allies.
Wharton Male Allies partners with outside organizations like Forté Foundation to bring in educational programming on what it means to be a strong male ally. They also run panels with practitioners in different fields who talk about how allyship has impacted their career and host dinners where students openly discuss times where they failed to show up as allies.
It’s also important that business schools work with companies to provide students with salary transparency. Female students also need the necessary resources to advance to the next promotion level.
Jessica Leigh Powers (pictured), who serves on the board of Wharton Women in Business, highlights how as a student, her time at the business school has encouraged her to peek into a lot of different cultures, to see what makes them more equitable. She uses this experience to shape the questions she asks a company when ultimately choosing to work for them.
Additionally, although Forté Foundation’s research finds that most students and alumni are happy with diversity, equity, and inclusive (DEI) efforts in the application process, the results are not so positive when it comes to the business school experience. More than one in five students and alumni—and one in three minority women—are unsatisfied with their MBA program’s DEI efforts.
To counter this, Elissa believes business schools should train faculty to build inclusive classrooms, have diverse guests and alumni speakers, and diversify case studies in their curriculum. She elaborates that only 10-15% of case studies in top business schools use female role models.
“When we look at the percentage of female faculty and faculty of color, it’s really abysmal,” adds Julia from Stony Brook. “I think the business school commitment is certainly there, it’s just a matter of making things happen, which can take time.”
For a long time, business schools have had great gender disparities among their students. But progress has been made in the classroom, with many more schools boasting a more equal representation of men and women.
As the representation gap closes, the same commitment needs to be applied to closing the gender pay gap. Only then will we begin to move towards a more equal post-MBA salary trajectory between men and women.