Does Discrimination Explain Gender Wage Gap for Chicago MBAs? No, It's Motherhood and Marriage

From Superfreakonomics via Freakonomics blog:

The economists Marianne Bertrand (Chicago), Claudia Goldin (Harvard), and Lawrence Katz (Harvard) analyzed the gender wage-gap by analyzing the career outcomes of more than 2,000 male and female MBAs from the University of Chicago.

Their conclusion: while gender discrimination may be a minor contributor to the male-female wage differential, it is desire — or the lack thereof — that accounts for most of the wage gap. The economists identified three main factors:

1. Women have slightly lower GPAs than men and, perhaps more important, they take fewer finance courses. All else being equal, there is a strong correlation between a finance background and career earnings.

2. Over the first fifteen years of their careers, women work fewer hours than men, 52 per week versus 58. Over fifteen years, that six-hour difference adds up to six months’ less experience.

3. Women take more career interruptions than men. After ten years in the workforce, only 10% of male MBAs went for six months or more without working, compared with 40% of female MBAs.

The big issue seems to be that many women, even those with MBAs, love kids. The average female MBA with no children works only 3% fewer hours than the average male MBA. But female MBAs with children work 24% less. “The pecuniary penalties from shorter hours and any job discontinuity among MBAs are enormous,” the three economists write. “It appears that many MBA mothers, especially those with well-off spouses, decided to slow down within a few years following their first birth.”

From the abstract of the paper:

"Although male and female MBAs have nearly identical labor incomes at the outset of their career, their earnings soon diverge, with the male annual earnings advantage reaching almost 60 log points at ten to 16 years after MBA completion. We identify three proximate reasons for the large and rising gender gap in earnings: 1) differences in training prior to MBA graduation; 2) differences in career interruptions; and 3) differences in weekly hours. These three determinants can explain the bulk of gender differences in earnings across the years following MBA completion.

The presence of children is the main contributor to the lesser job experience, greater career discontinuity and shorter work hours for female MBAs. It appears that many MBA mothers, especially those with well-off spouses, decide to slow down within a few years following their first birth. The pecuniary penalties from shorter hours and any job discontinuity among MBAs are enormous."