- Women comprise approximately 41% of new students entering full-time MBA programs.
- Despite possessing the same degree and qualifications, women who graduate with MBAs still earn less than men.
- Gender disparities in earnings create doubt about the return on investment (ROI) for women who graduate with MBAs.
- Pay audits, compensation transparency, and mentorship are potential ways to reduce the gender pay gap for women MBA students.
The current job market is hot, and students are joining MBA programs to capitalize on high-earning opportunities in the business and technology fields. This is especially true among women. As reported by the Forte Foundation, women now comprise 41.4% of enrolled students at Forte member schools, including George Washington University, John Hopkins University, and the University of Pennsylvania.
While the benefits of an MBA degree can be alluring, a recent report by the Forté Foundation found that women who graduate with MBA degrees still earn less than men. While there are various ways for companies and organizations to address the gender pay gap, is it fair to say women MBA students are receiving a positive ROI for their MBA degree?
Four Factors That Contribute to Pay Disparity for Women MBA Graduates
Increasing earning potential is one of the primary reasons many people pursue an MBA. And obtaining it does seem to pay off for men and women — at least initially. The Forté Foundation surveyed 1,476 MBA alumni and found that salaries for white men increased by 62% and white women’s by 68% after obtaining their MBA. Salaries for men of color increased by 70%, and wages for women of color rose by 57%.
The gender pay gap also narrowed from 8% to 6% based on first post-MBA jobs, but the pay gap has widened over time. The same survey revealed that the gender pay gap widens to 17% over time, with all men respondents currently earning an average of $209,011, compared to $173,070 for women. The factors below may account for these pay disparities.
Underrepresentation in Highest-Paying Industries
Consulting, finance, and technology are the highest-paying industries for MBA holders. While more women are entering these industries, their numeric underrepresentation explains part of their lower earnings relative to men. However, even in industries where women are the numeric majority — such as healthcare and the nonprofit field — there is evidence of a pay gap. In healthcare, women earn 86 cents to a man’s dollar, and at nonprofits, 88 cents.
Barriers to Negotiation
Women’s unwillingness or inability to negotiate job offers is also cited as a factor contributing to the gender pay gap. In 2003, Linda Babcock published “Women Don’t Ask,” which provided insights into women’s reluctance to negotiate and strategies to improve their job offers and advance professionally. However, recent research finds that women do ask for higher pay, but they often receive backlash.
In “Now, Women Do Ask: A Call to Update Beliefs About the Gender Pay Gap,” UC Berkeley professor Laura Kray and her colleagues assert that women negotiate more often than men but are also told “no” more often. Their 2019 survey of 1,900 MBA graduates found that even though women negotiated, they still earned 22% less than men. It still pays to negotiate, but it pays more for men than for women.
Absence of Women in Leadership
Beyond industry selection and negotiations, the gender pay gap is best explained by women’s continued underrepresentation in leadership roles, which are higher paid. A 2023 Stanford study of MBA graduates from a top 10 U.S. business school found that 96% of men and women serve in managerial roles within 15 years of graduating, but women are 24% less likely than men to serve in senior management. Furthermore, a 2022 McKinsey report notes that among C-suite leaders, only 1 in 4 are women, and only 1 in 20 are women of color.
The popular belief is that women need to “lean in.” However, women are already leaning in, but they face biases that prevent their advancement. A 2022 study of 29,809 management-track employees at a large North American retail chain found that women receive lower “potential ratings” than men, even when they perform better. The ratings are intended to forecast an employee’s future performance based on questions such as,
If given the opportunity, would [this employee] make a good manager? These ratings are heavily influenced by gender biases and leader stereotypes that often favor men.
A Great Resignation Among Women MBAs
In a recent turn of events, companies are finding that when they promote women to leadership positions, they struggle to retain them. Dubbed the “Great Breakup,” women leaders are leaving companies in unprecedented numbers. The 2022 McKinsey report notes that for every woman at the director level who gets promoted, two women at the director level leave their companies. They leave not only because of pay disparities but also the work culture. A 2023 MIT Sloan Management Review report found that women are 41% more likely than men to experience a toxic work environment.
As leaders, women are also more likely than men to encounter microaggressions. From mansplaining — which refers to a man interrupting a woman to explain something that she knows more about than he does — to “bropropriating,” which is a man taking credit for an idea that a woman originally presented, women encounter subtle and not so subtle efforts to undermine their authority and contributions. So, they leave.
Overcoming the Gender Pay Gap in MBA Programs
Addressing the gender pay gap is not only the right thing to do, but it also helps retain talent and avoid future employer-employee “breakups.” Furthermore, as college women graduate with their MBA degrees, organizations should be mindful to address this gap to recruit and retain top talent. In particular, three measures can help address pay disparities and support women’s career advancement:
- Pay audits: Although the Equal Pay Act of 1963 was intended to ensure men and women get paid equally for comparable work, the gender pay gap persists. Conducting annual pay audits to ensure that employees are paid equally for their work and their education level can narrow the gender pay gap.
- Pay transparency: Some states have adopted legislation that requires employers to disclose compensation information. In California, for example, an employer with 15 or more employees must include the pay scale for every position in a job posting. Providing job applicants with information about pay, even when it is not legally required, may reduce pay disparities and eliminate women’s need to negotiate fair pay with employers.
- Mentorship: It goes without saying that mentorship is crucial to career advancement for any person, especially students graduating college and entering the workforce. I asked Dr. Ellen Ensher, a leading expert in mentoring and careers, her thoughts on the importance of mentorship, and she said,
Mentors often provide access to stretch assignments, have insights on what it takes to get promoted, and can provide coaching that is crucial to getting ahead. They also have a network of talent, so their social capital is valuable.
Women are enrolling in MBA programs at record numbers, but the return on their academic investment has proven to be limited. While an MBA initially boosts pay, data demonstrates that it ultimately falls short of closing the gender pay gap, and workplace biases continue to perpetuate pay inequity and hinder women’s career advancement.
Obtaining an advanced degree may help at the individual level. Still, measures such as pay audits, compensation transparency, and mentorship are necessary at the organizational level for women MBA graduates to receive the ROI they desire and deserve.