Undercover Economist

Workplace inequality: it’s all down to the career breaks

Flick through any copy of the Financial Times and you’ll see a lot of chaps in suits. There’s a reason for this: there are many more men than women in the boardrooms of the world’s great companies. Explanations range from the politically correct (women are held back by the oppressive patriarchy) to the sexist (women aren’t up to the job).

Untangling this is difficult, but economists have tackled it with relish, in the process finding evidence to support almost any prejudice. One famous study conducted by Claudia Goldin and Cecilia Rouse looked at what happened when the leading, male-dominated, US orchestras introduced blind auditions for new members. Goldin and Rouse found that blind auditions went a long way towards correcting the gender imbalance. Maybe those pretty little things weren’t such awful musicians after all.

Other studies suggest a different explanation for male-dominated boardrooms: women may avoid intense competition, and cope badly if forced to compete. These studies are intriguing, but usually based on rather artificial experiments, or special cases – such as tennis tournaments. Last April, my colleague Lucy Kellaway wrote: “Men want power enough to hang on to it and women don’t want it enough to make them let go.” I am not sure of that, but I can certainly point to studies that support Lucy.

For my money, the most convincing explanations of the gender pay gap focus on the role of children. An elegant study from Amalia Miller of the University of Virginia finds that if a woman in her twenties waits an extra year before having her first child, her lifetime earnings rise by 10 per cent – a combination of higher wages and more hours worked. The effect is larger still for professional women.

This isn’t a story about high-earning women deciding to have children later: Miller carefully focuses only on non-voluntary changes to the timing of motherhood – miscarriages, problems in conceiving and accidental pregnancies.

Another study by the economists Lawrence Katz and Claudia Goldin charts the dramatic impact of the availability of the Pill: as women were able more easily to delay pregnancy, they enrolled in law, medicine and dentistry in far greater numbers.

Katz and Goldin, with Marianne Bertrand of Chicago’s Booth School of Business, have now produced a new study, examining the experience of Booth’s MBA alumni – a high-flying group from whose ranks one would expect future CEOs to emerge. The outstanding feature of this research is the very detailed data available on this group: their pre-MBA experience, the courses they took and the grades they earned, their career progression afterwards, and the timing of their families. Women did achieve worse grades, and avoided hardcore classes in finance: but the differences were tiny. Far more important was what happened when children came along. If you look only at promotions and earnings, childless women are all but indistinguishable from men. The moment children arrive on the scene, a big gap opens up.

“The penalty for career interruptions is huge,” Bertrand told me in a recent interview. New mothers are derailed from the fast track in investment banking or consulting, and their potential earnings fall by about 40 per cent. The gap is aggravated by the fact that many of these women are married to men so rich that they decide to drop out of the labour force altogether.

The Chicago alumni study throws a spotlight on one big unanswered question: is it really impossible to design a corporate job that can be done in a 40-hour week?

Also published at ft.com.